Q3 2023 Helix Energy Solutions Group Inc Earnings Call
Speaker 1: Please continue to stand by your conference. We'll begin momentarily. We thank you for your patience. So
Please continue to stand by your conference will begin momentarily we thank you for your patience.
[music].
Speaker 2: Greetings and welcome to the third quarter Heelick's Energy Solutions 2023 Earnings Conference call.
Greetings and welcome to the third quarter Helix Energy solutions 2023 earnings Conference call.
Speaker 2: During the presentation, all participants will be in the lesson only mode. Afterwards, we will conduct a question and answer session.
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.
Speaker 2: At that time, if you have a question, please press the one followed by the four on your telephone.
Speaker 2: If at any time during the conference you need to reach an operator, please press star zero.
Any time during the conference you need to reach an operator, Please press star zero.
Speaker 2: As a reminder, this conference is being recorded on Tuesday, October 24, 2023. I would now like to turn the conference over to Mr. Brent Arriaga, Chief Accounting Officer. Please go ahead.
As a reminder, this conference is being recorded on Tuesday October 24 2023.
I would now like to turn the conference over to Mr. Brent <unk> Chief Accounting Officer. Please go ahead.
Speaker 3: Good morning everyone and thanks for joining us today on our conference call for our third quarter 2023 earnings release. Participating on this call for Helix today our Oincrat, our CEO , Scotty Sparks, our COO, Eric Stapel, our CFO , Ken Nykirk, our General Counsel and myself.
Good morning, everyone and thanks for joining us today on our conference call for our third quarter 2023 earnings release.
Dissipating on this call for helix today are Owen Kratz, our CEO Scotty Sparks, our COO, Eric <unk>, our CFO , Ken Neikirk, our general counsel and myself.
Speaker 3: Hopefully you've had an opportunity to review our earnings press release and the related slide presentation release last night. If you did not have a copy of these materials, both can be accessed through the 40 investor page on our website at www.healaxesg.com.
Hopefully you've had an opportunity to review our earnings press release and the related slide presentation released last night.
If you did not have a copy of these materials both can be accessed through the for the investor page on our website at Www Dot helix ESG Dot com.
Speaker 3: Press release can be accessed in a press release tab and a slide presentation can be accessed by clicking on today's webcast icon.
The press release can be accessed the press releases tab and the slide presentation can be accessed by clicking on todays webcast icon.
Speaker 3: Before we begin our prepared remarks, Kid Nicarg will make a statement regarding forward-looking information again.
Before we begin our prepared remarks, Ken Neikirk will make a statement regarding forward looking information.
Speaker 4: 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 any associated presentation, statements of the state back, are forward looking statements and are made under the Save Public Provision of the Private Security's litigation reform act in 1995.
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 in the associated presentation.
Statements that are forward looking statements and are made under the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.
Speaker 4: Our actual future results may differ materially from our projections before looking at statements due to a number in variety of risks on certain these assumptions and factors, including those that four things lied to, most recently filed annual report on form 10K, our quarterly reports on form 10Q, and then our other file is with the SEC. You should not place undue reliance on four flicking statements and we do not undertake any duty to update any four flicking statement. You just claim any written or oral statements made by any third party regarding the subject matter of this conference call.
Our 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 in slide two most recently filed annual report on Form 10-K, our quarterly reports on Form 10-Q and in our other filings with the SEC.
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 SEC rules. The final slide of our presentation provides reconciliations of certain non-GAAP measures.
Speaker 4: Also during this call, certain non- GAAP financial disclosures that you made. And accordance with SEC rules, the final slide of our presentation provides reconciliation of certain non- GAAP measures to comparable GAAP financial measures.
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 Felix ESG Dot com.
Speaker 4: These reconciliations along with this presentation, the earnings press release, our annual report, and our replay of this broadcast, are available under the 40 Investors section of our website at www.healingscst.com.
Speaker 4: Please remember that information on this conference call speaks only as of today, October 24, 2023, and therefore you are advised that any time-sensitive information may no longer be accurate as of any replay of this call.
Please remember that information on this conference call speaks only as of today October 24th 2023, and therefore, you're advised that any time sensitive information may no longer be accurate as of any replay of this call.
Speaker 5: Good morning. This morning we'll review our Q3 highlights and financial performance. We'll provide insight into our operations and the key drivers to our results and outlook for the balance of 2023. Lastly, we'll provide insight into the development of offshore energy market, our focus on the opportunities within our energy transition model and opportunities beyond 2023.
Good morning. This morning will review, our Q3 highlights and financial performance will provide insight into our operations on the key drivers of our results and outlook for the balance of 2023.
Lastly, we will provide insight into the developer continued development of offshore energy market, our focus on the opportunities within our energy transition model.
The opportunities beyond 2023.
Moving to the presentation slides six through nine provided a high level summary of our results and key highlights for the third quarter of 2023.
Speaker 5: The underlying macro drivers of the offshore energy service market continue to be constructed and supportive of a sustainable long-term investment cycle. Offshore services both in the U.S. and internationally continue to be very active with traditional oil and gas competing with renewables for assets creating high levels of demand for services.
Underlying macro drivers of the offshore energy service market continues to be constructive and supportive of us.
Favorable long term investment cycle offshore services, both in the U S and internationally continue to be very active with traditional oil and gas competing with renewables for us creating high levels of demand for services.
In addition, our continued geographic expansion of our offshore renewable services into the U S and Asia Pacific markets has diversified our operations and broadened our reach in.
In addition to maintaining high utilization and enhancing the current rate environment for our other services.
The fundamentals for decommissioning remain positive with favorable regulatory push and high commodity prices with a positive market backdrop on top of strong seasonal activity, our third quarter results improved upon the solid performance delivered in Q2.
Our third quarter reflects.
Results.
Flex our best quarter since 2014 and are in.
The profile of the earnings power of our focus and geographically diversified business model.
Highlights for the quarter include the Q 7000 work the third quarter on decommissioning operations in New Zealand straw.
Strong well intervention utilization in the North Sea and Brazil.
Q4 thousand completed dry dock in July returning to operations.
The remainder of the quarter.
Robotics achieved strong seasonal utilization in operating results with high trenching and Russell activities.
He looks alliance improved seasonal results with continued high levels of execution, we maintained strong cash generation and positive free cash flow and we acquired five additional fog PMA systems for our shallow water abandonment segment.
Revenues for the quarter were $396 million.
An increase of $87 million from our second quarter results, we generated net income of $16 million compared to net income of $7 million in the previous quarter.
Adjusted EBITDA for Q3 increased to more than 96 million compared to $71 million in the second quarter.
During the third quarter, we generated operating cash flow of $32 million, including $18 million spent on dry dock and recertification cost, we spent $8 million on capex, including an initial $6 million in cash for the additional five spreads.
Our resulting free cash flow during the quarter was 23 million.
Our results were impacted by the regulatory certification and maintenance of the Q4 thousand which were completed at the end of July .
Our year to date revenues were $955 million, an increase of $370 million from this time in 2022, we.
We generated net income of $17 million compared to a net loss of $90 million at this time in 2022.
Year to date, adjusted EBITDA increased almost threefold from 'twenty to 'twenty, two increasing by $131 million to $203 million.
For the year to date, our free cash flow was $42 million compared to a negative $4 million in 2022.
These results represent significant improvements year over year and provide a glimpse into our earnings and cash generation potential.
Improvements were achieved despite the high number of regulatory maintenance days in 2023.
Tampered our.
Our results, but provide an opportunity for either further improvement in 2024.
Like to thank all of our employees for their efforts this quarter and in 2023.
Executing safe and efficient operations for our customers and it's always been our hallmark and we're committed to remaining an established leader in the offshore industry.
On to slide nine managing our balance sheet continues to be a top strategic priority during the quarter. We retired the final $30 million in 2023 convertible senior notes outstanding.
We maintained strong liquidity of 279 million and reduced our net debt to $59 million at quarter end.
