Q2 2023 Helix Energy Solutions Group Inc Earnings Call
[noise] greetings and welcome to the second quarter Helix Energy solutions 20 twenty-three earnings conference call. During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone if anytime during the conference you need to reach an operator. Please press star Zero as a reminder, this conference is being recorded Thursday July 27 2023.
I would now like to turn the conference over to Brent are Yoga C. E O of Helix energy. Please go ahead.
Good morning, everyone and thanks for joining us today on our conference call for our second quarter of 2023 earnings release participating on this call today for he likes our Goin' Crats R. C E O.
Scotty Sparks are C O O Eric staff, Eldar, CFO Goodnight, Kirk, our general counsel and myself.
Hopefully you've had an opportunity to review our earnings press release, so they're related slide presentation release last night.
Don't have a copy of these materials both can be accessed through the 40 investor page on our website at Www Dot helix E. S. G Dot com.
The press release can be access at a press releases tab and a slide presentation can be accessed by clicking on today's webcast icon.
Before we begin our prepared remarks, <unk> will make a statement regarding forward looking information Kent.
During this conference call, we anticipate making certain projections and forward looking statements based on our current expectations and assumptions as of today such forward looking statements may include projections and estimates of future events business or industry trends or business or financial results. All statements in this conference call or anything associated presentation <unk>.
Eight minutes of historical facts are forward looking statements center made under the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Actual future results may differ materially from our projections and forward looking statements due to a number and variety of risks uncertainties assumptions and factors, including those set forth and slide too and our most recently filed annual report on Form 10-K R. Quarterly reports on Form 10-Q, and then our other filings with the SEC you should not place undue reliance on forward looking.
Statements and we do not undertake any duty to update any forward looking statements. We disclaim any written or oral statements made by any third party regarding the subject matter of this conference call.
Also during this call certain non-GAAP financial disclosures may be made in accordance with S. A C rules the vinyl side of our presentation provides reconciliations a certain non-GAAP measures to comparable GAAP financial measures. These reconciliations along with this presentation. The earnings press release, our annual report and a replay of this broadcast are available under the for the investors section of.
Our website at Www Dot <unk> dot com.
Do you remember the information on this conference call speaks only as of today July 27th 2023, and therefore, you are advised at any time sensitive information may no longer be accurate as of any replay of this call.
<unk>.
Good morning. This morning will review our queue too high logged some financial hormones will provide insight into our operations in the key drivers to our results and outlook.
Three.
Lastly will provide insight into the continued development over the offshore energy market, our focus on the opportunities within our energy transition model and opportunities beyond twenty-three.
Moving into the presentation slides six to nine provide a high level summary of our results include highlights for the second quarter of 2023.
He looks delivered strong results assisted in part by the improved weather in the North Sea in Gulf of Mexico shelf, Despite current economic uncertainty and volatility of commodity markets oil prices remain supportive to the current investment cycle.
In addition to continue geographic expansion of the offshore renewables markets into the U S. In Asia Pacific markets has been pants, the current rate environment for our services.
Like for the quarter include the Q 7000 commenced operations in New Zealand.
Strong willed intervention utilization in the North sea in Brazil.
Robotics achieved strong utilization operating results with high trenching and best of all activity.
He likes alliance improve results with the activation of the upper Kedron and continued extrication from offshore Marine and energy services Division.
Two 4000 was in dry dock for more most of the quarter.
Improved cash generation and positive free cash flow.
And on the <unk>. He looks alliance was awarded 39 will pull field decommissioning contract in the Gulf of Mexico.
Revenue for the quarter were $309 million, an increase of 59 million from our first quarter results.
We generated net income of 7 million compared to a net loss of $5 million in the previous quarter.
Adjusted EBITDA for Q2 more than doubled quarter over quarter $271 million.
During the quarter, we generated strong operating cash flow of $32 million, including $24 million or a dry dock and recertification cause.
We spent 1 million on capex, resulting in $30 million in free cash flow during the quarter.
Ah results were significantly impacted by the regulatory certification and maintenance of the Q4 thousand. In addition to Q 7000 spent 55 days mobilizing to the Asia Pacific region with revenues and costs deferred until project commencement in late May.
