Helix Energy Solutions Group, Inc. · NYSE:HLX
Helix Energy Solutions — Q3 2006 Earnings Presentation
26 slides from Helix Energy Solutions's earnings presentation, Nov 1, 2006
Slide 1: Third Quarter 2006 Earnings Conference Call
Third Quarter 2006 Earnings Conference Call November 1, 2006 Owen Kratz -Executive Chairman Martin Ferron - President & Chief Executive Officer Wade Pursell - Chief Financial Officer
Slide 2: Forward-looking statements
This presentation contains forward-looking statements that involve risks, uncertainties and assumptions that could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements, other than statements of historical fact, are statements that
Slide 3: Presentation Outline
Presentation Outline I. Summary of Results II. Operational Highlights by Segment A. Contracting Services B. Oil & Gas III. Strategic Overview IV. Questions & Answers H E L I X E N E R G Y S O L U T I O N S
Slide 4: Summary of Results
Summary of Results (all amounts in thousands, except per share amounts and percentages) Third Quarter Third Quarter Second Quarter 2006 2005 2006 Revenues $374,424 $209,338 $305,013 Gross Profit 130,470 82,928 131,692 35% 40% 43% Net Income 57,029 42,671 69,139 15% 20% 23% Diluted Earning Per Share
Slide 5: Revenues and Gross Profit by Segment
3Q 2005 3Q 2006 Contracting Services 133.8 229.4 Oil & Gas Production 75.5 145 Revenues and Gross Profit by Segment 3Q 2005 3Q 2006 Contracting Services 42 85.9 Oil & Gas Production 40.9 44.6 Revenues in Millions Gross Profit in Millions H E L I X E N E R G Y S O L U T I O N S Contracting Services O
Slide 6: Earnings Growth
3Q 2005 3Q 2006 2005 Actual 2006 Estimate 42.7 57 0 150.1 255 36 Earnings Growth (Net Income in Millions) H E L I X E N E R G Y S O L U T I O N S 42.7 57.0 150.1 291 255 Guidance Range
Slide 7: Return on Capital Invested
2001 2002 2003 2004 2005 2006 12.3 4.9 7.4 13.4 16.5 19 Return on Capital Invested 3rd QTR YTD Annualized (See GAAP reconciliation at Company's website - www.HelixESG.com) 12 5 7 13 17 19 H E L I X E N E R G Y S O L U T I O N S (Percentage)
Slide 8: Debt to Book Capitalization
MARAD Construction and Other Long Term Debt Term B Facility (Amounts in Millions) 9/30/06 12/31/05 12/31/04 Debt To Book Capitalization 22% 40% 47% Convertible Notes H E L I X E N E R G Y S O L U T I O N S
Slide 9: Elements of Q3 Earnings Shortfall
Elements of Q3 Earnings Shortfall Factor Earnings Impact $/Share 1. Lower Oil & Gas Sales Due to Pipeline Shut ins and Production Management Issues. $0.10 2. Additional Marine Asset Maintenance/Upgrade Time: Expensed Costs 0.03 Opportunity Cost 0.05 3. Dry Hole Cost of Two Remington Deep Shelf Wells
Slide 10: Contracting Services (CS)
Contracting Services (CS) Third Quarter Third Quarter Second Quarter 2006 2005 2006 Revenues $251,206 $144,398 $237,354 Gross Profit 91,882 42,051 91,190 37% 29% 38% (Amounts reflected are in thousands, except percentages, and are before intercompany eliminations) Q3/06 Review: Overall revenues incr
Slide 11: Contracting Services continued
Contracting Services continued Q4/06 and Outlook: We expect better financial performance in Q4 due to both gradually improved pricing and significantly less vessel maintenance activity. It is particularly noteworthy that we have recently secured a $250 million term contract for the Seawell and a $15
Slide 12: CS - Well and Subsurface Consulting
CS - Well and Subsurface Consulting Third Quarter Second Quarter 2006 2006 Revenues $9,494 $10,263 Gross Profit $3,026 3,320 32% 32% H E L I X E N E R G Y S O L U T I O N S Q3/06 Review Revenue was down marginally from Q2 levels due to seasonal effects; however, gross profit margins remained at six
Slide 13: CS - Shelf Construction
CS - Shelf Construction Third Quarter Third Quarter Second Quarter 2006 2005 2006 Revenues $128,363 $49,246 $124,765 Gross Profit 57,738 17,667 60,944 45% 36% 49% Utilization 83% 65% 87% (Amounts in thousands, except percentages and are before intercompany eliminations) H E L I X E N E R G Y S O L U
Slide 14: CS - Shelf Construction Continued
CS - Shelf Construction Continued Q3/06 Review: Utilization levels dropped by four points as we caught up on vessel maintenance and completed the upgrade to the Kestrel three weeks later than expected. Revenues increased by 3% sequentially due to better pricing, but gross profit margins fell by four
Slide 15: CS - Deepwater Construction
CS - Deepwater Construction Third Quarter Third Quarter Second Quarter 2006 2005 2006 Pipelay 66% 100% 85% Robotics 82% 67% 67% Utilization H E L I X E N E R G Y S O L U T I O N S Q3/06 Review: Of our two deepwater pipelay assets, the Intrepid had an excellent quarter of utilization and performance
Slide 16: CS - Deepwater Construction Outlook
CS - Deepwater Construction Q4 and Outlook: Both the Intrepid and the Express have strong backlogs and the recent significant award for the Express, in the emerging East India deepwater area, demonstrates our ability to participate well in the fast growing deepwater pipelay segment. H E L I X E N E
Slide 17: CS - Well Operations
CS - Well Operations Q3/06 Review: The Seawell had a record quarter of financial performance due to an anticipated improvement in spot market pricing in the North Sea. However, the Q4000 thruster problems continued such that she had a thruster removed for rebuilding. This caused around twelve days o
Slide 18: CS - Well Operations Continued
CS - Well Operations Continued H E L I X E N E R G Y S O L U T I O N S Q4/06 and Outlook The Seawell has an exceptionally strong backlog, especially following the recently announced $250 million contract with Shell in the North Sea. The first phase of that contract will commence in January 2007. Dur
Slide 19: CS - Well Operations Continued (SEATRAC acquisition)
CS - Well Operations Continued In October we completed the acquisition of a majority stake in SEATRAC, a Perth- based subsea engineering and service provider, specializing in project engineering and subsea well operation in the Asia/Pacific region. We paid around $12 million for 58% of the company a
Slide 20: CS - Production Facilities
CS - Production Facilities Third Quarter Third Quarter Second Quarter 2006 2005 2006 Equity in Earnings $5,095 $3,049 $4,629 Production throughput (MBOe) 3,148 1,093 2,951 (Amounts in thousands) Q3/06 Review: Continued well problems, related to the K2 and K2N field developments, as well as construct
Slide 21: Oil & Gas - Financial Highlights
Oil & Gas - Financial Highlights Third Quarter Third Quarter Second Quarter 2006 2005 2006 Revenues $145,032 $75,463 $81,110 Gross Profit 44,595 40,877 41,499 31% 54% 51% Production (BCFe): Shelf 13.3 6.1 6.0 Gunnison 2.3 2.3 2.5 Average Commodity Prices (net of hedging impact): Oil/Bbl $62.55 $54.3
Slide 22: Oil & Gas - Commentary
Oil & Gas - Commentary H E L I X E N E R G Y S O L U T I O N S Q3/06 Review: Shelf: Production was 7.3 BCFe higher sequentially, but was around 3.2 BCFe lower than our expectation due to pipeline shut-ins and some production management issues following the pick-up of the Remington production. Natura
Slide 23: Oil & Gas - Q3 Drilling Update
Oil & Gas - Q3 Drilling Update Well Name Working Interest Result Potential*1 Reserves Estimated Initial Rate 1st Production % (Net BCFE) (Net MMCFE/D) Est. West Cameron 342 #1 100 Discovery 4 4 Q1 2007 Vermilion 162 #1 60 Discovery 2 3 Q1 2007 S. Marsh Island 80 A-2 60 Discovery 5 5 Q4 2006 Eugene I
Slide 24: Oil & Gas - Drilling Activity
Oil & Gas - Drilling Activity Well Name Working Interest % Operator Net Risked Project Potential (BCFE)* Status S. Marsh Island 80 A-3 60 ERT 8 Drilling S. Timbalier 145 #1 75 ERT 22 Drilling East Cameron 339 #1 60 ERT 9 Q4/06 Spud Garden Banks 506 #1 "NOONAN" 100 ERT 170 Drilling Green Canyon 250 "
Slide 25: Oil & Gas - Development Projects
Oil & Gas - Development Projects Project Name Working Interest Activity Potential* Reserves Estimated Initial Rate 1st Production % (Net BCFE) (Net MMCFE/D) Est. S. Marsh Island 116 60 Subsea Tie Back Completed 2 6 Q4 2006 Green Canyon 195 "TIGER" 40 Subsea Tie Back Completed 14 15 Q4 2006 Eugene Is
Slide 26: Helix Hedges - As Of October 31, 2006
Helix Hedges - As Of October 31, 2006 H E L I X E N E R G Y S O L U T I O N S
Helix Energy Solutions Group — Q3 2006 Earnings Presentation on 6ix