Now I'll turn the call over to Scotty for an in depth discussion of our operations.
Thanks, Kevin and good morning, moving on to slide 11.
Teams offshore and onshore outperformed again, producing another very well executed quarter, our best performing quarters since 2014.
In the third quarter of 2023, we continue to operate globally with minimal operational disruption with operations in Europe Asia Zealand, Brazil, the Gulf of Mexico and off the U S. East Coast, we continue to operate at high standards with strong uptime and efficiency for the quarter.
During the third quarter, we generated gross profit of $81 million.
Gross profit margin of 20% up from a gross profit to $55 million in the second quarter of 2023, and a significantly improved year over year.
And the first nine months of 2023, we generated a gross profit of $151 million and the gross profit margin of 16% sorry, much increase compared to a gross profit of $19 million for the first nine months of 2020.
2023 has been a strong year for helix and visibility across all sectors in 2024 and beyond is looking very positive certainly more positive than in recent times.
We have got an interest in some of our sports assets internationally now client base is increasing and there is strong tender activity away from the use of the areas of operations, we continued to contracts at better rates with more favorable terms.
Slide 12 provides a more detailed review of our well intervention business in the Gulf of Mexico.
<unk> had excellent utilization of 96% in the first quarter. The vessel performed very well conducted production enhancements and abandonment works on full wells.
<unk> deepwater working under a multiyear campaign for shell in.
In the latter part of the quarter the vessel commenced a full well campaign for another customer.
The key for thousands had utilization of 68% in the third quarter completed the scheduled regulatory dry dock in July .
The vessel then undertook a hijacked coating project for one customer.
Hence the free well production enhancement campaign for one clients and ultra deepwater.
Positively we expect both vessels will have high utilization for the remainder of 2023.
Work awarded in 2024 for both vessels with good visibility with potential further activity and increased rates compared to 2023.
As Keith vessels continue to operate under the integrated heat <unk> Subsea service Alliance package.
Moving to slide 13.
Our north Seawell intervention business continues to respond well to the increased demand in the region.
Having an even stronger third quarter than the second quarter, achieving 98% combined utilization in the U K.
Well enhancer commenced the quarterly working in the west.
West of Shetland region before relocated into the Central North Sea later in the quarter.
Vessel performed very well on production enhancement works on four wells for free customers and completed decommission operations on one well for another customer.
The Seawell also had a very good quarter, where can fatigue customers performing decommissioning works on numerous wells.
The non trust services continues to increase and our business in much improved conditions incentive rates contract incentives and utilization.
The seawell is fully contracted well into December of 2024.
So elyse the planned winter campaign project in the Mediterranean.
The well enhancer is contracted for the remainder of 2023 and has contracted and awarded work in 2024 with have increased rates.
The key seven was 88% utilized conducting the decommissioning contract in New Zealand throughout the quarter.
On completions of works in New Zealand the vessels scheduled to carrier appetite transit to Australia to undertake several intervention scopes for free clients commencing in the fourth quarter.
The G 7000, and contracted for 12 months plus options to undertake well it doesn't work and shell in Brazil, including the pay transit to Brazil.
The work is estimated to commence mid 2024, the Q seven.
7000 is contracted well into 2025, we have good visibility on <unk> in 2025.
Moving to slide 14.
In Brazil, we had good combined utilization of 97% in the third quarter the.
The Siem helix, one had a strong quarter and with 99% utilized in Q3 undertaken work on the <unk> decommissioning projects that <unk> energy performing work on six wells in the quarter.
The Siem helix, two had 96% utilization confection decommissioning activity on three wells with Petrobras.
Such vessels are contracted into the end of 2024 and there is increased demand in tender activity for <unk> post 2024 globally, including in Brazil.
In 2024, we look forward to bringing the Keystone thousands of Brazil, and then convincing the shelving commencing decommissioning contracts.
Slide 15 provides detail of our intervention fleet utilization.
Moving on to slide 16 for a robust <unk> robotics continued their good performance and had another strong quarter improving their results over the strong second quarter and again being the best performing quarter in revenue and EBITDA since 2015.
The business performed high standards with strong utilization on six vessels globally during the quarter, primarily working between trenching RV support and site survey work on oil and gas and renewables related projects.
The APAC region, the Grand Canyon, II had 100% utilization in Q3.
<unk> continued to perform well on a long term decommissioning project in Thailand.
The <unk> 1400, one pension system on board. The same play first continued work on renewables trenching projects in Taiwan undertaken 92 days of trenching utilization for the quarter.
It's a fortune 101 trenching spreads on the <unk> <unk> has now been contracted by the customer until November 2024.
And then they'll see the Grand Canyon, III, which utilize 100% in the quarter performance here renewable trenching projects with one customer and then oil and gas trenching project for another customer.
At Horizon.
100% utilization in Q3 completion renewables trenching works with two customers.
We've now extended the vessel chartered to the end of 2025 due to the massive trenching activity expected by some of our established clients in the coming years.
Also in the North Sea decline a wave completed 60 days of operations in the quarter undertaken <unk> remains on Saturday operations.
In the USA the shade of Board alone Jones Act compliant vessel, which utilized 95% in Q3.
The vessel performed works in the Gulf of Mexico to support the seismic note installation project.
Helix robotics is performing well and have a good backlog and visibility I believe we're expecting strong performance in 2023 and in 2024.
Net of some geographical expansion in the renewable sector continues highlighted by the recent contract extension for the <unk> hundred one and the same type has until late 2024.
Slide 17 details our robotics vessels are entrenched and utilization.
Slide 18 provides an overview of our shallow water decommissioning business Helix Alliance.
<unk> had an excellent third quarter, producing a record performing quarter to date with strong utilization across all three divisions.
The offshore division had nine displays operating in Q3 with a combined utilization of 85% performing decommissioning services.
Sure specified fixed salaries, Alex fees and it won creep bites, we've increased combined utilization of 91%.
Energy Services Division had increased operations in 1272 days or 84% utilization for the PNA systems deployed during the quarter conducting decommissioning services.
The division that operations of 259 days or 47% utilization in the quarter for the cyclical achieving systems.
Key to our success in the shallow water well decommissioning market in September we completed the acquisition of five TNA spreads for the energy services Division higher risks retrofit manpower and increasing our tightened pretty nice spreads to 20 units.
In Q3, the diamond and heavy lift divisions had increased combined utilization of 93% across the three dive in vessels.
Heavy lift barge the Hadrian had utilization of 100% undertaken platform removal and other decommissioning activities.
In the first quarter Helix Alliance commenced a nice sizable decommissioning contract since the Helix Alliance acquisition.
The contract is to decommission 39 wells remove and dispose of 15 pipelines and remove and dispose of seven platform structures.
The work we utilize those services that Phoenix Alliance offers highlights in the helix alliance as the preeminent contracting company offering fulfilled shallow water decommissioning in one package.
Helix Alliance had a good quarter. However, they work we undertake in shallow water is seasonal and we will likely see a drop offs in activity across all divisions as we enter the winter period.
Slide 19 provides detail for the helix aligns best on systems recent utilization.
Before I hand over to Brent.
I would again like to thank our global helix employees and partners, who will help us achieve an excellent quarter producing strong results.
And a very long time, so thank you all stay safe and keep up the good work.
We expect to finish 2023 strongly and are looking forward to what should be another very solid year rollout businesses in 2024, I will now turn the call over to Brent.
Thanks Scotty.
Moving to slide 21 outlines our debt instruments and maturity profile as of September 30, we had total funded debt of $233 million at quarter end during.
During Q3, we repaid the remaining $30 million of our 2023 converts entirely in cash.
As well as semiannual installments of <unk> debt.
We have no more scheduled maturities of our long term debt maturing during the remainder of the year, but as mentioned managing our balance sheet continues to be a top strategic priority.