Are you or do they revenues were $559 million, an increase of $246 million from this time and 22.
We generated net income of $2 million compared to a net loss of $72 million at this time in 2022.
Adjusted EBITDA for the year has increased by $87 million to $106 million.
For the year operating cash flow is $26 million compared to a negative 23 million in 2022.
These results represent significant improvement year over year, the high number of regulatory maintenance days in 2023 has tempered our results, but provided an opportunity for you, but even further improvements in 2024.
With strong year to date results and an outlook that continues to improve we're increasing our guidance for 2023.
I'd like to thank our employees for their efforts with a strong solid start to 2023 executing safe and efficient operations for our customers has always been our homework on our goal is to remain an established leader in the offshore industry.
On the slide nine we continue to execute on our share repurchase program. During the second quarter, we repurchase 750000 shares of our stock for approximately $5 million.
As we continue executing the program will balance I need to manage and found one R operations to our capital spin, including the line Sir now three maturing debt.
For strategic investment opportunities along with the number of fog the share repurchase program.
I will now turn the call over to Scotty for an in depth discussion of our operations.
<unk> good morning <unk>.
Firstly I would like to a gang sign cutscenes off shown onshore for another very well executed closer.
Performing quarter for many years that continues to be positive momentum and neglect Bluff show markets that we operation and all of our businesses are well positioned for the remainder of 2023 and beyond.
And the second quarter of 2023, we continue to operate globally with minimal operation and disruption.
Operations in Europe , Asia, Brazil, the Gulf of Mexico, and now for the USA East Coast.
We continued to operate with high standards with strung up some efficiency.
During the second quarter, we generate to the crush profits of $65 million in a garage profit margin of 18% up from a gripes lots of $1 million in the second quarter of 2022.
For the first six months of 2023, we generated a gross profits of $71 million and the gross profit margin of 13% collecting improvement from a grasp of 20 million for the first six months of 2022.
We are expecting then even February improved second half of 2023 compared to the first half of the year now that most of our logic behind regulatory maintenance periods I'll complete Mister market continues to tighten the nine trust services continues to gripe.
Slide 12 provides a more detailed results reveal about women's eventually business in the Gulf of Mexico.
The key 5000 had excellent utilization of 99%.
<unk> performed very well conducted production enhancements and embattlement less than five wells in ultra deepwater working under multimedia campaigns Michelle.
The key for thousands had utilization of 7% in the second quarter completing that see while advertisement campaigns for one client to Notre deep water and subsequently commenced to schedule and regulatory dry dock for the remainder of the quarter with compassion scheduled for the end of July Unfortunately that tried doctors taken longer than originally schedule as we undertook additionally, we should application.
Positively we expect both vessels to have high utilization for the remainder of 2023 with contracted or rewarded with <unk> and we already have avoided in 2024 with good visibility of potential February activity increased rates compared to the first off of 2023.
Key vessels continued to operate sounded integrated helix Sob's Subsea service Alliance package.
<unk> and <unk> intervention business continues to respond well to the increased demand in the region, having a very strong second quarter, achieving 100% utilization for <unk> in the U K.
One has to perform very well on production harassment works on six wells for for customers and then completed the commissioning operations on Manuel for another customer.
Let's see well also had a very good quarter working for free customers. The foreman decommissioning, let some numerous wells and production enhancement wetzel freeways.
The Man Trust services continues to increase in that business is seen much improved conditions insensitive rates contracting plans and utilization.
Let's see what is fully contracted for the remainder of the year and his recently contracted and expect to 210 day decommissioning project in the Mediterranean keeping the vessel contracted swelling to Q2 2024.
It wasn't until also has contracted with for the remainder of 2023 and that's been awarded work in 2024 five increased rates.
On completion of its dry docking in Malaysia at the key some thousand completed patrons it to New Zealand and then commence decommissioning contract in the second quarter.
On completion of the works in New Zealand, but the rest of his schedule to carrying out the patrons it to Australia. So in the next several decommissioning skypes. The nearest clients in the second half of 2023, and it's a key one of 2024.
