Hornbeck Offshore Services, Inc 10-Q for FY2022 Q1
Hornbeck Offshore Services, Inc. (HOS)
About this 10-Q
Hornbeck Offshore Services, Inc filed this 10-Q on April 27, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $150.13M
- down 8.1% from $163.42M a year earlier
- Net loss
- $42.03M
- compared with a net loss of $2.88M a year earlier
- Diluted EPS
- -$0.28
- compared with -$0.02 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
For the quarterly period ended
or
For the transition period from__________ to__________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) | | (Zip Code) |
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(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of April 22, 2022,
TABLE OF CONTENTS
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| | Condensed Consolidated Balance Sheets – March 31, 2022 (Unaudited) and December 31, 2021 | 3 |
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| | Notes to Condensed Consolidated Financial Statements (Unaudited) | 8 |
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | |
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2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| | March 31, | | December 31, | ||
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| 2022 |
| 2021 | ||
| | (Unaudited) | | | | |
ASSETS |
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Current assets: |
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Cash and cash equivalents | | $ | | | $ | |
Restricted cash | |
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Accounts receivable, net of allowance for credit losses of $ | |
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Other current assets | |
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Total current assets | |
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Property and equipment | |
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Less accumulated depreciation | |
| ( | |
| ( |
Property and equipment, net | |
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Operating lease right-of-use assets | |
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Other assets, net | |
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Total assets | | $ | | | $ | |
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LIABILITIES AND SHAREHOLDERS' EQUITY | |
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Current liabilities: | |
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Accounts payable | | $ | | | $ | |
Accrued liabilities | |
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Current maturities of long-term debt | |
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Current operating lease liabilities | |
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Total current liabilities | |
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Long-term debt | |
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Operating lease liabilities | |
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Deferred tax liabilities | |
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Other non-current liabilities | |
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Total liabilities | |
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Commitments and contingencies | | | | | | |
Shareholders’ equity: | |
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Common stock, | |
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Retained earnings | |
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Accumulated other comprehensive loss | |
| ( | |
| ( |
Total shareholders’ equity | |
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Total liabilities and shareholders’ equity | | $ | | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)
| | Three Months Ended | ||||
| | March 31, | ||||
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| 2022 |
| 2021 | ||
Net revenues | | $ | | | $ | |
Cost of sales | |
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Gross profit (loss) | |
| ( | |
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Selling, general and administrative expenses | |
| ( | |
| ( |
Loss from operations | |
| ( | |
| ( |
Net interest expense | |
| ( | |
| ( |
Other income (expense), net | |
| ( | |
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Royalty income and other | |
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Loss before income taxes | |
| ( | |
| ( |
Income tax provision | |
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Net loss | |
| ( | |
| ( |
Net loss attributable to redeemable noncontrolling interests | |
| — | |
| ( |
Net loss attributable to common shareholders | | $ | ( | | $ | ( |
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Loss per share of common stock: | |
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Basic | | $ | ( | | $ | ( |
Diluted | | $ | ( | | $ | ( |
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Weighted average common shares outstanding: | |
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Basic | |
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Diluted | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands)
| | Three Months Ended | ||||
| | March 31, | ||||
| | 2022 |
| 2021 | ||
Net loss | | $ | ( |
| $ | ( |
Other comprehensive income (loss), net of tax: | |
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Foreign currency translation gain (loss) | |
| ( |
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Other comprehensive income (loss), net of tax | |
| ( |
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Comprehensive income (loss) | |
| ( |
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Less comprehensive loss attributable to redeemable noncontrolling interests: | |
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Net loss | |
| — |
| | ( |
Foreign currency translation gain | |
| — |
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Comprehensive loss attributable to redeemable noncontrolling interests | |
| — |
| | ( |
Comprehensive income (loss) attributable to common shareholders | | $ | ( |
| $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
(in thousands)
| | | | | | | | | | Accumulated | | | | | |
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| | | | | | | | | | Other | | Total | | Redeemable | |||
| | Common Stock | | Retained | | Comprehensive | | Shareholders’ | | Noncontrolling | |||||||
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| Shares |
| Amount |
| Earnings |