Moving on Slide 22 provides an update on key balance sheet metrics, including cash long term debt liquidity and net debt levels with cash of 168 million, our net debt position at quarter end was $59 million.
At quarter end, we had yes, we had full $120 million of gross capacity under our ABL facility and no borrowings outstanding.
After Lcs.
Our net remaining availability under the ABL was $110 million with the resulting liquidity of $279 million.
Given the cash repayments of our 2023 converts installment of the naira debt during the quarter.
We repurchased 174000 shares of helix common stock for approximately $1 9 million.
Operator: Please continue to stand by your conference. We'll begin momentarily. We thank you for your patience.
Thanks Brent.
Our team performed well delivering strong results in the third quarter. It is our most active and best quarter of the year and the market continues to be constructive for the remainder of 'twenty three and into 2024, our results through three quarters have delivered the year over year improvements, we expected entering the winter months, we expect seasonal impacts to our op.
<unk> in the North Sea Gulf of Mexico, and APAC regions, given these expected impacts.
Operator: Greetings and welcome to the third quarter, Helix Energy Solutions 2023 earnings conference call. During the presentation, all participants will be in the lesson 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 at any time during the conference, you need to reach an operator, please press the R0.
We are tightening our guidance as follows revenue in the one two to $1 $3 billion range.
EBITDA $263 million to $278 million at $15 million increase from the midpoint pre cash flow of $100 million to $140 million.
Capex of $75 million to $85 million.
These ranges include some key assumptions and estimates any significant variation from these assumptions and estimates could cause our results to fall outside of the ranges provided.
Operator: As a reminder, this conference is being recorded on Tuesday, October 24, 2023.
Our fourth quarter results will be impacted by the seasonal weather in the northern Hemisphere robotics segment will be impacted in the north sea and APAC regions with a decrease in trenching activities are shallow water abandonment will be impacting the Gulf of Mexico with a decrease in heavy lift and diving activities. We nevertheless expect the fourth quarter to generate salt.
Brent Arriaga: I would now like to turn the conference forward to Mr. Brent Arriaga, Chief Accounting Officer. Please go ahead.
Brent Arriaga: Good morning, everyone, and thanks for joining us today on our conference call for our third quarter of 2023 earnings release, participating on this call for Helix today, our Oincrats, our CEO, Scottie Sparks, our CEO, Erik Staffeldt, our CFO, Ken Nykirk, our general counsel and myself. Hopefully you've had an opportunity to review our earnings press release and the related slide presentation release last night. If you did not have a copy of these materials, both can be accessed through the 40 investor page on our website at www.helixes.com. The press release can be accessed at the press releases tab and the slide presentation can be accessed by clicking on today's webcast icon.
<unk> seasonally adjusted results.
Providing a key as key assumptions by segment and region starting on Slide 25, first our well intervention segment the Gulf of Mexico as expected continued to be a strong market for the balance of 'twenty three with the expected strong utilization on both the Q4 Q five.
And benefiting from market rates.
In the U K North Sea, both vessels are contracted work through Q4 and into 2020 for activity levels for our well intervention vessels in this market continues to be robust.
Ken Nykirk: Before we begin our prepared remarks, Ken Nykirk will make a statement regarding forward-looking information. Again, 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 in the associated presentation, statements of us back, are forward-looking statements and are made under the safe public provisions of the Private Security's litigation reform act in 1995.
During the fourth quarter. The Seawell is scheduled to undertake a two to three week transit for a project in the western Mediterranean.
The Q 7000 is currently completing work in New Zealand on the TUI project the vessels expected to translate to Australia for contracted work three operators.
In Brazil, the Siem helix two has contracted into mid December of 'twenty, four with Petrobras and the Siem helix. One is contracted performing well abandonment work for tried it into Q4 of 24.
Moving to Robotics segment Slide 26, the robotics segment continues to benefit from a tight market, where currently both oil and gas market and the renewables markets are extremely active competing for assets and services.
Ken Nykirk: Our actual future results may differ materially from our projections and forward-looking statements due to a number in variety of risks, uncertainties, assumptions, and factors, including those that four can slide to, most recently filed annual report on form 10K, our quarterly reports on form 10Q, and then our other fileings with the SEC. You should not place undue reliance on forth-looking statements and we do not undertake any duties to update any forth-looking statement.
In the APAC region, and the Grand Canyon II is contracted from decommissioning and RV support work in Tyler.
We expected good utilization for the balance of 'twenty three in that region.
In addition, one of the recently acquired <unk> Covenant Crunchers is contracted and working into mid Q4 2024 on the cm Topaz in.
Ken Nykirk: You just claim any written or oral statements made by any third party regarding the subject matter of this conference call. Also, during this call, certain non-gap financial disclosures may be made, and accordance with SEC rules, the final slide of our presentation provides reconciliations of certain non-gap measures to comparable gap financial measures. These reconciliations, along with this presentation, the earnings press release, our annual report, and our replay of this broadcast, are available under the 40 Investors section of our website, at www.helicist.com. Please remember that information on this conference call speaks only as of today, October 24, 2023, and therefore you will advise that any time-sensitive information may no longer be accurate as of any replay of this call.
In the North Sea the Grand Canyon III is contracted to perform trenching work with expected good utilization in the fourth quarter. The horizon enabler with respect flexible charter has trenching projects into December the globe Lar wave is pursuing multiple short term scopes.
And the rest assure you <unk> is working on the Gulf of Mexico, performing <unk> operations with opportunities in the Gulf of Mexico. The vessel is expected to have good utilization in Q4.
Where production facilities. The HP one is on contract for the balance of 'twenty three with no expected change we have expected variability with projections as the Droshky field continues to deplete the Thunder horse field is expected to be offline in Q4 and the repairs.
Owen Kratz: Good morning. This morning we'll review our Q3 highlights and financial performance. We'll provide insight into our operations and the key drivers to our results and outlook for the balance of 2023. Lastly, we'll provide insight into the development of offshore energy market, our focus on the opportunities within our energy transition model and opportunities beyond 2023. Moving to the presentation slide six through nine, provide a high-level summary of our results and key highlights for the third quarter of 2023.
Continuing on slide seven for the shallow water abandonment segment. The shelf decommissioning market continues to be very active we've entered the period of time, where we expect seasonal variability in activity. We expect the marine offshore division utilization to scale back seasonally on lift boats Osp's and crew boats.
The energy services Division should have good utilization on 12, 14, P&A spreads and two to three cold tubing units during the remainder of 'twenty three.
Owen Kratz: The underlying macro drivers of the offshore energy service market continue to be constructed and supportive of a sustainable long-term investment cycle. Offshore services both in the U.S, and internationally continue to be very active with traditional oil and gas competing with renewables for assets, creating high levels of demand for services. In addition, our continued geographic expansion of our offshore renewable services into the U.S, and Asia Pacific markets has diversified our operations and broadened our reach.
There is seasonality in the dive in Entellus division that will impact the fourth quarter.
Moving on to slide 28, our Capex forecast for phase III has been heavily impacted by the dry dock and maintenance periods on our two vessels earlier in the year. In Q3, we spent an initial $6 million of cash to acquire five PMA systems, our cash burn in Q3 was approximately $26 million with a heavy regulatory year.
And our recent acquisition of our Capex forecast range for 'twenty three is now 75% to $85 million. The majority of our Capex forecast continues to be maintenance and project related which primarily falls into our operating cash flow.
Owen Kratz: In addition to maintaining high utilization and enhancing the current rate environment for our other services, the fundamentals for decommissioning remain positive with favorable regulatory push and high commodity prices. With the positive market backdrop on top of strong seasonal activity, our third quarter results improved upon the solid performance delivered in Q2. Our third quarter reflects our best quarter since 2014 and are in illustrative of our earnings power of our focus in geographically diversified business model.
Reviewing our balance sheet, our funded debt was $233 million at September 30, with the final payoff of the $30 million 2023 convertible senior notes in September and the semiannual and stops unmarried debt.
