Helix Energy Solutions Group reported a net loss of $55.7 million, or $(0.53) per diluted share, for the fourth quarter of 2009 compared with a net loss of $861.2 million, or $(9.48) per diluted share, for the same period in 2008, and net income of $3.9 million, or $0.04 per diluted share, in the third quarter of 2009. Net income for the year ended December 31, 2009 was $101.9 million, or $0.96 per diluted share, compared with a net loss of $639.1 million, or $(7.05) per diluted share, for the year ended December 31, 2008.
Fourth quarter 2009 results included the following items on a pre-tax basis:
- Impairment charges of $55.9 million primarily associated with a reduction in carrying values of twelve oil and gas properties due to a revision in reserve estimates.
- Non-cash exploration and other charges of $22.6 million primarily related to costs associated with offshore lease expirations.
The net impact of these items in the fourth quarter, after income taxes, was $0.49 per diluted share.
Owen Kratz, President and Chief Executive Officer of Helix, stated, "Our fourth quarter results reflected continued weakness in the contracting services market. We had anticipated this slowdown and as a result, diverted much of our pipelay and construction support assets to internal use to complete the necessary infrastructure for two of our deepwater oil and gas developments, Danny and Phoenix. The combination of a weak market and capacity devoted to internal use weighed heavily on our fourth quarter results. In addition, repairs to a third party pipeline servicing our Noonan natural gas field were not completed until early January, thus impacting our fourth quarter oil and gas production. Looking forward, the outlook is better. Customer activity is picking up and we expect utilization in the contracting services business to improve as 2010 unfolds. Furthermore, we are poised to increase our oil and gas production in 2010. I am pleased to announce that production from our Danny oil field commenced in early February and with the completion of third party pipeline repairs, we have increased production from the Noonan gas field. We are putting the finishing touches on the Helix Producer I and we expect to commence production from the Phoenix oilfield by mid-year."
Fourth quarter 2009 results excluded approximately $15 million of realized gains associated with the cash settlement of natural gas contracts that were previously recognized as unrealized gains in the first three quarters of 2009.
Third quarter 2009 results included the following items on a pre-tax basis:
- A $17.9 million gain from the sale of 23.2 million shares of Cal Dive common stock.
- A $10.4 million charge associated with a weather derivative contract entered into in July 2009 to mitigate against possible losses during the 2009 hurricane season.
The net impact of these two items in the third quarter, after income taxes, was $0.07 per diluted share.
Fourth quarter 2008 results included the following items on a pre-tax basis:
- Non-cash impairment charges of $907.6 million, including $715.0 million to reduce the carrying value of goodwill and $192.6 million to reduce the carrying value of certain oil and gas properties.
- Other non-cash exploration charges of $26.6 million related primarily to the write off of two suspended exploratory wells.
- A $6.7 million pre-tax loss associated with the sale of the Bass Lite field located in Atwater Valley Block 426 in December 2008.
The net impact of these two items in the fourth quarter of 2008, after income taxes, was $9.49 per diluted share.
- Subsea Construction revenues decreased from the third quarter of 2009 attributable primarily to lower utilization of our owned and chartered construction vessels (71% in the fourth quarter of 2009 compared with 77% for the third quarter of 2009). Further, certain fourth quarter contracts were completed at lower contract rates compared to similar type contracts in the third quarter as we experienced a weaker services market. Furthermore, a greater portion of our asset base was utilized for internal oil and gas development, and thus contributed to a relatively high level of intercompany revenue elimination.
- Well Operations revenues increased in the fourth quarter of 2009 compared with the third quarter of 2009 due primarily to the realization of higher contract day rates for the Q4000. Further, our newest well operations vessel, Well Enhancer, was placed in service in the fourth quarter in the North Sea and generated $12.8 million of revenues. The increased revenues were partially offset by lower utilization rates for our well operations vessels (67% in fourth quarter of 2009 for three vessels compared to 92% in the third quarter of 2009 for two vessels).
- Robotics revenues decreased in the fourth quarter of 2009 compared to the third quarter of 2009 following the completion of a trenching campaign in the third quarter and reflecting the general market weakness. There were no trenching revenues in the fourth quarter of 2009. Robotics asset utilization decreased to 58% in the fourth quarter of 2009 from 74% in the third quarter of 2009.
Oil and Gas
- Oil and Gas revenues increased $7.7 million to $71.5 million in the fourth quarter of 2009 due primarily to higher commodity prices realized for our oil production. Production in the fourth quarter of 2009 totaled 9.7 Bcfe compared to 9.8 Bcfe in the third quarter of 2009. The average prices realized for natural gas, including the effect of settled natural gas hedge contracts, totaled $7.97 per thousand cubic feet of gas (Mcf) in the fourth quarter of 2009 compared to $8.02 per Mcf in the third quarter of 2009. For oil, including the effects of settled hedge contracts, we realized $71.48 per barrel in the fourth quarter of 2009 compared to $68.86 per barrel in the third quarter of 2009.
- The Company's oil and gas production rate at February 23, 2010 approximated 145 million cubic feet of natural gas equivalent per day (MMcfe/d) as compared to 94 MMcfe/d at December 31, 2009. Third party repairs to the pipeline servicing the Noonan gas reservoir in our Bushwood field were completed in early January 2010. Separately, we commenced production from the Danny oil reservoir also in the Bushwood field on February 2, 2010.
- We have entered into oil and gas hedge contracts for approximately 25 Bcf of natural gas and 2.5 million barrels of oil to cover a significant portion of our forecasted production for 2010.
- Selling, general and administrative expenses were 15.7% of revenue in the fourth quarter of 2009, 10.1% in the third quarter of 2009, and 7.5% in the fourth quarter of 2008. Selling, general and administrative expenses increased compared to the third quarter of 2009 due to increased bad debt expenses and higher legal expenses.
- Net interest expense and other increased to $11.5 million in the fourth quarter of 2009 from $10.3 million in the third quarter of 2009. Net interest expense increased to $11.9 million in the fourth quarter of 2009 compared with $7.3 million in the third quarter of 2009. The increase in net interest expense was attributable to a reduction in capitalized interest of $3.5 million in the fourth quarter compared with the third quarter due primarily to the completion of the Well Enhancer in October 2009.
Financial Condition and Liquidity
- Consolidated net debt at December 31, 2009 increased to $1.1 billion from $950 million as of September 30, 2009. We had no borrowings under our revolver and our availability was $386 million at December 31, 2009. Together with cash on hand of $271 million and our revolver availability, our total liquidity was approximately $657 million at December 31, 2009. Net debt to book capitalization as of December 31, 2009 was 43%. (Net debt to book capitalization is a non-GAAP measure. See reconciliation attached hereto.)
- As of December 31, 2009, we were in compliance with our debt covenants under our various loan agreements. On February 19, 2010, we amended our senior credit facility by revising the consolidated leverage ratio covenant test and adding an additional senior secured debt leverage ratio test. The amendment is effective for periods beginning on or after March 31, 2010.
- We incurred capital expenditures (including capitalized interest) totaling $119 million in the fourth quarter of 2009, compared to $87 million in the third quarter of 2009 and $134 million in the fourth quarter of 2008. For the year ended December 31, 2009, capital expenditures totaled $328 million. These amounts exclude all Cal Dive capital expenditures in the periods noted.