Helix Energy eyes capex reduction as oil price decline and coronavirus hit the market

Houston-based oilfield services provider Helix Energy Solutions has withdrawn its previous financial and operational guidance for this year due to the current situation in the market. Expecting the spot market for 2020 to be significantly weaker than previously predicted, Helix now expects to slash its capex by 20 per cent.

Helix's Q5000; Source: Helix
Helix’s Q5000; Source: Helix

In an update on Monday, Helix Energy explained that, in light of the current, significant macroeconomic uncertainty resulting from the recent decline in oil prices and the ongoing COVID-19 crisis, the company is withdrawing its previously issued financial and operational performance guidance for 2020.

Owen Kratz, President and Chief Executive Officer of Helix, stated, “We are withdrawing our previously issued guidance for 2020. While our guidance for 2020 reflected the best information then available to us, at this time we simply are not in a position to provide 2020 guidance given the recent decline in oil prices, COVID-19, and their combined impact on our industry and our company”.

With regards to the coronavirus pandemic, Kratz said the company had implemented preventative protocols and established contingency plans designed to safeguard its personnel, assets, and their operability during this crisis, which has helped the company in minimizing operational disruptions.

Kratz added: “We have continued to operate seven well intervention vessels and six robotics and support vessels, in six different countries on four continents. Our supply chains and logistics, like those of many others, have been forced into challenging environments never before experienced. But we are proud that, thus far, we have risen to the occasion”.

Weaker spot market ahead 

When it comes to the impact that the coronavirus and the low oil price will bring and the industry’s reaction to it, Kratz said: “Our currently contracted work has continued, but we expect the spot market for the remainder of the year to be significantly weaker than previously forecast.

“We anticipate implementing cost reduction plans consistent with levels of work activity and expect to reduce our 2020 capital expenditures by approximately twenty per cent.”

Kratz concluded, “Nevertheless, we believe Helix will remain Free Cash Flow positive in 2020. These are trying times, but we believe we have the cash and liquidity to manage these current challenges.”

Helix anticipates providing additional commentary at the time of its earnings release for the first quarter of 2020, currently scheduled at or near the end of April.