I'll skip the remaining slides in leisure.
At this time I will turn the call back to Owen for further discussion of our outlook for closing comments. Thanks, Eric.
Things are good and we expect even better returns going forward.
Owen Kratz: Highlights for the quarter include the Q7000 who worked the third quarter on decommissioning operations in New Zealand. Strong well-intervention utilization in the North Sea and Brazil. The Q4000 completed dry dock in July, returning to operations for the remainder of the quarter. Robotics achieved strong seasonal utilization and operating results with high trenching and vessel activities. Helix alliance improved seasonal results with continued high levels of execution. We maintained strong cash generation and positive free cash flow and we acquired five additional PNA systems for our shallow water abandonment segment.
We continue to outperform our expectations, resulting in an additional increase to our 2023 guidance to an EBITDA range of $263 million to $278 million.
We're in the budgeting process for 2024, so we don't have specific guidance to share at this time.
What we see so far it could be upwards of 10% growth for 2024 over 2023 from our current assets.
This includes legacy below market rates.
Obviously contracted that start to roll off by the end of 2024, which would indicate even further growth opportunities in 2025 over 2024, we've already pointed out. The 2024, we will have approximately 200 fewer scheduled maintenance stage, then 2023 assuming market rates.
Owen Kratz: Revenants for the quarter were 396 million and increased to 87 million from our second quarter results. We generated net income of 16 million compared to net income of 7 million in the previous quarter. Adjusted the bidot for Q3 increased to more than 96 million compared to 71 million in the second quarter. During the third quarter we generated operating cash flow of 32 million, including 18 million spent on dry dock and recertification costs.
We're able to manage costs and execute on our maintenance programs. This could turn into approximately $25 million to $30 million in EBITDA.
We have four major assets currently impacted by legacy rates.
We ask that each one is on the two year contract to the end of 2024 with a small escalator in rates for 2020 for over 23 offsetting higher costs by.
Owen Kratz: We spent 8 million on capex including an initial 6 million in cash for the additional 5 PNA spreads. Our resulting free cash flow during the quarter was 23 million. Our results were impacted by the regulatory certification and maintenance of the Q4000 which were completed at the end of July. Our year-to-day revenues were 955 million and increased of 370 million from this time in 2022. We generated net income of 17 million compared to a net loss of 90 million at this time in 2022.
By 2025, we expect the vessel to be able to achieve market rates, which could be 50% to 60% increase to the current rates.
So it's to us on a two year extension of a four year contract that has a flat rate until the end of 2024 at that time, we expect the vessel to be available at market rates, which could be approximately 40% higher.
The Q 5000 has a partial year commitment contract that ends at the end of 2024.
Owen Kratz: Year-to-date and adjusted EBITDA increased almost threefold from 2022, increasing by 131 million to 203 million. For the year-to-date our free cash flow was 42 million compared to a negative 4 million in 2022. These results represent significant improvements year-over-year and provide a glimpse into our earnings and cash generation potential. The significant improvements were achieved despite the high number of regulatory maintenance days in 2023 that have tampered our results, but provide an opportunity for either further improvement in 2024.
The year over year escalator for 2020 for over 23, but we will not see market rates until 'twenty five.
The Q 7000 is contracted to work in <unk>.
Pack into mid 2024 before transitioning to Brazil for 12 to 18 months the rate cost differences between APAC work and the Brazil work should generate 20% to 30000, a day increase in EBITDA contribution starting in 2025 before reaching market rates in 2020.
Six.
When I refer to market rates I'm referencing current market rates as we don't know what the market rates will be in 2012 for 26 other than to say that current market rates are not yet back up to 2014 levels rig rates continued to increase in supply is expected to remain tight.
Owen Kratz: I'd like to thank all of our employees for their efforts as quarter and end in 2023. Executing safe and deficient operations for our customers has always been our hallmark and we're committed to remaining an established leader in the offshore industry.
At this time, we don't have sufficient assets to meet the expected demand, we don't anticipate adding any new helix purchased or newbuild vessels, but instead could look to partner with select vessel owners to provide helix systems and expertise to cover demand as an alternative to adding excess capacity to the market.
Owen Kratz: One to slide nine, managing our balance sheet continues to be a top strategic priority. During the quarter we retired the final 30 million of 2023 convertible senior notes outstanding. We maintain strong liquidity of 279 million and reduced our net debt to 59 million at quarter hand.
We will be assessing our spread deployment strategy with consideration given to maintaining our presence and relationships in all the regions, where we were.
Scott Sparks: I'm now turned to call over to Scottie for an in-depth discussion of our operations. Thanks Alan and good morning moving on to slide 11. The teams offshore and onshore outperforms again producing another very well executed quarter been our best performing quarter since 2014. In the third quarter of 2023 we continue to operate globally with minimal operational disruption with operations in Europe, Asia, New Zealand, Brazil, the Gulf of Mexico and off the US East Coast.
So this and we added two additional intervention systems in two centers at the end of 2022.
The renewables market.
<unk> forecasted growth rates for the work in the market that would allow us to grow our.
Oh.
It would allow us to grow our trenching and <unk> clients business within those two areas without a need to expand into other segments of the offshore wind market. We are adequate returns could be a challenge.
Scott Sparks: We continue to operate high standards with strong uptime efficiency for the quarter. During the third quarter we generated gross profits of 81 million and a gross profit margin of 20% up from a gross profit of 55 million in the second quarter of 2023 and the significantly improved year over year. For the first nine months of 2023 we generated a gross profit of 151 million and a gross profit margin of 16%. Very much improved compared to a gross profit of 19 million for the first nine months of 2022.
Last year's acquisition of Alliance and the extension of our decommissioning business once again into the Gulf of Mexico shelf has been a good success.
This business is clean EBITDA contribution more than tripled since our acquisition and then 'twenty two 'twenty three is on track to generate roughly.
Rob will the initial guidance given at the time of the acquisition as demand has increased faster than we expected.
A recent study indicates over 14000 wells to be abandoned in the Gulf of Mexico.
Scott Sparks: 2020 free has been a strong year for Helix and visibility across all sectors in 2024 and beyond is looking very positive. Certainly more positive than in recent times. We have grown interest in some of us spot assets internationally. Now client base is increasing and there's strong send directivity away from our usual areas of operations. We continue to contract that better rates with more favorable terms. Slide 12 provides a more detailed review of our ones of engine business in the Gulf of Mexico.
The structures and pipelines with 90% of wells being in shelf waters.
And feel good and Cox bankruptcies have kick started an intense desire to see this work done.
From both successor owners, who will assume the liability as well as regulatory bodies pushing for a solution.
Field abandonment process begins with assessment and making the old structure safe to work on then the focus turns to the P&A wells following the pipelines or abandon the platform's removed with the last phase named debris clearance of the ocean floor.
Scott Sparks: The key 5,000 had excellent utilization of 96% in the third quarter. The vessel performed very well conducting production enhancements and abandonment works on four wells in ultra deep water working under a multi-year campaign for Shell. In the latter part of the quarter the vessel commenced a full well campaign for another customer. The key 4,000 had utilization of 68% in the third quarter, completed the scheduled regulatory drive-up in July. The vessel then undertook a hydrate courting project for one customer and commenced the free well production enhancement campaign for one client in ultra deep water.
After after a flurry of wells P&A work on 2023, we can expect the potential slowdown and will work in a ramp up in pipeline and platform removal.
May be the trend until the more recent talks bankruptcy work begins at which time all phases of the work should be active.
Helix is the premium preeminent shelf contract with the bones, all the main asset classes needed to perform all aspects with full field abandonment work, we expect to work to continue for years to come based on the work that exists. We believe the business lines helix was developed for the end of life oil and gas and the development of offshore.