| Loss |
| Equity |
| Interests | |||||
Balance, December 31, 2021 |
| | | $ | | | $ | | | $ | ( | | $ | |
| $ | — |
Net loss |
| — | |
| — | |
| ( | |
| — | |
| ( |
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Foreign currency translation adjustments |
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| — | |
| ( | |
| ( |
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Activity in company stock plans, net and other |
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| ( | |
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| ( |
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Share-based compensation |
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| — | |
| — | |
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Balance, March 31, 2022 |
| | | $ | | | $ | | | $ | ( | | $ | |
| $ | — |
| | | | | | | | | | Accumulated | | | | | |
| |
| | | | | | | | | | Other | | Total | | Redeemable | |||
| | Common Stock | | Retained | | Comprehensive | | Shareholders’ | | Noncontrolling | |||||||
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| Shares |
| Amount |
| Earnings |
| Loss |
| Equity |
| Interests | |||||
Balance, December 31, 2020 |
| | | $ | | | $ | | | $ | ( | | $ | |
| $ | |
Net loss |
| — | |
| — | |
| ( | |
| — | |
| ( |
| | ( |
Cumulative-effect adjustments upon adoption of ASU No. 2020-06 |
| — | |
| ( | |
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| — | |
| ( |
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Foreign currency translation adjustments |
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Accretion of redeemable noncontrolling interests |
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| ( | |
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| ( |
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Activity in company stock plans, net and other |
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| ( | |
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| — | |
| ( |
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Share-based compensation |
| — | |
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| — | |
| — | |
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Balance, March 31, 2021 |
| | | $ | | | $ | | | $ | ( | | $ | |
| $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash flows from operating activities: |
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Net loss | | $ | ( | | $ | ( |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |
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Depreciation and amortization | |
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Amortization of debt issuance costs | |
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Share-based compensation | |
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Deferred income taxes | |
| ( | |
| ( |
Unrealized foreign currency (gain) loss | |
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| ( |
Changes in operating assets and liabilities: | |
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Accounts receivable, net | |
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| ( |
Income tax receivable | | | | | | |
Other current assets | | | ( | | | |
Accounts payable and accrued liabilities | |
| ( | |
| ( |
Other, net | |
| ( | |
| ( |
Net cash provided by (used in) operating activities | |
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Cash flows from investing activities: | |
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Capital expenditures | |
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Net cash used in investing activities | |
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Cash flows from financing activities: | |
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Repayment of Term Loan | |
| — | |
| ( |
Repayment of Nordea Q5000 Loan | |
| — | |
| ( |
Repayment of MARAD Debt | |
| ( | |
| ( |
Debt issuance costs | |
| ( | |
| ( |
Payments related to tax withholding for share-based compensation | |
| ( | |
| ( |
Proceeds from issuance of ESPP shares | |
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Net cash used in financing activities | |
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| ( |
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Effect of exchange rate changes on cash and cash equivalents and restricted cash | |
| ( | |
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Net decrease in cash and cash equivalents and restricted cash | |
| ( | |
| ( |
Cash and cash equivalents and restricted cash: | |
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Balance, beginning of year | |
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Balance, end of period | | $ | | | $ | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 — Basis of Presentation and New Accounting Standards
The accompanying condensed consolidated financial statements include the accounts of Helix Energy Solutions Group, Inc. and its subsidiaries (collectively, “Helix”). Unless the context indicates otherwise, the terms “we,” “us” and “our” in this report refer collectively to Helix and its subsidiaries. All material intercompany accounts and transactions have been eliminated. These unaudited condensed consolidated financial statements have been prepared pursuant to instructions for the Quarterly Report on Form 10-Q required to be filed with the Securities and Exchange Commission (the “SEC”) and do not include all information and footnotes normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP in U.S. dollars and are consistent in all material respects with those applied in our 2021 Annual Report on Form 10-K (our “2021 Form 10-K”). The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in the financial statements and the related disclosures. Actual results may differ from our estimates. We have made all adjustments, which, unless otherwise disclosed, are of normal recurring nature, that we believe are necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, statements of comprehensive income (loss), statements of shareholders’ equity and statements of cash flows, as applicable. The operating results for the three-month period ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. Our balance sheet as of December 31, 2021 included herein has been derived from the audited balance sheet as of December 31, 2021 included in our 2021 Form 10-K. These unaudited condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes thereto included in our 2021 Form 10-K.