<unk> 7000 has been contracted for 12 months plus options to undertake leather betterment, what we've shelling Brazil, including the patrons. It's amazing the work is expected.
<unk>, two 2024, and the <unk> doesn't have contracted well into 2025, and we have good discipline and work lately following on in 2025.
Moving to slide 14.
In Brazil, we had good utilization of 97% in the second quarter.
The same headaches, one was 94% utilizing Q T undertaken work on it to your decommissioning project for tried into energy performance work on <unk> in the courtroom.
The same headaches too had a strong forward. So we have 100% utilization competing production enhancement work on C wells and the commission activity empty, whereas with Petrobras.
But such vessels are contracted to the end of 2024 and there is increased demand in terms of activity you could ask such vessels post 2024 gladly included in Brazil.
With the Chiefs 70000 shell contracts, we are pleased to have free vessels contracted in the <unk> region in 2000 2004.
Slide 15 provide detail about what intervention fleet utilization.
<unk> onto slash 16 for a robotics reviewed the.
The budget has continued that good performance and had another strong culture being the best performing quote concerns and revenue and EBITDA since 2015.
The business performed at high standards were strung utilization approaching six vessels gladly joined the fortunate primarily what I can between trenching Rv's important such survey work on oil and gas and renewables related projects.
And the APEC region in the Grand Canyon, So you had 100% utilization and Q T. The vessel performed dwell on my lungs, and decommissioning project in Thailand.
The newly acquired 14 1400, <unk> system completed mobilization to Taiwan on both the same type as a project chartered vessel commenced work undertaken 65 days of Trenton utilization in the quarter performing well on the size of the estimated 200 dates assumptions renewable trenching projects.
And then I'll see the Grand Canyon free with utilized 89% performance you renewable changing projects for one customer.
The horizon Slash 48 days was spot vessel utilization compete in renewables trenching works for to customers in northern gas Trenching project for another clients.
Thanks to Trenton vessels, and then also you have a strong backlog for the remainder of the 2023 trenching season, with a mix of renewable and oil and gas trenches.
Most of them in the North Sea, because I'm always completed 68 days of operations undertaken ordinance removal insight Saturday operations.
In the USA the sheet aboard along the Giants that complaint vessel, which utilized 91% in Q T. <unk> works in the Gulf of Mexico to support the seismic note installations installation project is expected to continue <unk> with options to extend.
On the East Coast. The recently acquired Icloud Trenching system completed 58 days of utilization working on the client provided vessels on the second site preparation on renewables wind farm support projects again, expanding our services that we offer to the renewable sector.
Okay. Thanks for <unk> is performing very well and have a good backlog invisibility lately, we're expecting strong performance in 2023, you should have a best yes. It was 2015.
Servicing geographical expansion in the renewable sector continues and the robotics group completed work in eight countries no friction from four vessels and her name was set to this quarter.
Slide 17 details that robots expresses already entrenching utilization slide.
Slide 18 provides an overview of our shallow water decommissioning business <unk> Alliance.
It takes alliance had a very strong second quarter, producing their best performing quarter Tonight.
Yeah Sure Division had nine despite separation in Q T with an increased company combined utilization of 88% the foreman Decondition services.
Offshore also supplied six osv's luxury boats with an increased combined utilization of 76%.
The energy services Division had an increased operations in 1250 days or 92% utilization for the 15 K nice systems deployed conducting decommissioning services.
The divisions had increased operations of 304 days or.
56% utilization for the sixth coach even systems.
And can you tell me the diving and heavy lift division season commenced we've increased combined utilization of 53% across the free diving vessels with one of the vessels the patriots undertaken find regulatory dried up maintenance and most of the quarter.
The heaviness caused the Hadrian had increased utilization of 79% undertaking platform removal and a a decommissioning activities.
And the second quarter hated some lines was awarded than my sizable decommissioning contract since that he'd exact position the.
The contractors to decommission 39 wells remove and dispose of 15 pipelines and remove and dispose of seven platform structures.
<unk> recently convinced me spread out over the next 12 months with an estimated value of $30 million to $40 million in each of 2023 and 2000 2004.