Scott Sparks: Positively, we expect both vessels will have high utilization for the remainder of 2023. We have work awarded in 2024 for both vessels with good visibility for potential further activity and increased rates compared to 2023. Both few vessels continue to operate under the integrated Helix SLB Subsea Service Alliance package. Moving to slide 13, our North Sea Wound Prevention Business continues to respond well to the increased demand in the region, having an even stronger third quarter than the second quarter, which even 98% combined utilization in the UK.
Lynn has positioned the company well with a strong balance sheet for the general question of double digit free cash flow yield going forward.
I believe this.
Good perspective on why Im saying things are good.
But we expect them to get even better.
Sure.
Thanks, Owen operator at this time.
Scott Sparks: The one-hancer commenced the quarter working in the west of Shetland region before relocating to the central North Sea later in the quarter. The vessel performed very well on production enhancement works on four wells for free customers and then completed decommission operation on one well for another customer. The Seawell also had a very good quarter working for two customers performing decommissioning works on numerous wells. The Manfrost Services continues to improve, now business-seeing, much improved conditions in terms of rates, contracting, terms, and utilization.
Questions.
Thank you.
If you would like to register a question. Please press the one four on your telephone you will youre at three tone prompt to acknowledge your request.
Your question has been answered and you would like to withdraw your registration. Please press. The one followed by the three once again to register a question. Please press the one four on your telephone one moment. Please for the first question.
Okay.
Scott Sparks: The Seawell is fully contracted well into the summer of 2024 and will shortly leave for the planned winter campaign project in the Mediterranean. The well-enhanceder is contracted for the remainder of 2023 and has contracted and awarded work in 2024 with further increased rates. The Q7000 was 88% utilized conducting the decommissioning contract in New Zealand throughout the quarter. On completion of work in New Zealand, the vessel is scheduled to carry out the paid transit to Australia to undertake several interventions to scope the free client's commencing in the fourth quarter.
Our first question comes from James Schumm with TD Cowen. Please proceed.
Hey, good morning, guys.
Can you just help me understand the free cash flow guide for this year I mean, you have EBITDA going up nicely versus the prior guide and I think you've got free cash flow down $30 million or so at the midpoint.
It looks like Capex is up I don't know six or $7 million.
So you called out working capital in the press release, but.
Scott Sparks: The Q7000 is then contracted for 12 months plus options to undertake well-evalent work in Shell in Brazil, including the paid transit to Brazil. The work is estimated to commence in mid 2024. The Q7000 is contracted well into 2025 and we have good visibility and work globally following on in 2025. Moving to slide 14. In Brazil, we had good combined utilization of 97% in the third quarter. The Seam Hilux I had a strong quarter and was 99% utilized in Q3, undertaking work on the two-year decommissioning project for Trident Energy, performing work on six wells in the quarter.
Is that it or like why would you not.
Be able to reverse the working capital build in the fourth quarter.
It's kind of typical for <unk>. So just just help me understand what's going on with the free cash flow. Please.
Yes, Youre right, Jim I think the primary driver for the adjustment to the free cash flow is the working capital increases Youre right about obviously the increased EBITDA that comes with also an increase to our revenue.
Over 50 $50 million just.
Quarter over quarter. So overall this is primarily a timing issue.
Scott Sparks: The Seam Hilux II had 96% utilization, completing decommissioning and activity on three wells with Petrobras. Both SH vessels are contracted into the end of 2024 and there's increased demand and tender activity for the SH vessels post 2024 globally, including in Brazil. In 2024, we look forward to bringing the Q7000 to Brazil and then convening the Shell decommissioning contract. Slide 15 provides detail about when to mention for utilization. Moving on to slide 16 for a BOSIC tribute.
I think from what we are forecasting in the fourth quarter I think we see.
Some flow back in the fourth quarter as were projecting strong free cash flow between $60 to $100 million in the fourth quarter alone I think theres a good chance that will happen in the early first quarter as well once again the seasonal impact activity levels remained strong into October November before we see this.
Seasonal dip in December and so so it is primarily.
Working capital and once again, it's primarily just a timing issue there is the impact of the <unk>.
Scott Sparks: The BOSICs continue their good performance and have another strong quarter. Improving their results over the strong second quarter and again being the best performing quarter in Samsung, revving in EBITDA since 2015. The business performed high standards for strong utilization on six vessels globally during the quarter, primarily working between trenching, ROV support and site survey work on oil and gas and renewables related products. The APAC region, the Grand Canyon 2, had 100% utilization in Q3.
<unk> increased the capex that we've outlined.
But those are the two main drivers.
Thanks, Eric and just to confirm there is no you have no collection issues or anything like that it's just timing and so we should this should reverse by the fourth I'm sorry by the first quarter if not in the fourth quarter is that fair I think that's fair I think overall.
Scott Sparks: The vessel continued to perform well on a long-term decommissioned project in Thailand. The T-1401 trenching system onboard the CNPFAS continued work on the renewables trenching project in Taiwan, undertaking 92 days of trenching utilization for the quarter. The T-1401 trenching spread on the CNPFAS has now been contracted by the customer until November of 2024. In the North Sea, the Grand Canyon 3 was utilized 100% in the quarter, performing two renewable trenching projects for one customer and an oil and gas trenching project for another customer.
Jim once again activity levels for us as a whole this year over last year revenues are up by over $400 million and so I think the impact of of the working capital on our cash flow generation has been.
Obviously, you have quite strong also think that we've had a little bit of shift in our schedules that has impacted.
The working capital as well at this time, we don't expect to see.
Scott Sparks: The horizon of April F had 100% utilization in Q3, completing renewables trenching works for two customers. We have now extended the vessel charge into the end of 2025 due to the amount of trenching activity expected by some of our established clients in the coming years. Also in the North Sea, the global wave completed 60 days of operations in the quarter and the taken order to remove the site survey operations. In the USA, the Sheet of Border Long, a Jones Act confine vessel was utilized 85% in Q3.
<unk> collection issues.
Okay and then the last one for me can you can you just give an update on the 2026 converts what's the strategy or what's the most likely outcome there.
I think from that standpoint, Jimmy that we've had been advised and expect that.
The converts that we have are is an instrument that we could we can hold to maturity.
Once again, managing our balance sheet has always been our top priority.
Scott Sparks: The vessel performed works in the Gulf of Mexico to support a seismic node installation project. Helix Robotics is performing well and have a good backlog and visibility globally. We are expecting strong performance in 2023 and in 2024. Our service and geographical expansion in the renewables sector continues, highlighted by the recent contract expansion for the C-1401 and C-NP-1000 till late 2024. Slide 17 details our robotics vessels are in trenching utilization. Slide 18 provides an overview of our shallow water decommissioning business Helix Alliance.
And then from that standpoint, we continue to weigh our options on how to manage this.
Several years back our focus was primarily on cash generation now as the market has improved.
We're looking at our options from the debt standpoint, obviously, we haven't been shy about talking about.
Wanting to a more traditional debt instrument.
Other than convert so really really all options are on the table and focus really top priority is managing our balance sheet.
Scott Sparks: Helix Alliance had an excellent third quarter, producing a record performing quarter to date with strong utilization across all three divisions. The offshore division had nine lift boats operating in Q3 with a combined utilization of 85% performing decommissioning services. Our offshore also supplied six OVs OSVs and had one crew boats with increased combined utilization of 91%. The energy services division had increased operations of 1272 days or 84% utilization for the P&A systems deployed during the quarter conducting decommissioning services.
Okay. Thanks, a lot Eric I appreciate it.
Our next question comes from Luke Lemoine with Piper Sandler. Please proceed.
Thank you good morning.
Just wanted to kind of clarify a couple of your comments on the initial 24 outlook. When you set up at least 10% were you referring to EBITDA for 24.
Yes.
Okay and is that inclusive or exclusive of the.
<unk>.
The 25% to 30 million of dry docks that you had in 'twenty three.
