Q2 2019 Earnings Call
If any time during the conference you need to reach an operator, you can press star Zero as a reminder, this conference is being recorded Thursday July 25, 2018, I'd now like to turn it over to Mr., Erik Staffeldt Executive Vice President and CFO . Please go ahead Sir.
Good morning, everyone and thanks for joining us today on our conference call for our Q2 2019 to earnings release participating on this call for he likes today as Olin Kratz, our CEO Scotty Sparks, our COO, Jim <unk>, our general counsel and myself.
Hopefully you've had an opportunity to review our press release and the related slide presentation released last night.
If you do not have a copy of these materials both can be accessed through our investment page on our website at www Dot helix, yes, two dot com press release can be accessed under the press releases tab.
In the slide presentation can be accessed by clicking on todays webcast icon.
Before we begin our prepared remarks, Ken My Kirk will make a statement regarding forward looking information Kim.
During this conference call, we anticipate making certain projections and forward looking statements based on our current expectations. All statements in this conference call or in the associated presentation. Other than statements of historical fact are forward looking statements that are made under the safe Harbor provisions of the private Securities Litigation Reform Act of 1990.
Our actual future results may differ materially from our projections and forward looking statements.
Due to a number and variety of factors, including those set forth in slide two our most recently filed annual report on Form 10-K , and our other filings with the SEC.
Also during this call certain non-GAAP financial disclosure.
In accordance with FCC rules. The final slide of our presentation provides reconciliations of 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 investors section of our website at Www Dot helix BSG dotcom Alan.
Good morning, everyone. Thanks, Ken we're going to start on slide five which was a high level summary of Q2 results.
The second quarter results reflect increased activity in the north sea, marking the end of the winter weather benefiting both our well intervention and our robotic segments.
Revenue increased 35 million and our net increase our net income increased 15 million from the first quarter.
Our results for the first quarter reported revenues of 201 million and net income of 17 million.
We generated $50.3 million EBITDA.
Moving to slide six for the quarter. We recorded net income of 17 million compared to net income of 1 million in Q1, we generated EBITDA of 50 million in Q2 compared to 30 million in Q1.
Our operating cash flow was $67 million and our free cash flow was 53 million.
Our results for the quarter were negatively impacted by 20 days of unplanned downtime on our BP contract related to our 15, K. IRS system and a one time 1.1 million charge related to employee stock compensation.
For our year to date results, we reported a net income of 18 million compared to net income of $15 million during the same period in 2018.
We generated EBITDA of 81 million in the first half of 2019 compared to 80 million in the first half of 2018.
In May we acquired controlling interest in subsea technologies group limited or SPL move small UK based engineering from the designs and manufactures feed hydraulic and mechanical connectors.
Although this acquisition will have no immediate material impact on our results. It does strengthen our position in the supply of subsea intervention systems.
Moving to slide seven.
Our utilization during the quarter benefited from the end of the winter season in the North Sea is expected well intervention vessel utilization increased to 94% from 74% in Q1 with our downtime primarily related to the 15 K. IRS system.
Our operations in the North Sea, and Brazil performed very well with minimal downtime.
Robotics also benefited from the end of the winter season, and the increased activity that followed.
Onto slide eight.
From a financial statement perspective, our cash levels at quarter end increased to 261 million from $2.2 million at the end of Q1.
We invested 16 million in capital expenditures and we made 7 million of net debt repayments.
During the quarter, we generated 70 million of operating cash flow 30 million year to date.
We generated 50 million of free cash flow in the quarter and are marginally positive for the year. Our net debt at the end of Q2 was $161 million compared with 209 million in the first quarter.
During Q2, we amended our primary credit facility extending its maturity 18 month due December 2021. In addition to extending the maturity of our.
Term loan and revolver, we increased our revolver capacity by 25 million to $175 million.
And we increased our term loan by approximately $2 million.
Ill now turn the call over to Scotty for an in depth discussion of the operations results.
Thanks, Aaron good morning, everyone.
Moving on to slide 10.
The second quarter was a busy period for OKE level vessels contracted for the quarter achieving high utilization across the fleet. We also completed the acquisition of STL, which we expect will enhance our in house engineering and also enable helix to offer further subsea product developments for Sunday, what intervention technologies.
In the second quarter, we achieved increased revenues of $218 million compared to 167 million in the first quarter.
Gross profit margin increased to 20%, resulting in a profit to $40 million increasing from 10% in the 16 million gross profits in Q1.
And then also the intervention business PIF Vescos achieve high utilization for numerous clients are still uptime performance, including the successful completion of another shallow water rises based coaching project from the line of wholesale.
Hi festivals appliance be working into the fourth quarter.
In the Gulf of Mexico in the Q 5000 continued for BP for at the quarter Q4 thousand to achieve very good utilization for the quarter overcoming has work into the fourth quarter with numerous clients.
Performance in Brazil was strong again.
