USA: Helix Releases Fourth Quarter and Full Year 2011 Results

Helix Energy Solutions Group, Inc. reported net income of $16.8 million, or $0.16 per diluted share, for the fourth quarter of 2011 compared with a net loss of $49.8 million, or $(0.48) per diluted share, for the same period in 2010, and net income of $46.0 million, or $0.43 per diluted share, in the third quarter of 2011.

Net income for the year ended December 31, 2011 was $129.9 million, or $1.22 per diluted share, compared with a net loss of $127.1 million, or $(1.22) per diluted share, for the year ended December 31, 2010.

Fourth quarter 2011 results included the following items:

* Impairment charges totaling $107.5 million ($69.9 million after-tax) primarily associated with a reduction in carrying values of certain U.S. oil and gas properties and increases in U.S. and U.K. asset retirement obligations

* Tax benefit of $31.3 million related to a reorganization of the Australian subsidiaries, offset by impairment charges of $17.1 million associated with the reduction in the fair value of certain Australian assets ($14.2 million after-tax)

* Gain on sale of an oil and gas property of $4.5 million ($2.9 million after-tax)

* The net impact of these items in the fourth quarter, after income taxes, was $(0.50) per diluted share.

Fourth quarter 2011 highlights included:

* Cash increased by $171 million during the quarter after paying down an additional $18 million in debt, ending the year at $546 million

* Net debt in the quarter decreased by $187 million for a total net debt decrease in 2011 of $358 million

* Oil and gas production totaled 2.24 million barrels of oil equivalent, or MMboe (13.4 billion cubic feet equivalent, or Bcfe) in Q4 2011 versus 1.95 MMboe (11.7 Bcfe) in Q3 2011

* Year-end proved reserve estimates totaled 38.9 MMboe (233.2 Bcfe), 58% of estimated reserves are oil, with a SEC price case PV-10 value of $1.5 billion

* Total estimated proved and probable reserves as of December 31, 2011 were 58.8 MMBoe (352.9 Bcfe)

* Sold “Wideberth” gas property for $31 million (5.3 Bcfe of proved reserves)

Owen Kratz, President and Chief Executive Officer of Helix, stated, “when filtering out the impairments, much of which were associated with declining economics on our natural gas properties, Helix booked another strong operational quarter and generated a relatively significant amount of free cash flow.”

Contracting Services

* Subsea Construction and Robotics revenues decreased in the fourth quarter of 2011 compared to the third quarter of 2011 primarily due to decreased utilization of the mobile pipelay equipment and lower activity levels at the onshore spoolbase facility. Overall utilization rate for Helix owned and chartered vessels increased to 91% in the fourth quarter of 2011 from 86% in the third quarter of 2011. ROV and trenching utilization increased to 69% in the fourth quarter of 2011 compared to 67% in the third quarter of 2011.

* Well Intervention revenues decreased in the fourth quarter of 2011 due primarily to lower day rate work performed in the North Sea coupled with the mobilization of the Well Enhancer to West Africa. Vessel utilization in the North Sea decreased to 96% in the fourth quarter of 2011 from 98% in the third quarter of 2011. Vessel utilization in the Gulf of Mexico (Q4000) was 100% in the fourth quarter of 2011. On a combined basis, vessel utilization decreased slightly to 98% in the fourth quarter of 2011 compared to 99% in the third quarter of 2011.

Production Facilities

* The Helix Producer I continued its deployment on the Phoenix field throughout the fourth quarter of 2011.

Oil and Gas

* Oil and Gas revenues increased in the fourth quarter of 2011 compared to the third quarter of 2011 due primarily to slightly higher oil and gas production and higher oil prices. Production in the fourth quarter of 2011 totaled 2.24 MMboe compared to 1.95 MMboe in the third quarter of 2011.

* The average price realized for oil, including the effects of settled oil hedge contracts, totaled $110.75 per barrel in the fourth quarter of 2011 compared to $100.93 per barrel in the third quarter of 2011. For natural gas and natural gas liquids, including the effect of settled natural gas hedge contracts, company realized $6.16 per thousand cubic feet of gas (Mcf) in the fourth quarter of 2011 compared to $6.15 per Mcf in the third quarter of 2011.

* Oil and gas production has averaged approximately 24 thousand barrels of oil equivalent per day (Mboe/d) year-to-date through February 21, 2012, compared to an average of 24 Mboe/d in the fourth quarter of 2011.

* Helix currently has oil and gas hedge contracts in place totaling 4.6 MMBoe (2.8 million barrels of oil and 11.0 Bcf of gas) in 2012 and 2.1 MMBoe (1.1 million barrels of oil and 6.0 Bcf of gas) in 2013.

Other Expenses

* Selling, general and administrative expenses were 7.3% of revenue in the fourth quarter of 2011, 5.9% in the third quarter of 2011 and 9.9% in the fourth quarter of 2010.

* Net interest expense and other decreased to $18.8 million in the fourth quarter of 2011 from $34.8 million in the third quarter of 2011, due primarily to foreign currency gains in the fourth quarter compared to foreign exchange losses and losses associated with premiums paid upon repurchases of senior unsecured notes in the third quarter. Net interest expense decreased to $22.2 million in the fourth quarter of 2011 compared with $24.1 million in the third quarter of 2011, due primarily to the repurchase of $75.0 million of the senior unsecured notes during the third quarter.

Financial Condition and Liquidity

* Helix repaid $18.0 million of the Term Loan from proceeds of the sale of an oil and gas property. Since the beginning of 2011 they have repaid $212 million of debt.

* Consolidated net debt at December 31, 2011 decreased to $609 million from $796 million as of September 30, 2011. Helix had no outstanding borrowings under the revolver as of December 31, 2011. Helix total liquidity at December 31, 2011 was approximately $1.1 billion, consisting of cash on hand of $546 million and revolver availability of $559 million. Net debt to book capitalization as of December, 2011 was 30%. (Net debt to book capitalization is a non-GAAP measure. See reconciliation attached hereto.)

* On February 21, 2012, company amended the senior credit agreement to allow for an additional $100 million of borrowings under a new term loan committed by a syndicate of banks. Terms and conditions of the new term loan (which is expected to fund in March) are the same as those contained in the revolving credit facility. Proceeds from the term loan together with $100 million of existing liquidity will be used to repay $200 million in principal amount of the senior unsecured notes in late March.

* Company incurred capital expenditures (including capitalized interest) totaling $46 million in the fourth quarter of 2011, compared to $65 million in the third quarter of 2011 and $33 million in the fourth quarter of 2010. For the years ended December 31, 2011 and 2010, capital expenditures incurred totaled $229 million and $179 million, respectively.

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Subsea World News Staff , February 23, 2012;  Image: Helix