Certain reclassifications were made to previously reported amounts in the consolidated financial statements and notes thereto to make them consistent with the current presentation format.
We do not expect any recently issued accounting standards to have a material impact on our financial position, results of operations or cash flows when they become effective.
Note 2 — Company Overview
We are an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention and robotics operations. Traditionally, our services have covered the lifecycle of an offshore oil or gas field. In recent years, we have seen an increasing demand for our services from the offshore renewable energy market. We provide services primarily in deepwater in the Gulf of Mexico, Brazil, North Sea, Asia Pacific and West Africa regions. Our North Sea operations are subject to seasonal changes in demand, which generally peaks in the summer months and declines in the winter months. Our services are segregated into
Our Well Intervention segment provides services enabling our customers to safely access offshore wells for the purpose of performing production enhancement or decommissioning operations, thereby avoiding drilling new wells by extending the useful lives of existing wells and preserving the environment by preventing uncontrolled releases of oil and gas. Our well intervention vessels include the Q4000, the Q5000, the Q7000, the Seawell, the Well Enhancer, and
Our Robotics segment provides offshore construction, trenching, seabed clearance, and inspection, repair and maintenance (“IRM”) services to both the oil and gas and the renewable energy markets globally, thereby assisting the delivery of affordable and reliable energy and supporting the responsible transition away from a carbon-based economy. Additionally, our Robotics services are used in and complement our well intervention services. Our Robotics segment includes remotely operated vehicles (“ROVs”), trenchers and robotics support vessels under term charters as well as spot vessels as needed.
8
Our Production Facilities segment includes the Helix Producer I (the “HP I”), a ship-shaped dynamically positioned floating production vessel, the Helix Fast Response System (the “HFRS”) and our ownership of oil and gas properties. All of our current Production Facilities activities are located in the Gulf of Mexico.
Note 3 — Details of Certain Accounts
Other current assets consist of the following (in thousands):
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Contract assets (Note 7) | | $ | |
| $ | |
Prepaids | |
| |
| | |
Deferred costs (Note 7) | |
| |
| | |
Income tax receivable | |
| |
| | |
Other receivable (Note 11) | |
| |
| | |
Other | |
| |
| | |
Total other current assets | | $ | |
| $ | |
Other assets, net consist of the following (in thousands):
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Deferred recertification and dry dock costs, net | | $ | |
| $ | |
Deferred costs (Note 7) | |
| |
| | |
Prepaid charter (1) | |
| |
| | |
Intangible assets with finite lives, net | |
| |
| | |
Other | |
| |
| | |
Total other assets, net | | $ | |
| $ | |
| (1) | Represents prepayments to the owner of the Siem Helix 1 and the Siem Helix 2 to offset certain payment obligations associated with the vessels at the end of their respective charter term. |
Accrued liabilities consist of the following (in thousands):
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Accrued payroll and related benefits | | $ | |
| $ | |
Accrued interest | | | | | | |
Deferred revenue (Note 7) | |
| |
| | |
Asset retirement obligations (Note 11) | |
| |
| | |
Other | |
| |
| | |
Total accrued liabilities | | $ | |
| $ | |
Other non-current liabilities consist of the following (in thousands):
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Deferred revenue (Note 7) | | $ | |
| $ | |
Other | |
| |
| | |
Total other non-current liabilities | | $ | |
| $ | |
9
Note 4 — Leases
We charter vessels and lease facilities and equipment under non-cancelable contracts that expire on various dates through 2031. We also sublease some of our facilities under non-cancelable sublease agreements.
