Helix Energy Solutions reported fourth quarter net income of $120.4 million, or $1.25 per diluted share. These results included a $151.7 million pre-tax gain ($1.02 per diluted share) related to our majority owned investment in Cal Dive. This non cash gain results from the acquisition by Cal Dive during the fourth quarter of Horizon Offshore using cash and shares of Cal Dive common stock, resulting in an adjustment in our investment in Cal Dive.
During the quarter we also recorded oil and gas impairments / dry hole costs totaling $91.0 million and other net non-recurring charges of $3.4 million (see details on slide 7 of attached presentation). These impairments included $20.9 million pre-tax for the write-off of Devil's Island as a result of drilling a well in Q1 2008 which found no additional hydrocarbons (the additional $13 million cost of drilling the well will be expensed, as required, in Q1 2008). The net result of these unusual items in Q4 2007 is $0.38 per diluted share. Absent these items, net income for the fourth quarter of 2007 was $83.2 million, or $0.87 per diluted share. This compares to $0.71 per share generated in the fourth quarter of 2006 before the $1.02 per share gain realized in that quarter from the carve-out IPO of our Shelf Contracting segment ("Cal Dive").
Owen Kratz, President and Chief Executive Officer of Helix, stated, "We are very pleased with the strength in our business units and the value creation inherent in the company. Helix personnel continue to handle the growth with continued quality improvements. We look forward to 08 as a settling out year during in which the value that has been created can begin to be unlocked."
The $104 million increase in year-over-year fourth quarter revenues was driven by both Oil and Gas production and Contracting Services increases, due primarily to extra capacity on the shelf (Cal Dive) and continued escalating market demand in the deepwater. The increase in oil and gas revenues was due primarily to a 16% increase in year-over-year production. In addition, on the oil and gas side the sale of a 30% working interest in the Phoenix oilfield last quarter resulted in over $20 million of operating income during the fourth quarter.
Absent the oil and gas impairments / dry hole costs, despite the fact that gross profit was higher by $10 million, margins for the fourth quarter 2007 were 32%, which were six points lower than 38% in the fourth quarter of 2006 as Cal Dive experienced a seasonal margin decline, the Q4000 was out of service for upgrades, and a significant project during the quarter utilized a chartered vessel.
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