Divestments performed very well achieving high utilization of 99% remarkable uptime.
What buckets achieved another good quarter with a high level of utilization across the chartered fleet.
For the first time, we contracted renewable energy work outside of Europe , with the GC to leaving the Gulf of Mexico to welcome I wouldn't fondant, Taiwan, highlighting our commitment to geographically expand in renewable energy markets.
Due to the departure of GCT, we commenced the fed a charter for one year on the Jones Act compliant vessel for the Gulf of Mexico.
Slide 11.
Slide 11 provides a more detailed review of our operations for our light intervention business in the Gulf of Mexico.
The key 5000 continued working for BP for the entire quarter, achieving 77% utilization due to the technical side of the on the jointly owned helix one sub sea 15, K. IRS system.
The vessel will remain with BP and so the end of the third quarter undertaken well enhancement whats.
The key for thousands achieved good utilization of 93% the vessel performed well with minimal commercial downtime completing a 12 well campaign for one clients prior to undertaking cpnine used for level. The vessel then commenced work on one rather lora andreski field completion to paying itis week initial estimates indicate this project was completed ahead of budget.
Lodging generated from this project will be recognized in the third quarter.
Moving to slide 12.
Our north sea well intervention business continued DNS plans with five vessels fully contracted throughout the course of strong uptime performance.
The well enhancer achieved 99% utilization performing.
Performing very well working for free clients and also completed another successful shallow water quote shaving project.
The Seawell also performed well working for free clients, achieving 97% utilization.
The Q 7000 continues mission preparation in Singapore. The vessel is now fully manned and training on the vessel has commenced.
Our subsea system I've ACICS has been legalized onboard the vessel is currently being integrated.
Trauson and clients upset since our expected to commence in August and the vessel currently planned to be ready to commence transit to West Africa in the third or fourth quarter.
As mentioned earlier, we completed the acquisition of STL during the quarter.
The acquisition enhances our in house engineering capability set or reducing our reliance on third parties and should allow us to develop an influence some subsea system technologies for the markets.
Moving to slide 13.
In Brazil, our operations from Petrobras continues to go extremely well when we achieved another strong quarter, Jason our best quarter to date in relation to uptime performance.
Hi vessels continue to undertake numerous varied skypes, mostly related to production enhancement. We've now completed welcome over 50 wells for Petrobras.
In the second quarter, the Siem helix, one achieved monks, 9% mutualization working on four wells on the second city abandonment scopes and two production enhancement scopes.
The Siem helix team also achieved 99% utilization working on six wells performing five production enhancements got someone abandonment Scott.
Moving on to slide 14 for our robotics Harvey.
Good politics continues to recover well Q2 in the first half of 2019 year over year was much increase robotics with strong operational performance significantly better you can actually utilization.
We expect to see this continue through the second half of 2019.
And the second quarter vessel charter fleet utilization was 92% with two vessels each slice and dice the renewables projects in the North Sea and the Grand Canyon, two leaving the Gulf of Mexico for the APEC region.
Being replaced by a one year charter for agenda that compliant vessels the Ross candies.
In the quarter, we achieved 138 days of trenching operations for numerous clients.
The Grand Canyon works in the North sea, achieving 98% utilization on the combined hard and soft and Trenching project divestments plans remain busy and so we'll be invensense exciting there enough table side, reducing our cost base.
The Grand Canyon free had 79% utilization nicely performing Watson sanctioned projects and RV support Watson LLC.
During the course of the Grand Canyon, two is located in the Gulf of Mexico, and had 96% utilization working on deepwater RV support Skypes before leaving the Gulf of Mexico in June So I wanted to take a longer term contract in the Asia region.
And so on that site welcome our first non European renewables contracts in Taiwan.
With the GC to leaving the Gulf We charted the Ross can these R&D support vessel a near term basis divesting. These Jones Act compliance and is planned to oil price and the Gulf of Mexico on the charter for one year, the flexible utilization trends.
The chart to commence late in Q2 and went straight to work achieving 16 days of deepwater RV support work and we have approximately 180 days already contracted with visibility for additional opportunities.
I went to slide 15.
Ill leave this slide detailing the vessels RV and trenching utilization for your reference I will now turn over the call to Eric for a discussion on the balance sheets and the 2019 outlook.
Thanks Cody.
Slide 17 outlines our debt instruments and their maturity profile as previously mentioned, we amended our credit facility extending both our revolver and term loan by 18 months, increasing our revolver availability by $25 million an increase in our term loan to $35 million with this amendment, we reduced our principal payments in 2000 $20 million to $100 million and provide additional liquidity liquidity with the $25 million increase in revolver capacity to manage our maturities maturing debt if needed.
Moving to slide 18, it provides an update on key balance sheet metrics, including gross and net debt levels at June Thirtyth.
Our net debt in Q2 decreased to $163 million from 209 million in Q1. The decrease in net debt. During Q2 is primarily attributable to the $67 million of operating cash flow offset by $60 million of Capex.