The contracts, we use utilize all services that he takes office he takes a lying selfish, including some of the multiple aosp's tni's spreads one of the value of investments in the heavy <unk>. This.
This contracts again highlights the helix alliances the only country contracting company that can offer fulfilled shallow bullets or abandonment.
Slide 19 provides details for the heated July assessments systems recent utilization.
Before I hand over to Brent I would like to think of labor Felix employees and partners probation, producing strong results and they're very good quarter, our best quotes for many years. So thank you stay safe and keep up the good work.
As mentioned earlier the second half of 2023 is really shaping up well for helix and we expect the strongest seconds off of the <unk> in the first half of this year.
For the next few years, we expect to be in a strong position with high demand for our services across all sectors and regions. We operates and it's been proven rights and generally better terms and conditions.
Now turn the call that if it's a breakdown.
Thanks Scott.
Moving to slide 21 without lines are debt instruments in maturity profile is June 30, we had total funded death of $267 million a quarter and <unk>.
Painting Maturity's in 2023 include $4 million installment of marriage that in August 2023, converts, which mature in September and have a remaining principal surf $30 million.
We have long communicated our intention to cast settle those notes using cash on hand.
Moving on to slide twenty-two provides an update on key balance sheet metrics, including cash longterm that liquidity and net debt levels.
We catch on $183 million or that that position at quarter end with $78 million.
During the second quarter, we increase the size of our ABL facility from $100 million to $120 million.
A quarter and we had $112 million gross capacity under ABL and no borrowings outstanding.
After considering <unk>, our net remaining availability and a <unk> was $103 million with resulting liquidity of $295 million.
I will now turn the call over to Eric for discussion on our ally for 2023 and beyond.
Thanks, Brent as we've discussed we've had a solid start to 2023 and the offshore market traditional oil and gas and renewables continues to show its strength.
We are increasing our guidance for 2003 as follows revenue one 175 to 1.25 billion EBITDA $240 million to $270 million at $25 million increase from mid point.
Free cash flow of $130 million to $170 million or 20 million increase from mid point in our capex and the 65% to $80 million range.
Ranges include some key assumptions and estimates any significant variation from these cases countries and estimates could cause our results to fall outside the range is provided.
At quarterly results are likely to continue to be impacted by seasonal weather in the north sea in Gulf of Mexico shelf, primarily the fourth quarter and first quarter. In addition, the timing of our vessel maintenance periods and project mobilizations will cause variances between quarters for instance, the impact of the Q4 thousand dry dock extension, which has resulted in.
Fewer days available for work in Q3, we Nevertheless expect the second half of 2023 to be stronger than the first half with the third quarter likely be in our struggle.
Providing key assumptions by segments in regions sturdy on slide 25, first harwell invention segments. The Gulf of Mexico is expected to continue to be a strong market in 23 with improving rates and expected strong utilization on the Q4 thousand Q 5000.
Q4 thousand is currently expected to completed stocking and beyond higher by the end of July .
In the UK, nor see both vessels have contracted work through Q4 with the C well having to work into Q2 of 2024 activity levels for our well intervention vessels in this market continues to be robust during the second half of this year to see well is scheduled to undertake a two to three week transit for a project in the Mediterranean.
The key 7000 is currently operating in New Zealand on the truly project. The vessel has contracted work in the APEC region expected into Q1 of 2024.
In Brazil, the CMP like Swan contracted into mid December 24, with Petro broth and he likes one is contracted performing well abandonment work for tried it into Q4 2024.
Moving to a robotic segment on slide 26.
<unk> continues to benefit from from a tight market. We're currently both oil and gas market and renewables market are extremely active competing for our assets and services and the APEC region. The Grand Canyon tunes contracted to perform decommissioning and Arlene support work in Thailand into Q3 with expected good utilization for the balance of.
23 in that region.
In addition to one of the recently acquired 200 1400, <unk> is contracted and working into Q4.
In the North Sea the Grand Canyon, three is contracted to perform trenching work with expected strong utilization for the 2023.
Horizon enabler with as flexible charter has trenching projects into the queue for the globe are wave is forecasted to have good utilization the side clearance and new XO removal during the remainder of the year.