Scott Sparks: The division had operations of 259 days or 47% utilization in the quarter for the six cool tube and systems. Geostross success in the shallow water, well decommissioning markets. In September, we completed the acquisition of five over P&A spreads for the energy services division. Hiring the rest, rectal sets, manpower, and increasing our total P&A spreads to 20 units. In Q3, the dive in the heavy lift division had increased combined utilization of 93% across the three diving vessels.
Okay.
That would be primarily based on the $25 million to $30 million.
EBITDA from lower maintenance Capex.
Okay got it so just thought that amount with those absent plus rate growth on top of that right.
Alright.
That does not include any.
Any anything.
Anything other than continued operations from our current assets. It doesn't include any acquisitions of production or.
Scott Sparks: The heavy lift barge, the Heedron, had utilization of 100% undertaken platform removal and other decommissioning activities. In the first quarter, Heedex Alliance commenced a most sizable decommissioning contract since the Heedex Alliance acquisition. The contract is to decommission 39 wells, remove and dispose of 15 pipe loans and remove and dispose of seven platform structures. The work we utilize all services that Helix Alliance offers, highlighting that Helix Alliance is the permanent contracting company offering full-field shallow water decommissioning in one package.
Or other impacts that May also increase.
So that's why we said greater than 10%.
Okay, Alright, perfect. Thanks Owen.
As a reminder to register a question. Please press the one four on your telephone or.
Our next question comes from Greg Lewis with <unk>. Please proceed.
Yes, hi, Thank you and good morning, everybody and thanks for taking my questions.
I was hoping that you could talk a little bit more about the shallow water abandonment market.
Scott Sparks: Helix Alliance has a good quarter, however the work we undertake in shallow water is seasonal and we will likely see a drop-off in activity across all divisions as we enter the winter period. So I'd 19 provide detail for the Helix Alliance Vestance Systems recent utilization. Before I hand over to Brent, I would again like to thank our global Helix employees and partners.
I guess one question was the.
A handful of.
Assets you purchased I guess it was like $6 million were those were those acquired from <unk>.
Existing I guess competitors or were those.
New equipment that was ordered and you took delivery of.
Scott Sparks: We all help to achieve an excellent quarter, producing strong results, our best in a very long time. So thank you all, stay safe and keep up the good work. We expect to finish 2023 strongly and are looking forward to what should be another very solid year for all of our businesses in 2024.
That was no we're not looking to add capacity to the market that was an acquisition from existing competitor. It was very attractive because they are also came with it.
Quite a number of offshore workers and people are the biggest bottleneck too.
Brent Arriaga: I'm now turning the call over to Brent. Thanks, Garry. Moving to slide 21, it outlines our debt instruments and maturity profile as it's set to number 30. We had total funded debt of 233 million at Corp.
Your ability to cover a greater market share in this market. So the thing that people are actually more important than that in new equipment.
Okay, and Thats 65 original and <unk>.
Brent Arriaga: Inn. During Q3, we repaid the remaining 30 million of our 2023 converts entirely in cash, as well as the semiannual installments of our mayor at debt. We have no more scheduled maturities of our long-term debt entering during the remainder of the year.
<unk> Division had replenish to hire those.
Those people direct.
Good win for us.
And then just as.
And just as we try to piece together.
Fragmentation of the shallow water market.
Brent Arriaga: But as mentioned, managing our balance sheet continues to be a top strategic priority. Moving on, slide 22 provides an update on key balance sheet metrics, including cash, long-term debt liquidity and net debt levels. With cash of 168 million, our net debt position at Corp. Inn was 59 million. At Corp. Inn, we had full 120 million of gross capacity under our ABL facility and no borrowings outstanding. After LC's, our net remaining availability into the ABL was 110 million, with the resulting liquidity of 279 million. Given the cash repayments of our 2023 converts and installment of the mayor at debt during the quarter, we repurchased 174,000 shares of helix to common stock for approximately 1.9 million.
Realizing it's also.
Geographic specific do you see as this market unfolds.
Obviously, you guys are in a pretty great position from a balance sheet and liquidity and cash.
Could there be opportunities to do more such similar I mean, you did mention potential for or that the guidance was exclusive of any.
Acquisitions is this scenario, where the company could continue to look to grow over the next one to two years.
Yes, I think we will keep a close eye on the market.
To all of our major clients.
One of the advantages that we have is that we already have the systems in.
Policies in place that qualify us to work for the majors, which are the are the recipients of the liability as it were from the field within Cogs bankruptcy, so depending on their demand.
Erik Staffeldt: I will now turn the call over to Eric for a discussion on our outlook for 2023 and beyond. Thanks, Brent. Our team performed well, delivering strong results in the third quarter. It is our most active and best quarter of the year, and the market continues to be constructive for the remainder of 23 and into 2024. Our results to three quarters have delivered the year-over-year improvements we expected.
<unk>.
If it gets to the point, where we're exceeding our capacity to supply then there are opportunities that we could look at.
Okay Super helpful. And then just one more from me realize realizing that.
When we talk realizing that.
Erik Staffeldt: Entering the winter months, we expect seasonal impacts to our operations in the North Sea, Gulf of Mexico, and APEC regions. Given these expected impacts, we are tightening our guidance as follows. Revenue in the 1.2 to 1.3 billion dollar range. It bit up 263 to 278 million, a 15 million increase from the midpoint. We cast low of 100 to 140 million, a capex of 75 to 85 million.
Sometimes well intervention assets have to compete against offshore drilling rigs.
A big Commerce, a big theme across the drilling space been white space and idle time as rigs look to get back to work.
It's interesting because when we when we listen to you. It doesn't seem like we're really facing it doesn't seem like the well intervention assets are facing much white space.
Is that.
Erik Staffeldt: These ranges include some key functions and estimates, any significant variation from these assumptions and estimates could cause our results to fall outside of the ranges provided. Our fourth quarter results will be impacted by the seasonal weather in the Northern Hemisphere. Robotic segment will be impacted in the North Sea and A-PAC regions with a decrease in trenching activities. Our shallow water abandonment will be impacting the Gulf of Mexico with a decrease in heavy left and diving activities.
I guess my question is are we starting to see.
Drilling rigs kind of look to take some of the short term well intervention work or is the white space that we're seeing in offshore drilling really transient in rigs arent looking to compete against your <unk>.
Well intervention assets.
Ill take that.
I think that there are certain rigs are entering the intention set of decommissioning market theres been a couple of contracts awarded in the day.
Erik Staffeldt: We nevertheless expect the fourth quarter to generate solid, seasonally adjusted results.
Well, it's a Gulf of Mexico, a couple of awarded in Australia that we are expecting high utilization for all of our assets in 'twenty, three and as we get into 'twenty four.
Erik Staffeldt: Providing a key assumptions by segment in region, starting on slide 25, first our well intervention segment. The Gulf of Mexico is expected to continue to be a strong market for the balance of 23. With the expected strong utilization on both the Q4,000 and Q5,000, and benefiting from market rates. In the UK, North Sea, both vessels have contracted work through Q4 and into 2024, activity levels for our well intervention vessels in this market continues to be robust.
And you also have to look at it.
Geographically, we don't really compete with rigs in the North Sea for instance, our vessels are very specific to the type of work that happens in the north sea being <unk>.
<unk> has an older wells in the North sea.
So there is there is a few contracts that have been awarded but I wouldn't say, Craig impacting us and we're expecting good utilization.
Okay Super helpful. Thanks.
Erik Staffeldt: During the fourth quarter of the Sea, well is scheduled to undertake a two to three week transit for a project in the Western Mediterranean. The Q7,000 is currently completing work in New Zealand on the Turing Project, the vessel is expected to transit to Australia for contracted work with three operators. In Brazil, the Sea, Helix II is contracted into mid-December of 24 with Petrobras and the Sea. Helix II is contracted performing well abandonment work with Trident into Q4 of 24.
Thank you.
Our next question comes from Don Crist with Johnson.
Johnson Rice. Please proceed.
Good morning, gentlemen, I wanted to ask one quick question about the convertible debt I mean, obviously, they're all options are on the table, but.