Our net cash position at quarter end increased to $261 million our quarter end net debt to book capitalization was 9%.
Moving over to slide 20 for a discussion on our 2019 outlook, we are maintaining our guidance for 2019 EBITDA in the range of 165 to one nine.
Year to date results are on par with 2018 results and the perceived activity levels in the markets. During the second half of the year support our guidance. This range includes some key assumptions and expectations and estimates as follows we're assuming full year benefit of the CMBX, one and CMBX two in Brazil, We expect the 2019, North sea well intervention market to maintain the high level of activity into Q4, we expect Q4 thousand to have good utilization improving as supported by the trust acquisition.
Q 5000 is forecasted for 270 days with BP with opportunities for the remaining 95 days in robotics, we expect to continue to benefit from reductions in our cost structure for the vessel charters and the foreign currency had exploration of the foreign currency hedges and increased activity in the second half of the year.
We expect marginal improvement in R&D utilization and trenching market similar to 2018.
Production facilities as expected fairly consistent with the slightly lower results for the second half of the year.
And Thats with last year, our annual into the guidance includes approximately $20 million reduction related to low cost for Brazil contracts paid previously expensed over the term of the contract.
To achieve the high end of our range. The Q 7000 would be working in the fourth quarter were 29, Kim the 2019 forecast range includes nominal benefit from our oil and gas production covering its operating expenses with planned facility downtime in the second half of the year.
Course, any significant variation from these keys assumptions could cause our EBITDA to fall outside the range provided.
Moving to slide 21, we have $1 billion in backlog with 281 million currently scheduled an estimated to be completed during the remainder of 2019, our backlog is heavily weighted to our BP Q 5000 contracted to Petrobras contracts and the huge producer one contract.
Gulf of Mexico, well intervention market Q4 thousand currently has worked into Q4 with identified opportunities thereafter vessels currently servicing the spot market and expected vessel utilization to be driven by near term opportunities and aided by internal work from the Trotsky assets.
The Q 5000 will continuous program with BP through.
Q3, the IRS 15, K. system is holiday rig contract with expected utilization through Q3.
In the North Sea water intervention market, we are assuming a continued base level activity for two vessels, we expect strong utilization through Q3, and the typical seasonal weakness during the winter months in Brazil, We expect a full year of operations on both Siem helix one the Siem helix two in a change from previous guidance. The CMP next to will now have downtime for scheduled maintenance in Q4 anticipated to be between four and 14 days the shipyard maintenance on the CMC helix. One has now been pushed into 2020. However in the vessel. However, the vessels schedules are fluid and timing of the shipyard maintenance may change.
Robotic segment is expected to benefit from continued improvements to its cost structure, both charter vessel cost and hedge reductions and increased market activity in the second half of the year.
We expect robotics to be well positioned for continued improving improved results in 2019.
Over to slide 23.
Capex for the year is forecasted at $145 million.
Most of the capital related to completing the Q 7000.
Including the forecasted.
Shipyard payment at delivery.
Maintenance Capex includes dry docks completed in the first quarter of the HP, one seawell well enhancer.
Our schedule remain debt payments for the year approximate $23 million.
I'll Skip slides 25 and leave it for your reference at this time I'll turn the call back to Owen for closing comments.
Thanks, Eric.
Well the second quarter picked up as we expected we had a few issues that kept it from being even better.
Operational downtime on the 15 K. IRS system again caused downtime on the Q 5000 BP contract, maybe food can has now been modified and it has been and is redeployed.
Operations in Brazil continue to be executed at a very high level and robotics continues to improve taking advantage of lower costs and increased activity.
So far this year were on par with last year, but we expected to be ahead, we're not far off expectations and we do see the second half of the year, which we hope to be strong if not stronger than we expected.
This should allow us to.
Forecast meeting, our objective, which is to be above the midpoint of our guidance.
To reach the upper end of our guidance would require EBITDA contribution from the Q 7000.
We're currently mobilizing the Q 7000 for work in West Africa.
Due to some delays outside of helix control that project is currently scheduled to begin early January .
While it might be possible that we could do other work ahead of those it's difficult to say, whether the engineering and long lead items could be made ready in time.
Following the first project there is the number of clients considering taking advantage of the vessel wall looked in the region and after that we intend to trends with the vessel to the North Sea, where several clients are keenly watching the work in West Africa.
The timing for bringing the Q 7000 market seems about right for its utilization.
We are definitely seeing improving utilization across the fleet there may still be too early to predict when rate improvement might follow.
Earlier this year, we heard our service providers other service providers Im sorry, as well as ourselves comment on the improved 10 during volumes. While this is true we question how much of this tendering will actually translate into work I still believe that we may remain in a challenging market for perhaps another year.
Supply might be reduced or worked off I do expect to see consolidation is also on the rise before we see any meaningful improvements in rates.