And the and the U S should Lea borderline is working in the Gulf of Mexico, performing early operations with opportunities in the Gulf of Mexico, and the Usu's East coast with vessels expected to have strong utilization for 23.
Four production facilities CHP, one is on contract with balance of 23 with no expect to change we do have expected variability with production as the address you feel continues to defeat.
Continuing on to slide 47 for our shallow water abandonment segment. The shelf decommissioning market continues to be very active for 2023, we expect a marine offshore division to maintain give us utilization on eight to nine lip boats with some variable seasonality on the lsp's improvements.
The energy services Division should have strong organization for 12 to 15 PNA spreads in one to three calls tubing me that strained 23.
They're in the seasonality and the diving and heavy lift division, where the update kidron as mobile iphones embark expected until late two three.
Moving on to Slide 28, Capex forecast for 2000, 2023 is heavily impacted by the dry docks and maintenance periods on our queue vessels to Q 7000 to 5000 completed their maintenance periods in the queue for thousands scheduled to complete its dry dock in late July .
We did undertake additional recertification work on the queue for thousands which resulted in additional days in the yard and increased capital spent with a heavy regulatory year and the inclusion of Helix Alliance. Our Capex range for 2023 is now $65 million to $80 million or.
Cash spending Q2 was approximately $25 million the majority of our Capex continues to be maintenance and project related which primarily falls into our operating cash flows.
Reviewing our balance sheet are funded that is $267 million at June 30th is expected decreased by $34 million during the balance of twenty-three with scheduled principal payments, primarily the majority of the $30 million.
Remaining on the 2023 converts.
I'll skip the remaining slides and lead them for your reference this time I will turn the call back to Owen.
Discussion on our outlook and for closing comments.
<unk>.
Last quarter, we indicated that we thought we were timing towards the upper end of our initial gardens and things have continued to improve.
In fact, we're exceeding our forecasts despite a few anomalies and Q2, we more than doubled our queue wanted me to <unk> in our forecast for the Rosewood twenty-three remained strong we've raised the lower end over EBITDA guidance by $30 million in the upper room by 20 million is Eric mentioned.
This was a testament not only to a robust offshore service market, but the diversification, we built into our business and operational execution by our people.
2023 has started well and as strong as our current performances there are identifiable opportunities for even further improvement going forward a spokesman for 2024.
First five of our World intervention broke the Q4, Q 7000 to 5000, well in hamster and see well all have planned maintenance or document this year as you've already heard the most significant unexpected issue in Q2 occurred with the regulatory required dry Dr. Mchugh 4000.
Which resulted in an unanticipated recertification work and significant additional maintenance Catholics expense also earlier this year, we experiments and a number of delays on the queue 7000, as a result of weather and shipyard performance negatively impacting the Q 7000 potential returns.
None of these events should recur in 2024, we should have approximately 200 incremental vessel to settle in 2024.
Any of our well intervention segment.
Based on fewer scheduled maintenance space.
R 2023 rates and cause the potential benefit of 2024 could be up to 25 to 30 million from these extra boost.
In addition, the offer service market continues to improve with supply constraints for restaurants, and services, leaving a higher rates and greater visibility.
The rates are continuing to grow and improve in many regions, but our particular.
They're partially offset by higher labor costs.
There are there are contractual rate increases already on the Q 7000.
S H two and that's H one for 2024 with further contract extensions with right improvements under discussion on these vessels.
We continue to work through legacy rates on work contract with weaker point in the market prior to 2023, creating further future upside for the current higher rate environment.
Of the three <unk> and two intervention systems recently acquired one of each are currently working on long term commitments. So far the forecaster returns are better than originally expected.
Meaning the other two systems could bring additional upside.
Shallow water abandonment has just begun to see the potential for the demand increases rates have only started to improving the space and are expected to escalate going forward somewhat offset by hard labor costs.
But the outlook for decommissioning, Birmingham, but appears to be strong for years to come.
We're well positioned in the transitional segments in the oil and gas markets are businesses are poised for long sustained demand as the energy market transitions, while many contractors, who have struggled to maintain suitable returns when the offshore wind markets. The helix approach are providing specialty services generating satisfactory road.