Would you expect any of the current noteholders to convert given where it's trading today it seems at least to us that.
The.
The.
Erik Staffeldt: Moving to robotic segments, slide 26. The robotic segment continues to benefit from the tight market, but currently both oil and gas market and the renewable markets are extremely active competing for assets and services. In the APEC region, the Grand Canyon II is contracted to form decommissioning and our reciprocal work entitled expected good utilization for the balance of 23 in that region. In addition, one of the recently acquired T-14 countries is contracted to working into mid-Q4, 2024 on the Sea and Tobas.
It doesn't really seem like anybody is going to convert at this stage, given where they're trading today.
Yes, good morning, Don I think the advice that we've gotten from the experts in this area is generally not expect any of the holders to convert because the notes traded at a premium to our stock price and so that's the advice that we've been given and I think that you can see from the trading value of the <unk>.
They are trading at a slight premium to our to our stock price and therefore, we would not expect there to be a conversion.
Erik Staffeldt: In the North Sea, the Grand Canyon III is contracted to perform trenching work with expected good utilization in the fourth quarter. The horizon enabler with the expected flexible charter has trenching projects into December. The global are way that's pursuing multiple short-term scopes. In the rest, the Chilean borderline is working on the Gulf of Mexico performing ROV operations with opportunities in the Gulf of Mexico, the vessel is expected to have good utilization in Q4.
Okay and I wanted to ask one question on the alliance payout it seems like it impacted your EPS, but not sure. Your EBITDA. This quarter can you remind us when that actually goes out the door when that cash was that sort of the ex management team.
So you have the measurement period, Don goes through the fourth quarter of 'twenty three so so includes the upcoming quarter as well.
We'll true it up.
Erik Staffeldt: For production facilities, the HP-1 is on contract for the balance of 23 with no expected change. We have expected variability with production as the Drosky field continues to deplete. The Thunderhawk field is expected to be off-line in Q4 than new repairs.
As of as of the third quarter two they ended up to fair market estimate value estimate of $74 million.
The payment is expected to happen in the start of the second quarter of 2024.
Erik Staffeldt: Continuing on slide 27 from the shallow water abandonment segment, the Shelby commissioning market continues to be very active. We've entered the period of time where we expect seasonal variability and activity. We expect the marine offshore division utilization to scale back seasonally on the lift boats, OSVs and crew boats. The energy services division should have good utilization on 12-14 p.n.a, spreads and 2-3 cold tubing units turned into remainder of 23.
Well I think we're all in agreement that alliance has significantly outperformed so we don't mind paying a little bit more to them. So I appreciate the time today. Thanks.
Erik Staffeldt: There is seasonality in the diving and heavy lift division that will impact the fourth quarter.
And to your point there once again it is $74 million through the third quarter.
We expect obviously will adjusted upwards as they continue to outperform here in the fourth quarter.
Thank you.
Gentlemen, there are no further questions at this time.
Erik Staffeldt: Moving on to slide 28, our CAPEX forecast for 23 has been heavily impacted by the dry docs and maintenance periods on our Q-vessel earlier in the year. In Q-3 we spent an initial 6 million of cash to acquire 5 PNA systems. Our cash spending Q-3 was approximately 26 million. With the heavy regulatory year in our recent acquisition, our CAPEX forecast range for 23 is now 75 to 85 million. The majority of our CAPEX forecast continues to be maintenance and project related, which primarily falls into our operating cash flow.
Okay. Thanks for joining us today, we very much appreciate your interest and participation and look forward to having you on our fourth quarter call in February . Thank you.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.
[music].
Erik Staffeldt: Reviewing our balance sheet, our funded debt was 233 million of September 30th, with the final payoff of the 30 million 2023 convertible senior notes in September, and it's my annual and stock unmarried debt.
Okay.
Sure.
[music].
Okay.
Erik Staffeldt: I'll skip the remaining slides and leave those comments.
Okay.
[music].
Owen Kratz: This time I'll turn it all back to Owen for further discussion of our outlook and for closing comments. Thanks, Eric. Well things are good and we expect even better returns going forward.
Owen Kratz: We continue to outperform our expectations, resulting in an additional increase to our 2023 guidance to an EBITDA range of 263 to 278 million. We're in the budgeting process for 2024, so we don't have specific guidance to share at this time. But with what we see so far, it could be upwards of 10% growth for 2024 over 2023 from our current assets. This includes legacy below market rates previously contracted that start to roll off by the end of 2024, which would indicate even further growth opportunities in 2025 over 2024.
Owen Kratz: We've already pointed out that 2024 will have approximately 200 fewer scheduled maintenance days than 2023. Assuming market rates and that we're able to manage costs and execute on our maintenance programs, this could turn into approximately 25 to 30 million in EBITDA. We have four major assets currently impacted by legacy rates. The SA-21 is on a two-year contract to the end of 2024 with a small escalator rate for 2024 over 23, offsetting higher costs.
Owen Kratz: By 2025 we expect of us to be able to achieve market rates, which could be a 50 to 60% increase to the current rates. The SH-2 is on a two-year extension of a four-year contract that has a flat rate until the end of 2024. At that time we expect of us to be available at market rates, which could be approximately 40% higher. The Q5000 has a partial year commitment contract that ends at the end of 2024.
Owen Kratz: There's a year-over-year escalator for 2024 over 23, but we'll not see market rates until 25. The Q7000 is contracted to work in the APEC into mid 2024 before transitioning to Brazil for 12-18 months. The rate in cost differences between APEC work and the Brazil work should generate 20 to 30,000 a day increase in EBITDA contribution starting in 2025 before reaching market rates in 2026. When I refer to market rates, I'm referencing current market rates, as we don't know what the market rates will be in 25 or 26 other than to say that current market rates are not yet back up to 2014 levels.
Owen Kratz: It could look to partner with select vessel owners, provide Helix systems and expertise to cover demand as an alternative to adding excess capacity to market. We'll be assessing our spread deployment strategy with consideration given to maintaining our presence and relationships in all the regions where we were. To this end, we added two additional intervention systems and two trenches at the end of 2022. In the renewables market, we forecasted growth rates for the work in the market that would allow us to grow our trenching and site clearance business within those two areas without a need to expand into other segments of the offshore wind market where adequate returns could be a challenge.
Owen Kratz: Last year's acquisition of alliance and the extension of our decommissioning business once again into the Gulf of Mexico shelf has been a good success. This business has seen EBITDA contribution more than triple since our acquisition and in 2023 is on track to generate roughly double the initial guidance given at the time of the acquisition as demand has increased faster than we expected. A recent study indicates over 14,000 wells to be abandoned in the Gulf of Mexico and thousands of structures and pipelines with 90% of wells being in shelf waters.
Owen Kratz: The recent fieldwood and cocks bankruptcies have kickstarted an intense desire to see this work done from both successor owners who will assume the liability as well as regulatory bodies pushing for a solution. A full field abandonment process begins with assessment of making the old structures safe to work on, then the focus turns to the PNA of the wells. Following this, the pipelines are abandoned and the platforms removed with the last phase being debris clearance of the ocean floor.
Owen Kratz: After a flurry of well PNA work in 2023, we can expect a potential slowdown in well work in a ramp up in pipeline and platform removal. This may be the trend until the more recent cocks bankruptcy work begins, at which time all phases of the work should be active. Helix is the premier pre-eminent shelf contractor that owns all the main asset classes needed to perform all aspects of full field abandonment work.
Owen Kratz: We expect the work to continue for years to come based on the work that exists. We believe the business lines Helix has developed for the end of life oil and gas and the development of offshore wind has positioned the company well with a strong balance sheet for the generation of double-digit pre-cash flow yield going forward.
Owen Kratz: I believe this gives you a good perspective on why I'm saying things are good, but we expect them to get even better. You know what?
Operator: Thank you. If you would like to register a question, please press the one-four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one-four by the three. Once again, to register a question, please press the one-four on your telephone. One moment please, for the first question.