We are seeing production change hands with newly empty entrants into the offshore market. One sufficient time passes for these new players to set their assets and set plans, we'd expect that there will be more aggressive in their management of the reserves, which should mean greater demand for our services.
Helix is in the final year of our planned capital its been program.
We do expect to be free cash flow positive for 2019.
But but strongly free cash flow positive in 2020.
You may have noticed that we are beginning to rollout a new website.
Going forward, we'll be highlighting our capabilities rather than just our assets.
Helix is well known as the leader in well intervention and jet trenching lesser known for the full extent of what we're capable of with our assets. We hope good an aggressive marketing approach along these lines should increase demand in margin over time.
Our goal is to expand these capabilities in a capital light manner.
We are assessing our options for the best allocation of our free cash flow mindful that we'd like to consider and continue to work towards de leveraging the company.
Looking forward, we should see growing our continuing growth in robotics through further cost reduction as charters renew or roll off as well as improved utilization.
And robotics, we have sufficient capacity do except greater market share with existing assets.
The recent drastically deal and potential for other similar deals should yield greater results.
On margin through reduced idle asset time risk the Q 7000 deliveries should see contribution by the beginning of the year and ramp up its acceptance in demand grows.
All of this means further growth without excessive capital investment, we believe that we're well positioned for the future.
Hi, I really believe that over the next few years will be approaching a period with ample opportunities for a company with a clean balance sheet in a robust business.
With that Eric ill turn it back over to you to start to today.
Operator at this time, we're ready to take questions.
Okay, if you'd like to register a question. Please press the one followed by the four new telephone you will hear a three total prompt technology request if youd like to withdraw you can press one three.
And our first question from the line of martial Atkins. Please go ahead.
Good morning, guys on it seems like it might take here is that you have virtually every part of your business.
Exceeded expectations in this quarter with the exception of the Q 5000.
And then you briefly walk through it and your conclusion, but but give us a little more color on what the downtime.
It was and how confident are you the problems fixed and lastly at least relate in the 5000.
Are you going to get work in Q4, what's your what's your outlook there.
Well. This is Vince was a recurrence of a problem, but Scott is the one that's close enough to it so Scott do you want to.
Well in some of the details on what happen.
Sure, Yes, good morning Marshall.
Over the start of the year and then the second part of the quarter, we had a hydraulic control failure, we decided to change out all of the parts in that they control costs of that failure.
It Wasnt, just one or two items, we decided to have an extended period and replaced Apache items with new components and also our quality management system that lies components in supply. So we do feel we've got a good handle up of the issue.
We've been up for both since then and we're operable now so we feel we've got on top of it it wasn't extended period, because we decided to just go in and change at all of those components with with new with new parts and new components within days POPSEQ.
So they feel we've got a good handle can never guarantee you that that would be no downtime, but we've definitely got the Graham and thats been causing shovel safer.
Perfect and then the fourth quarter outlook I know the.
Stuff done in third quarter, How's your fourth quarter shaping up so right now we've been working a full quarter of 55000 limit being a newer units. Obviously it is interesting and I know say if that were to fall apart. We have the backdrop of the trustee fail to for that some utilization that key foreshadows looking quite.
Good at this time, we still have some gaps to fill that but I can see a position where key for us packs and then anything else will lend on key five.
Terrific and then let's switch over to the Q seven.
Seems like things have been pushed back a little bit there.
In terms of the start dates just just give us a little more color on what you're seeing there both in terms of the kind of near term getting it to work and.
It seems like you're getting a lot of interest both in North Africa and in the North Sea.
Looking out to next year and beyond so give us your sense of what you're seeing on on both both near term and looking out maybe a year.
Okay, I'll take that to begin with and chime in if you guys have anything to add but.
The contract was originally supposed to be doing August one.
And then got deferred into the fourth quarter.
And then we took a more recently got word that long lead items and engineering was going to put it into the early part of January I believe the window for starting to work now is January one to January 15.
Both both parties were moving forward were mobilizing the vessel.
We're spending money the producers spending money.
Teams are onboard the both will now going through the acceptance everything's moving forward. It's just we've slowed down the pace a little bit because of the delay on some of the items.
Not our items.
But then beyond that.
There are a number of clients in West Africa that are interested in following on.
We are hopeful that one of them might be able to go earlier.
But does the time run ticks here, because we've slowed down the process a little bit because the delay it makes it a little challenging to get all the engineering and long lead items. So if we were going to put we're ahead of this.
So.
It's still possible.
Too early to say definitively, we will or won't but.
It does look like strong follow on activity. After this first contract and then Bob.
Once we're finished in West Africa, we do have clients that are looking to use it in the north sea.
And we do have interest in the vessel all the way through with other clients talking about projects. So towards the end of next year. So I think the utilization on the Q 7000. Once she starts to work I think the timing and the market is about right for them.
Sounds good I'll re queue for thanks, guys.