Turns with an outlook for not only sustainability, but growth as well the.
The three buckets of our business model maximizing existing reserves decommissioning in renewables support remains our foundation and each one shows promise for sustain.
Sustainable growth.
We always explore opportunities are prioritized shareholder return with our current focus being on growth within our existing capabilities. We believe we're being patient and selective with these opportunities in our markets continued to be dynamic where.
We expect to generate double digit free cash flow yield going forward, we will be paying attention to our capital structure and as well as capital allocation to building cash share repurchase and growth in a balanced manner to yield where we believe will represent the greatest return to the shareholders.
And with that I'll turn it back to your thanks Owen operator at this time, we'll take any questions.
Thank you it seems like to register a question. Please press the one followed by four on your telephone.
<unk> acknowledged to request.
Okay. Your question has been answered and you would like to withdraw your registration. Please press. The one followed by the three our first question is coming from the line of Greg Lewis. Please go ahead.
Yeah. Thank you and good morning, everybody and thanks for taking my questions I wanted to start off talking about well intervention.
Clearly it seems like the pendulum is definitely started to swing towards towards you guys in terms of your ability to kind of push pricing I'm kind of curious have customers realizing that.
Visibility is pretty good and and you know.
In the next six six plus months, but if customers started to look at the kind of contract. These vessels, even farther out I E and the rig market, we're seeing customer starting to look for Clinton in starting in 25.
How how how.
What are you what are those customer conversations like around your your time core assets.
Good morning, just gotta hear how <unk> that yeah, we are seeing future outlook that in Brazil, we're seeing clients picking out the vessels to 2025, we're in discussions with pets, your best and others to extend the search vessels down there.
<unk> has taken the key 7000 to 2025 and I have options that could take all the way up to 2026th.
In the North Sea, we've got a better outlook than we've had in many many is pretty kind of the way back from 2014, we have more pictures right.
That is right now got into 2020 forward and we've had an awful long time. So we are definitely seeing the decline to take a forward on this we've got long term agreements that have been set up in the Gulf of Mexico recently that Bill acts of Oxy shell in half. So so these clients are looking out towards the future.
Providing us with a better backup in mcadam in awhile.
Alright, I'll, just add a little bit about it I think if you go back to 2022.
There was starting to be a demand for clients.
Clients looking out with multiple years, there was a reluctance on our part because we were still in the downturn and therefore, we were providing what we consider now legacy rates.
Which are well below current market rates. So we were reluctant to give pricing out.
NAMIC in the market right now though.
Thanks.
Clients have come around to realizing that for multiyear contracts there has to be escalator. So we're we're being more successful in building escalators into our contracts that gives us a little more confidence and going ahead, and starting discussions about booking additional multi year out into the <unk>.
Future. So that's I think the <unk> the clients are sort.
Sort of pivoting towards being concerned more about <unk> availability then.
Cheating the lowest rate possible.
Possible.
Yeah, absolutely and then and then I want to.
Yeah, I guess you know in hindsight congratulations on a line. It's I mean, just as as we think about what is happening in in that you know abandonment business.
Yeah I, it's been impressive I guess I think what a lot of people are wondering was this kind of just some pent up demand or as as we think about it and I'm not asking for multiyear guidance, but as as you see certain things in this market.
Over the next couple of years is is there any reason why we can at least hold will what will have been able to do more recently in the in that space and he's just been like like I said I mean.
Give us a little color on what's happening there and I guess I have to assume that the acquisition of the lines really has exceeded your guys' expectations at least at this point.
Yeah I I believe we're we've reached a historic inflection point in the marketplace I mean for years of decommissioning of the shallow water structures was the hockey stick that just never occurred and there's always.
The industry business model was to sell them on two smaller producers and then just shove the decommissioning work out into the future.
The end result of that though is that a lot of you've seen two major bankruptcies in the last few years. The end result is that the the task from the production has been stripped of their companies and bankruptcies declared <unk>.
Forcing these properties back onto the market what's different now though is that most of these properties have a net negative about the value and therefore, there are no I think the industry is learning their lesson about selling them onto a smaller producers because the the abandonment is going to come back and it's coming back into vengeance here.