The following table details the components of our lease cost (in thousands):
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Operating lease cost | | $ | |
| $ | |
Variable lease cost | |
| |
| | |
Short-term lease cost | |
| |
| | |
Sublease income | |
| ( |
| | ( |
Net lease cost | | $ | |
| $ | |
Maturities of our operating lease liabilities as of March 31, 2022 are as follows (in thousands):
|
| | |
| Facilities and |
| | | |
|
| Vessels |
| Equipment |
| Total | |||
Less than one year | | $ | | | $ | |
| $ | |
One to two years | |
| | |
| |
| | |
Two to three years | |
| | |
| |
| | |
Three to four years | |
| | |
| |
| | |
Four to five years | |
| | |
| |
| | |
Over five years | |
| — | |
| |
| | |
Total lease payments | | $ | | | $ | |
| $ | |
Less: imputed interest | |
| ( | |
| ( |
| | ( |
Total operating lease liabilities | | $ | | | $ | |
| $ | |
| | | | | | | | | |
Current operating lease liabilities | | $ | | | $ | |
| $ | |
Non-current operating lease liabilities | |
| | |
| |
| | |
Total operating lease liabilities | | $ | | | $ | |
| $ | |
Maturities of our operating lease liabilities as of December 31, 2021 are as follows (in thousands):
|
| | |
| Facilities and |
| | | |
|
| Vessels |
| Equipment |
| Total | |||
Less than one year | | $ | | | $ | |
| $ | |
One to two years | |
| | |
| |
| | |
Two to three years | |
| | |
| |
| | |
Three to four years | |
| — | |
| |
| | |
Four to five years | |
| — | |
| |
| | |
Over five years | |
| — | |
| |
| | |
Total lease payments | | $ | | | $ | |
| $ | |
Less: imputed interest | |
| ( | |
| ( |
| | ( |
Total operating lease liabilities | | $ | | | $ | |
| $ | |
| | | | | | | | | |
Current operating lease liabilities | | $ | | | $ | |
| $ | |
Non-current operating lease liabilities | |
| | |
| |
| | |
Total operating lease liabilities | | $ | | | $ | |
| $ | |
10
The following table presents the weighted average remaining lease term and discount rate:
| | | | | | |
| | March 31, | | December 31, | ||
|
| 2022 | | 2021 | ||
Weighted average remaining lease term |
| years | | years | ||
Weighted average discount rate |
| | % | | | % |
The following table presents other information related to our operating leases (in thousands):
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash paid for operating lease liabilities | | $ | |
| $ | |
Right-of-use assets obtained in exchange for new operating lease obligations (1) | |
| |
| | |
| (1) | Amount in 2022 primarily relates to the charter extensions for the Siem Helix 1 and the Siem Helix 2 (Note 12). |
Note 5 — Long-Term Debt
Scheduled maturities of our long-term debt outstanding as of March 31, 2022 are as follows (in thousands):
| | 2022 | | 2023 | | 2026 | | MARAD | | |
| ||||
|
| Notes |
| Notes |
| Notes |
| Debt |
| Total | |||||
Less than one year | | $ | | | $ | — | | $ | — | | $ | |
| $ | |
One to two years | |
| — | |
| | |
| — | |
| |
| | |
Two to three years | |
| — | |
| — | |
| — | |
| |
| | |
Three to four years | |
| — | |
| — | |
| | |
| |
| | |
Four to five years | |
| — | |
| — | |
| — | |
| |
| | |
Gross debt | |
| | |
| | |
| | |
| |
| | |
Unamortized debt issuance costs (1) | |
| ( | |
| ( | |
| ( | |
| ( |
| | ( |
Total debt | |
| | |
| | |
| | |
| |
| | |
Less current maturities | |
| ( | |
| — | |
| — | |
| ( |
| | ( |
Long-term debt | | $ | — | | $ | | | $ | | | $ | |
| $ | |
| (1) | Debt issuance costs are amortized to interest expense over the term of the applicable debt agreement. |
Below is a summary of certain components of our indebtedness:
Credit Agreement
On September 30, 2021, we entered into an asset-based credit agreement (the “ABL Facility”) with Bank of America, N.A. (“Bank of America”), Wells Fargo Bank, N.A. and Zions Bancorporation. The ABL Facility provides for an $
Commitments under the ABL Facility are comprised of separate U.S. and U.K. revolving credit facility commitments of $