Thanks.
The next question's from the line of Ian Macpherson. Please go ahead.
Thanks.
And honestly just want to pick up on a couple of the same topics you just went over.
Given the.
The visibility that the customer interest in the Q 7000.
And we're at the.
It seems like we're at the precipice pricing inflection you said, maybe we might be a year away from real.
Pricing power, but to what extent do you think you can control the test your own destiny with regard to.
Contract sort of day rate 10, or do you have customers, who are looking to lock in lower pricing on the Q 7000.
And can you accommodate that can you resist that how do you think about optimizing that assets profitability over that three year horizon or is it just too early to you then.
Contemplate.
Beyond its first few wells.
Yeah, So I'll jump in here on that one and so we have got a significant piece of interest on Q 7000. After the first project. The first project is targeted to be multiple wells.
And then we have a couple of major is after that.
Numerous wells they look at that and they're spending money into vessel acceptance already like vis vis visited the vessel in Singapore already and sent their acceptance teams down there and we have another client spending money in August again have their acceptance seems go down there. So we're starting to see interest I would say the right. So somewhat in line with the Reits were starting to see in the UK market.
The intervention rates for Q seven are going to be somewhat in line with the the rights that where we're obtaining for.
The seawell in one answer it's going to have a UK based cost base.
It will also have the integrated package of slumber J on board. So we will have less mop the mob costs of their equipment going onboard them and some of the teams will be multi tests. So.
The market hasn't come back fully but we're definitely seeing.
Reits that are in line with the UK, and then not bad and they're better than rig rates that are in the UK right now.
Thanks.
Yes, Im back on line, sorry about the call dropped, but I'd just like to add something to that we have.
Seven intervention assets now with the Q seven two in the North sea to Gulf of Mexico to Brazil, we strategically we have the.
Desire to expand geographically West Africa further in Brazil and.
The north sea as well as Asia Pacific, but Q 7000, then becomes are only really available asset we have strong utilization on the others.
So I think it bodes well.
For the utilization on the Q 7000, without dropping any of the utilization from the other vessels, which should allow us to start pressing rates a little bit.
Thank you Bob Thats helpful.
And then just going back to the the technical downtime on on the 15 K IRS system.
Yes, I know you said that you have made the fixing youve redeployed and everything is going well now I just wanted to clarify did any of the downtime creep into July or was it contained in Q2 and you've been at full uptime since the beginning of Q3. The major event that we had been was.
The start of Q2 and.
So we could have bought the system on deck and changed a few components we took a.
Our view on that on the answer all of the control valves replaced with me and updated our quality procedure on timing of change of those items and some of the components. So back in April .
Since then we've been redeployed we have had one or two days come up here recently related to small things not major downtime events here. So we're feeling a lot more confident but again I need to point out we can never take out downtime in these environments, we're working fast water depth seveneight thousand feet with the first 15 K.
Long rig deployed assets in.
And it's quite a large complicated system that we feel that the issue that we had in Q1 on the issue in Q2, we have a good handle on from now.
Got it thanks, guys I'll pass it over.
Thank you.
The next question's from the line of Georgia O'leary. Please go ahead.
Good morning, guys.
Good morning.
Oh I thought your commentary around independents, and some private equity backed players in the offshore markets coming back with interesting I just wonder if you could.
Characterize how your dialogue is with those players if some of them may have decent programs for you to work on but it does seem like a green shoot for the industry. So just curious for some more color there.
Yes, I think you have several categories of those new producers some of them are.
Run like the oil majors.
But the vast majority I think the play, but they're making is that they can come in and work. These reservoirs more aggressively than they have been and therefore generate a lot of upside.
And we've been talking with them I think you you can't spread yourself to Ben I think it's a matter of picking the right ones and we're moving towards more of a partnering ship relationship with some of these guys.
And I do think that it will bring.
More demand for our services.
Great and then second question just on the Robotics business you guys have done a very good job of taking costs out of the system until this point, but I'm just wondering if you could frame.
Order of magnitude of what's left.
To pull out from that business and then secondarily utilization for Aro. These just broadly remains relatively sluggish.
What is the outlook in the back half for utilization the Aro These in particular.
I think thats, probably a two part question with Eric you are probably best positioned answer the first part and then discarded.
Yes, I think from from a cost standpoint, what's left to take out we do have some some hedges were underwater.
That is costing us.
Roughly between 12 to 15000 today. So those costs, we have some rolling off here in July and I think the next one is February of next year. So those are definitive coffee that you could take off I think after that it's really at a point of.
Minimizing.
You could say idle time on our on our chartered vessel fleet, we're going to be a point where from a long term charter standpoint town two vessels and so I think we're better positioned to manage that idle time cost.
But the definitive amounts coming off obviously, the charters rolling off and then.
The Grand Canyon, one coming off in October of this year.
Yes.
With regard to utilization obviously, the charter fleet utilization, that's very good treaty end of the year.
The Grand Canyon, one rolls off in October and it should be fully utilized up into that period.
GC twos taken up long term now down in Asia, and taking on some renewables workforce out of Europe , and as a backstop contract fluids as well.
And then because of that were taken on the Ross candies, the Ross candies Weve already secured work for so from a vessel utilization point with good from a trenching utilization point in that good.
The stand that sort of rents Iraq RV RV that go in other People's assets I would say its flat to slight improvement as we got to the end of the year that.
We're not seeing as classic flooded market for Rvs out there right now so we do have a bunch of rvs that are on certain clients assets I mean, those assets and began to work care as the construction market starting to step up so I'd like to think we are going to see a gradual improvement of RV utilization, but nothing major yet so.
Alright, great Thats very helpful. Thanks, Thanks to both you guys and then just one more for me on that.
Competitive landscape front it seems like we finally got.
Floating drilling rig activity actually starting to to March higher I realize as or one of your largest competitors and is rigs are struggling to find drilling work. They were competing more intensely in the intervention market.
With with drilling rig count actually migrating higher is that competitive landscape improved at all or are you still seeing a similar level of pressure, which you saw 369 months ago.
Where do you where do you think you've got it.
I mean, certainly the rigs really affect us nicely in the Gulf of Mexico and.
Now if you look at.
Compare last year to this year, our utilization that is that's better than last year for sure our rights of increased slightly.
And as rigs in the Gulf of Mexico last year, I think there was about 17 slicing assets out there and now there's a maximum of 25 and 24 taken up.
Craig Ellis analysis, what we read in the press, but that certainly is an increase in rig activity and that means that the overhang is removing the way and allowing it to come back to us some of our major clients that are out there that have had wing hang have.
Lost those rigs will move those rigs to other countries.
Basins.
And then there are inquiring about what for next year. So I think increased rig activity certainly helping us we're in a better place than last year, we've got.
More visibility of towards.
Well that require work next year and we've got some older favorable clients inquiring about time for our assets again, so it is an incredible.
Thanks again for the color guys I'll turn it back over.
The next questions one David Smith. Please go ahead.
Thanks, and good morning.
Morning.
Most of my questions have been asked and answered.
Ill ask if if we take the midpoint of your 19 revenue guidance that would imply a second half revenue outlook thats pretty flat versus the first half.
If we take the midpoint of your 19 EBITDA guidance that would imply a second half it's about 20% better than the first half.
I just want to confirm first that.
Is it fair to think about the midpoint of guidance as the baseline for your expectations.
And if so why did want to ask how much of that relative EBITDA improvement would you expect to come from robotics.
Well I think as far as the guidance expectations. Our range of guidance includes a lot of pros pluses and minuses. So it really depends on our where we are but I wouldn't say that you're far off in saying that our expectations as well like I said in the comments are are.
Our objective is to be above the midpoint of our guidance.
All right.
Eric can you help me out there.
With respect to that.
Yes, as far as the as the second half I think the way that you're looking at our revenue and the EBITDA contribution is how we've laid it out I do think that we see revenue.
Roughly flattish I think we do see improvements in our cost structure Canyon, obviously is a big driver third quarter has historically been one of their strongest quarters.
And so we do expect relative improvement there we do expect improvement also.
In the in the well intervention side.
Our second quarter.
Like like a one said was not necessarily what we expected with some of the downtime issues, but I think you were able to put that behind us we'll be in a position that we will be able and target to deliver.
Higher results in the second half of the year.
I think the only thing I would I think the only thing I would add to that would be.
Our expectations, we have call it a subdued outlook for the fourth quarter, given how soft last year was and I think where we are right. Now is that we're seeing the potential for the fourth quarter to be stronger than what our expectations were.
Okay, I appreciate that and follow up if I may.
If we think about the Q 7000, and the future kind of translating seasonally between the North Sea and West Africa.
What kind of downtime should should we think about for for just mobilization, great. If that vessel is working in the north sea for.
Six or seven months and West Africa for the rest of the year.
It's a 14 day transit the belief is that correct Scott between West Africa in the North Sea.
Yes around that depending where in West Africa, we are yes.
Yes, no doubt, but also assumes that we make that shift on speculation, whereas our intent would be to try and put together a string of contracts and.
Share that mobilization cost across the user clients.
And get the baton paid for so it wouldn't be considered downturn.
That's good color appreciate it.
And last being being a little greedy here, but just.
On on that Q 7000, generically what would you expect profitability on the Q 7000 to be similar and the north sea versus West Africa or anywhere else in the Golden triangle.
I would I would say yes.
Yes, I think it would be similar.
Great. Thank you very much.
The next question is from line of Vebs Vaishnav. Please go ahead.
Hey, Thanks for taking my questions.
I guess just first on.
Dry docks can you talk about.
We noticed cm helix one dry dock has been moved to 2020 can you talk about what are the dry docks, we need to think about in 2020.