We saw this potential.
Oh, four happening, which is why we bought it looks alliance and we're just as I said in my color comments were just now starting to see I mean, there's been a ramp up in the decommissioning demand, but with the recent Cox bankruptcy I think you're just going to see a tsunami of of.
Decommissioning demand on those shallower waters and this time was not going to be the optionality installing the modem. So the work is actually going to get done now and you're starting to see that reflected in the results with the lungs.
Okay, Oh, so you got to connect with the.
Alliance, we are there any company that can be for shadow.
<unk>, it's a full field of documents of decommissioning and the recent award that we've just had a defensive nonwireless shifting pipelines and set of instructions to remove shows that we have all the capabilities to to package big decommission packages together.
Yeah, now, it's been pretty pretty exciting to watch anyway. Thanks for taking my questions have a great day.
Thank you.
Our next question is coming from the line of <unk>. Please go ahead.
Hey, good morning, guys congrats on a great quarter.
Thank you.
So you have some longterm contracts on some well intervention vessels and at least the Gulf of Mexico, and Brazil, how much if at all to rates typically move up in this scenario.
I'm just trying to get a sense of what 2024 might look like for these longer term contracts.
We do have some legacy leftover in 2024, especially down in Brazil with the essentials.
It's H T.
We're discussing their probation clients for extensions past 2024, and I think it's fair to say that we will be increasing the right Sundays contracts.
Some of the legacy contracts, we've just been in place and that started the new longer term contracts. We've just put in place in the Gulf of Mexico far better rights and the the legacy right you've had in the past so.
We've had recently contracts with up to longer term.
Free outlook contracts with majors in the Gulf and that far better rights and some that legacy because we've had in the past and I think our end points of that won't be increases in this space can be for next year, just on utilization days as well.
Just to expand on back on the Q 7000, we do have a multiyear contract through 2025.
On that vehicle. It does have escalators already built into the contract. So we do have built and visibility on the improvement there same with the S. H one going forward and then as I mentioned in a presentation, where also we're in discussions.
Discussions about extending both of those Brussels, along with the us So it's too.
Ross for multi years beyond what we already have currently we contracted with all of that would also have escalators built into it.
The two vessels in the North Sea are are very.
Hi, and spammed right now and we are booking partial utilization contracts on a multi year basis and for instance, we already have 300 days of work already contracted in the North Sea.
With some pretty meaningful rate increases over 2023. So there's there's we already have at this time last year, we'd go view about four or five things that we knew we were going to have them may be a little early for us to quantify all of this would have to work through it but there is there is there are a number of <unk>.
Cause of things that are already contracted we have visibility on the built in improvement 20 for over 23.
Okay. Thanks for that and then just.
Wanted to ask what's driving the strength in robotics I mean is this.
Anything in particular were there any one time unusual items here closeouts.
Hi margin mix and if you could just comment on where rates are versus last year.
Okay, I'll check that for about six hours.
Very good performance this year in big improvements a lot of this has been driven by the renewable sector and and not build up into the trenching markets.
We've had a couple of one time items this year, where a couple of lumps I'm trying some jobs when you're not saving for him very well, but obviously you've seen the expansion into Taiwan, where we.
Some new trenches and we put them to work in Taiwan, and Taiwan market is expanding Saddam Hussein next sanctioned and renewables.
Just trenching, but other services on a global basis, we come from Trenching that was primarily a U K based business now in Taiwan, There's talk of Korea, as we've been Trenton and on the Usp's coast to say, so I see that continuing and expanding and <unk> say, 10% to 15% year over yet.
Okay, Great and then if I could just squeeze one more in the the ethics Kidron like how how do we think about that is that similar to a well intervention vessel in terms of day rates and opex or similar to a rig or but at any color there would be great.
Nowadays.
<unk> has a shelf heavy lift asset so it bears no resemblance to roots or the other vessels.
Margins that it can achieve.
You have to sort of understand the heavy lift market.
Heavy lift market as the seasonal market.
Can only safely operate during the more benign summer months, so your bill seasonality.
There, there's probably discounts or exposure to be taken if you wanted to work in the winter time, but.
Typically.
It's going to be lower utilization, but also then you have to realize that and.
<unk> work comes to fruition and we're talking about well over a thousand structures that needs to be removed and there's only a remaining have you lift assets in the Gulf of Mexico. So they are all going to be very busy but the time is coming and decommissioning. The field you focus first on making the platform safe.
Flushing.
Been doing all of your well being in a in your pipelines. The very last thing is the platform removal. So while you're seeing a lot of activity on wells and platform make safe work right now the heavy lifting portion is still yet to come with just seeing the the <unk>.
First real increase in utilization for the heat as it went to work this year and I think you'll see the rates and the utilization for that S. As in.
Improve going forward.
But but oh and I just want to make sure I got that correctly.
I'm just asking about the the economics is that is that similar to well intervention or is at below or above and I know, there's some seasonality, which is going to change that but in general.
It is July one intervention right. So it's more in line with the high end construction vessel I said, one of our heightened tension versus a similar sort of rights that we would all the time for that vessel.
Okay. Thanks I appreciate it.
And as a reminder to register for a question. Please press. The one followed by a for our next question is coming from the line of David Smith. Please go ahead.
Good morning, and congratulations on a solid corner.
Thank you.
I was hoping to circle back to that Big decommissioning contract you went out and if I heard your comments correctly revenue from that contract expect it to be 30 that $40 million each of 23 to 24.
You just want to go into my garden. So at the mid point about $70 million over 12 months.
Yeah, it's almost 30 per cent of your <unk> fourth quarter revenue in that segment.
Alright, I'm used to thinking about it.
Sorry.
You have to remember it spread out.
That'd be certain parts that we can't be for the winter months like the heavy lifting so that might be like towards the end of the first quarter of next year. So it it is spread out but.
To $40 million of each year is a good a good.
Guidance on that.
Perfect. So I'm used to thinking about the plugin abandonment <unk> relatively short term in nature.
I would love any color that you can share about that project.
This is an operator taken a more holistic approach than I previously did and and I'm curious if you were seeing operators getting nervous at all about <unk> availability to execute therapy in a plan. So you know maybe they're contracting for a larger program is first appointment the stock market.
Yeah. The the the focus right now is on the wells are on all these structures, where you've got to understand there. There is an excess of 5000 wells out there to do the the there's there's far more work than our entire industry right now could get done in the next five to seven years.
So it's.
And what what that means is that the producers.
The the awareness of wanting to get the work done now is just occurring all at the same time, there's a real concern by the producers on availability.
So I think the fact that we own anywhere from.
Oh, well anywhere from 25% to 50%, depending on which asset class you're talking about of all the assets available and we are the only ones that actually have all of the outcome classes required to do the work I think is garnering a lot of attention from the producers that are a little concerned about getting in with you and.
Having availability to get their work done so it's all very positive for us.
Yeah, I think I think this <unk>.
Oh is that we're talking about realized that we could provide all of the assets and then you had to come to a one shot to get everything done. So they didn't have to manage in a in a typical.
Typical environment, five or seven different contractors, and making sure that I schedule, Wisconsin get rid of all works I just have to come to us and we project manage the whole thing for them with all the different assets that we have.
Yeah, I I appreciate all that color and if I could.
Sneaking a quick follow up question on the.
That alliance and I'm curious if you see other opportunities out there to maybe add to your shallow water abandonment sleep.
There are opportunities to buy more equipment.
The the the.
The bottleneck in the industry is going to be people.
I think our approach to that is that we would like to remain I think on the on the shelf you have degradation and the quality of the contractors over the past decades of of slow work on the shelf.
One thing that he likes brings to it as though the quality of our processes. So please and standards.
So we're going to be a little reluctant to just go out and buy more equipment and then just look for bodies, we're going to be.
A little more cautious in adding quality people and will add assets as we the people.
Great I appreciate your time today. Thank you.
We have no further questions.
Thanks for joining us today, we very much appreciate your interest and participation and look forward to having you on our third quarter of 2023 call in October . Thank you.
That concludes our conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
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