James Schumm: Our first question comes from James Schumm with TD Cowan, please proceed. Hey, good morning guys. Can you just help me understand the free cash flow guide for this year? I mean, you have EBITDA going up nicely versus the prior guide, and I think you got free cash flow down, 30 million or so at the midpoint. It looks like CAPEX is up, I don't know, six or seven million. So, you know, you called out Working Capital in the press release, but is that it, or like, why would you not be able to reverse the Working Capital build in the fourth quarter?
James Schumm: That's kind of typical for OFS. So, just help me understand what's going on with the free cash flow, please. Yeah, you're right, Jim. I think the primary driver for the investment to the free cash flow is the working capital increases. You're right about obviously the increase to EBITDA. That comes with also an increase to our revenue by over 50 million, just a quarter of a quarter. So, overall, this is primarily a timing issue.
James Schumm: I think from what we are forecasting in the fourth quarter, I think we see some flow back in the fourth quarter, as we're projecting strong free cash flow between 60 to 100 million in the fourth quarter alone. I think there's a good chance that it will happen in the early first quarter as well. Once again, the seasonal impact, you know, activity levels remain strong. It's October, November before we see the seasonal dip in December, and so it is primarily working capital, and once again, it's primarily just a timing issue. There is the impact of the slight increase to CAPEX that was outlined, but those are the two main drivers.
James Schumm: Thanks, Eric. And just to confirm, there's no, you have no collection issues or anything like that. It's just timing. And so, we should, this should reverse by the fourth, sorry, by the first quarter, if not in the fourth quarter. Is that fair? I think that's fair. I think overall, again, activity levels for us as a whole this year, over last year, revenues are up by over 400 million. And so, I think the impact of the working capital on our capital generation has been, obviously, quite strong. I also think that, you know, we've had a little bit of shift in our schedules that has impacted the working capital as well. At this time, we don't expect or see significant collection issues.
James Schumm: The last one for me, can you just give an update on the 2026 converts? What's the strategy or what's the most likely outcome there? You know, I think from that standpoint, Jim, we've been advised and expect that the converts that we have are an instrument that we could hold to maturity. Once again, managing our balance sheet has always been our top priority. And then from that standpoint, we continue to weigh our options on how to manage this.
James Schumm: Several years back, our focus was primarily on task generation. Now as the market has improved, you know, we're looking at our options from the debt standpoint. Obviously, we haven't been shy about talking about wanting to a more traditional debt instrument rather than convert. So really, really all options are on the table and focus really top priority is managing our balance sheet.
James Schumm: Okay. Thanks a lot, Erik. Appreciate it.
Luke Lemoine: Our next question comes from Luke Lemoine with Piper Sandler. Please proceed. Any more?
Luke Lemoine: I just want to kind of clarify a couple of your comments on the initial 24 outlook. When you set up at least 10%, were you referring to EBITDA or 24? Yes. Okay. And is that inclusive or exclusive of the 25 to 30 million of dry knocks that you had in in 23? That would be primarily based on the 25 to 30 million of enhance EBITDA from lower maintenance gap. That's okay. Got it.
Luke Lemoine: So just up that amount with those absent plus regroup on top of that, right? Right. That does not include anything other than continued operations from our current assets. It doesn't include any acquisitions of production or other impacts that may also increase it. So that's why we said greater than 10%. Okay. All right. Perfect. Thanks, Owen.
Operator: As our reminder to register a question, please press the one four on your telephone.
Craig Lewis: Our next question comes from Craig Lewis with DTIG. Please proceed. Yeah.
Craig Lewis: I thank you and good morning, everybody. Thanks for taking my questions. I was hoping that you could talk a little bit more about the shallow water abandonment market. You know, I guess one question was the handful of assets you purchased. I guess it was like $6 million. Were those acquired from existing, I guess, competitors or were those kind, was that new equipment that was ordered and you took delivery of? That was no, we're not looking to add capacity to the market that was in that position from an existing competitor.
Craig Lewis: It was very attracted because it also came with quite a number of offshore workers and people are the biggest bottleneck to. You know, your ability to cover greater market share in this market. So, adding the people was actually more important than that in the equipment. Okay. And then 65 original employees that that division had, we kind of have to hire 62 of those people direct. So it's a really good win for us.
Craig Lewis: And then just as we try to piece together the fragmentation of the shallow water market and realizing it's also geographic specific. Do you see as this market unfolds and obviously you guys are in a pretty great position from a balance sheet and liquidity and cash. Could there be opportunities to do more such similar? I mean, you did mention potential for or that the guidance was exclusive of any acquisitions. Is this an area where the company could continue to look to grow over the next one to two years?
Craig Lewis: Yeah, I think we'll keep a close eye on the market and talk to all of our major clients. One of the advantages that we have is that we already have the systems and policies in place that qualify us to work for the majors, which are the other recipients of the liability as it were from the fieldwood and cocks bankruptcy. So depending on their demand and if it gets to the point where we're exceeding our capacity to supply, then there are opportunities that we could look at.
Craig Lewis: Okay, super helpful. And then just one more for me, realizing that when we talk realizing that sometimes well intervention has to have to compete against offshore drilling rigs, a big theme across the drilling space has been white space and idle time as rigs look to get back to work. You know, it's interesting because when we listen to you, it doesn't seem like we're really facing. It doesn't seem like the well intervention assets are facing much white space.
Craig Lewis: Is that I guess my question is are we starting to see drilling rigs kind of look to take some of the short term well intervention work or is the white space that we're seeing in offshore drilling really transient and rigs aren't looking to compete against your well intervention assets? There's been a couple of contracts awarded in the deep water Gulf of Mexico, a couple of water in Australia that we are expecting fine utilization for all of our assets in 23 and as we go into 24.
Craig Lewis: And you also have to look at it geographically, you know, we don't really compete with reason and all secrets. And so our best of the very specific to the type of work that happens in an LC being diver enhanced and older wells in an LC. So there is a few contracts that have been awarded, but I wouldn't say it's greatly impacting us and we're expecting good utilization for that. Super helpful. Thank you very much. Thank you.
Don Criske: Our next question comes from Don Criske with Jonathan Rice, please proceed. Good morning, gentlemen. I wanted to ask one quick question about the convertible debt. I mean, obviously, all options are on the table. But would you expect any of the current noteholders to convert, given where it's trading today seems at least to us that the doesn't really seem like anybody's going to convert it this stage, given where they're trading today? Good morning, John.
Don Criske: I think the advice that we've gotten from the experts in this area is to generally not expect any of the holders to convert because the notes trade at a premium to our stock price. And so that's the advice that we've been given. And I think that you can see from the trading value of the converts that they are trading at a slight premium to our stock price. And therefore, we will not expect there to be a conversion.
Don Criske: Okay. And I wanted to ask one question on the alliance payout. It seems like it impacted your EPS, but not your your EBITDA this quarter. Can you remind us when that actually goes out the door when that cash goes out to the X management team? So, yeah, the measurement period don goes through the fourth quarter of 23. So, so it includes the yet coming quarter as well, at which point we'll true it up as of the third quarter to get it up to a fair market estimate value estimate of 74 million. The payment is expected to happen in the start of the second quarter of 2024. Well, I think we're all in agreement that alliances significantly outperform. So, we don't mind paying a little bit more to them.
Don Criske: So, I appreciate the time today. Thanks. Yeah, I am to your point there. Once again, it is 74 million through the third quarter. We expect, obviously, we'll adjust it upwards as they continued up to four here in the fourth quarter.
Operator: Thank you.
Operator: Gentlemen, there are no further questions at this time. Okay. Thanks for joining us today. We very much appreciate your interest in participation. I look forward to having you on our fourth quarter call point 23 in February. Thank you.
Operator: That does conclude the conference call for today. We thank you for your participation. And as that you please disconnect your line. Have a great day everyone.