11
We and certain of our U.S. and U.K. subsidiaries are the initial borrowers under the ABL Facility, whose obligations under the ABL Facility are guaranteed by those borrowers and certain other U.S. and U.K. subsidiaries, excluding Cal Dive I – Title XI, Inc. (“CDI Title XI”), Helix Offshore Services Limited and certain other enumerated subsidiaries. Other subsidiaries may be added as guarantors of the facility in the future. The ABL Facility is secured by all accounts receivable and designated deposit accounts of the U.S. borrowers and guarantors, and by substantially all of the assets of the U.K. borrowers and guarantors.
U.S. borrowings under the ABL Facility initially bear interest at the LIBOR rate plus a margin of
The ABL Facility includes certain limitations on our ability to incur additional indebtedness, grant liens on assets, pay dividends and make distributions on equity interests, dispose of assets, make investments, repay certain indebtedness, engage in mergers, and other matters, in each case subject to certain exceptions. The ABL Facility contains customary default provisions which, if triggered, could result in acceleration of all amounts then outstanding. The ABL Facility requires us to satisfy and maintain a fixed charge coverage ratio of not less than
2022 Notes
The 2022 Notes bear interest at a coupon interest rate of
The effective interest rate for the 2022 Notes is
2023 Notes
The 2023 Notes bear interest at a coupon interest rate of
12
Prior to March 15, 2023, holders of the 2023 Notes may convert their notes if the closing price of our common stock exceeds
Prior to March 15, 2021, the 2023 Notes were not redeemable. On or after March 15, 2021, we may redeem all or any portion of the 2023 Notes if the price of our common stock has been at least
The indenture governing the 2023 Notes contains customary terms and covenants, including that upon certain events of default, the entire principal amount of and any accrued interest on the notes may be declared immediately due and payable. In the case of certain events of bankruptcy, insolvency or reorganization relating to us or a significant subsidiary, the principal amount of the 2023 Notes together with any accrued interest will become immediately due and payable.
The effective interest rate for the 2023 Notes is
2026 Notes
The 2026 Notes bear interest at a coupon interest rate of
Prior to November 17, 2025, holders of the 2026 Notes may convert their notes if the closing price of our common stock exceeds
Prior to August 15, 2023, the 2026 Notes are not redeemable. On or after August 15, 2023, we may redeem all or any portion of the 2026 Notes if the price of our common stock has been at least
13
The indenture governing the 2026 Notes contains customary terms and covenants, including that upon certain events of default, the entire principal amount of and any accrued interest on the notes may be declared immediately due and payable. In the case of certain events of bankruptcy, insolvency or reorganization relating to us or a significant subsidiary, the principal amount of the 2026 Notes together with any accrued interest will become immediately due and payable.
The effective interest rate for the 2026 Notes is
2026 Capped Calls
In connection with the 2026 Notes offering, we entered into capped call transactions (the “2026 Capped Calls”) with three separate option counterparties. The 2026 Capped Calls are for an aggregate of
The 2026 Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting Helix, including a merger, tender offer, nationalization, insolvency or delisting. In addition, certain events may result in a termination of the 2026 Capped Calls, including changes in law, insolvency filings and hedging disruptions. The 2026 Capped Calls are recorded at their aggregate cost of $
MARAD Debt
In 2005, