Helix Says Four Shelf Platforms Sustain Extensive Damage
Helix Energy Solutions is issuing a preliminary report on the impact of both Hurricanes Ike and Gustav on its operations. Both hurricanes have impacted the Company's Gulf of Mexico oil and gas production, while the Company's contracting services businesses remain operational with little or no business interruption. Presently, nearly all of its oil and gas production remains shut in from Hurricane Ike as the extent of damage to production facilities and third party pipelines is assessed. The Company expects third quarter, 2008 production to be approximately 5 bcfe lower than the second quarter of 2008 due to shut in production in September. While the Company has sustained some damage to its own production facilities from Hurricane Ike, the larger issue in terms of production recovery involves damage to third party pipelines and onshore processing facilities. The timing of when these facilities will be operational is uncertain and not subject to the Company's control.
To date the Company has identified four shelf production platforms plus certain other production assets that have sustained extensive damage. However, the company's assessment of damage to its gas production assets is ongoing and thus has not been fully evaluated. The Company carries comprehensive insurance on all of the Company's operated and non-operated producing and non-producing properties; however, there will be some amounts subject to deductibles.
The majority of the Company's deepwater production facilities and associated shelf host platforms received only minor damage and are currently being re-manned for reinstatement of production operations. Prior to Hurricane Gustav, Helix commenced production from its Bushwood (Noonan) development before having to shut the well in for Hurricane Gustav and then again for Hurricane Ike. The Bushwood development has apparently sustained little or no damage to its three subsea wells and the subsea infrastructure that connects the wells to the host facility located at East Cameron Block 381, although damage to a third party export pipeline downstream from the East Cameron host facility will delay the restart of production from this key field. Helix expects the field to meet its production rate expectations after production resumes.
Helix's contracting services business has experienced little or no business interruption. While the Company's Port Arthur spoolbase suffered damage, to date no interruptions have occurred to pipelay work in the Gulf of Mexico. The Company expects its 58% owned subsidiary, Cal Dive, to receive an incremental amount of inspection, repair and maintenance work as a result of the damage caused by Hurricane Ike.
As a result of production shut-ins and the resultant deferrals from the two storms, the Company will not achieve its total 2008 production estimates. As such, our prior earnings guidance for 2008 is no longer meaningful and it is too early to determine the impact on 2009 earnings. The Company plans to provide an updated report on the hurricane impact and production guidance for the remainder of the year in connection with the release of its third quarter 2008 results.
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