Got it.
Okay. So first of all the Siem helix one it's not a dry dock is a small maintenance period. So its a shipyard nine cents period.
And we've been working alongside with Petrobras as to when we were able to take that time and then we're happy now that we can leave the Siem helix one into 2020 and then some of that time gets offset because we had a contractual allowance with with Petrobras that allows us to have.
Maintenance days, so it's not.
A large drydock is such a small replacing some surface taught components and sort of annual maintenance on your second one.
The major dried out we'll have coming up in 2020 will be the key five thousands fast five year dry dock say at the start of the Q five will be out of action for.
A longer periods.
Estimate right now is 55 to 65 days.
And then I think besides that I think the only thing we may have.
As wild on the Q4 thousand yes, and I think that also may be a small program.
See well, but we expect that to be done during the idle periods in the winter months into lump sale.
Okay. That's helpful.
And.
This is this could you provide some color on that you want to get your deferred Ross Candy. So just.
How it came out on and what attracted prices there.
Yes, do you want me to take that.
Yes, you are the one closest to.
Okay. So the main reason behind that was the GCT getting an anchor contracts in the APAC region and then also taken on the especially of those contracts in the APAC region. So.
We didn't want to be in the Gulf of Mexico without the vessel, we partnered up for the lost candies with it being a Jones act compliant vessel, which means that there is a bit more demand than normal R&D. So support vessels there.
We have it on a one year charter, we have an option to take it longer the chaucer as flexible utilization its not a full back to back pre six five charts RASM with our other vessels, we have a bunch of flexibility in that Chaucer.
And we've already secured a good portion of the work that we would need to undertake that sorry.
We're feeling confident we've got quite a few opportunities out there.
The key drivers, mainly we want to make sure that we have a vessel ability for our robotics division in the Gulf of Mexico due to the GC, leaving that to the Asia region, which is good for our Asia region also.
The thing I'll just.
A little bit of color to that the Jones Act argument has been going on for a number of years about whether or not our ob vessels should be Jones act or not.
There is no there is no prescriptive requirement for our Jones Act, but a lot of the producers are starting to show a preference for Jones Act vessels. So seizing on this opportunity to relocate the GC to bring on a Jones act vessels should increase our opportunities for greater utilization in the Gulf of Mexico.
Okay Thats next.
Helpful color.
And if I think about just the guidance annual guidance you had talked about last quarter that it could be towards the high end.
Siem helix as we talked about it's a small maintenance program, but still pushed out into 2020 now we have Ross Candice as well.
But still the guidance remains unchanged just wanted to add think about the puts and takes around it is it more because we had some downtime on Q five that's going to be offsetting it or if you can provide some color on that.
Urge you can add something to do both but basically it's the.
The Q five downtime here has set us back a little bit and the Q 7000 work is delayed.
But we see the offset to that being a stronger second half of the year than what we were expecting so therefore, we held the guidance of flat.
That's all I needed thank for taking my questions.
Thank you.
And again as a reminder, if you'd like to ask a question. Please press one for now.
The next question is from the line of Bill Dezellem. Please go ahead.
Thank you I had a couple of questions first of all relative to the Q 5000 is BP, indicating or inclined to use the vessel in the Q4.
Even whether it's because of the work they have or because of the downtime that you experienced this quarter are you really looking to to fill up that schedule with client other than BP.
No.
Sorry.
All right, we will be or.
Yes, we plan to fill out that schedule with other clients some of them BP BP will not be taken the vessel in the fourth quarter.
We do have.
Discussions on gallons contract the vessel and like we said earlier, if that falls either on our backs that will be to do work on Orion failed at the jobs we failed so.
Great. Thanks, guys, that's actually a good segue to my second question, which is relative to the draw skew well that you are completing this week.
Ahead of budget would you please discuss kind of how the.
I guess would be the accounting works for that and profit recognition that may come about as a result of being ahead of.
Budget are lower cost than anticipated.
Yes, Doug I'll go ahead and take that yes, so from an accounting perspective, we started work in the late second quarter.
So we have a number of days that we perform the work in the second quarter.
That was recognized essentially at breakeven gross margins.
Like you mentioned that we mentioned in our call. The work is being completed.
At this point in time. This week, we do expect a small profit in that and so I think that will be recognized to the to the point that we are able to achieve that here in the third quarter.
That'll flow through our numbers, there will be an adjustment to our abandonment estimate.
For that well.
That will drive the profit that we recognize.
So basically at the end of the contract it's like a percentage of completion contract at the end of the at the end of the well if it comes in under budget.
Any that under budget to a differential versus your original estimate is then book this profit.
That's the right way to think about it yes.
Great. Thank you both.
The next question is a follow up from Marshall Adkins. Please go ahead.
So just a follow up real quickly on the free cash flow here on the had a phenomenal free cash flow generation this quarter.
Over 4% just in a quarter.
And our mass says you generate you know maybe another 150 million next year walk me through your priorities on what you are going to do with that cash.
Alright.
I'm just thinking about how to phrase this because I don't want to get ahead of myself.
Got ongoing discussions with the board now on assessing the options we have a strategic meeting in September there will be discussing these issues.
Keep in mind, what I said in the.
Note that we do want to keep de leveraging the company.
At what rate.
I think so.
Two up for discussion and then.
Like I also said I think that our growth opportunities going forward do not require a lot of capital so that either builds cash or it means returning value to the shareholders.
I can tell you my own personal preference would be share repurchase.
But I'll I'll stop at that and just leave it that it's a board decision and we have those conversations pending here.
Okay. So so first for I mean, just and I know this conceptual and subject to the board, but first priority a little bit of debt pay down. Although you don't have a whole lot of that relatively speaking and then with the excess.
Stock buyback and or something other return of capital depending on what the board says, but not building another Q 8000 or something like that.
Definitely not we're past our aggressive capital spending phase we have the best fleet in the industry right now for well intervention.
It's time to reap the harvest here, but I would point out if we don't have that much but if you look at our debt profile. We do have some pretty meaningful maturities. So we want to make sure that were strong enough to meet those now part of our discussion with the board will be the options of refinancing stretching it out of versus going ahead, and eliminating it but we do want to be in a strong cash position to have that optionality.
Right and then last one on that issue.
It does seem like you kind of made a small acquisition here.
In in the quarter.
Sounds like there'll be probably some more of that from time to time. This specific aquas subsea Tech I think it was what what does that bring to you just out of curiosity.
This was a this is a small engineering and fabrication company here out of Aberdeen by the way, that's where I'm, taking this call from which is why it dropped out but.
Im working over here out of Aberdeen.
They are preferred provider for intervention of engineering and fabrication solutions. We've used them for years. This was an opportunity for us to consolidated.
And by doing so.
We recapture of some of the innovations that we have been working on of innovation for the future and it also bolsters, our internal engineering staff, which.
Following 2015, we laid off an awful lot of people and its necessary for us to.
Start rebuilding this this acquisition made sense not so much from what it generates of for the EBITDA line, but it's a third party costs that we would incur of anyway. So by internalizing the sort of applies that third party costs to the acquisition price and makes it worthwhile.
Thank you and last one from me drop ski.
Just give us an update of where you stand there I think your about the just completed one abandonment, but.
Others.
Give us update on on your ability to increase production there how does that work and or do you see more tag onto like draw ski.
Anytime in the near future.
Oh, we are working the market, we do have a universe of potential draw ski type add ons, we don't have anything of it.
But I can say is eminent.
We don't really need it right now it looks like the schedules filling out and the reason we would do those deals is to have the hedge against our utilization risk.
So we have time to be picky about that.
With regard to the upside on the production of drug discovery, we have identified a recompletion.
It's in the planning stages still.
If we do that it would be it's sort of in conjunction with the timing of the next DNA by going out and doing. It then if it's successful it's a great upside if it is not successful then the incremental additional cost to go ahead and do the PNM is.
Not material.
So.
The timing really depend we bought it to have the flexibility on the scheduling and therefore, the timing of when we do all of this is very much market dependent.
Right. Thank you.
The next question is a follow up from Ian Macpherson. Please go ahead.
Hey, Thanks for the follow up just want to squeeze in one more kind of hunting and pecking around the guidance.
It just occurred to me was the Ross can be shorter and.
Just the improving legs of visibility in robotics is that business now.
As you see it structurally.
Positive EBIT contributor through three quarters and seasons at this point.
I am asking historically does the guidance assume that robotics EBIT positive in Q4.
Short answer, yes, and then I'll, let Scott the fill in the details.
I think one thing you need to be mindful of hearing is the rough can these charts that commenced in June .
And it cyber one year. So some of that work is going to be into the next year that weve already secured against the the minimal sort of utilization deal we have with the vessel.
But we are we have seen a year over year improvement quarter over quarter and robotics, we expected to be stronger in the second half of 2019.
We have secured trenching work into 2027 and beyond so we are seeing an improvement I'll have to refer to Eric if were positive in Q4 to finish off the question. Yes. So as we mentioned with robotic for the year. Our real focus this year was getting to the point, where we'd be gross profit positive for the year and I think we're definitely on track to do that.
On a quarter by quarter basis, we don't necessarily give.
Specific quarterly guidance, but I think our expectation at this point in time is that for the year.
Canyon would be Youd EBIT positive.
Okay.
Good enough hey, Thanks, again I'll pass it over.
Thanks, Dan.
There are no other questions in queue.
Okay. So thanks for joining us today, we very much appreciate your interest and participation and look forward to having you on our third quarter 2019 call in October . Thank you.
That does conclude the conference call for today, we thank you for your participation and you can now disconnect your lines.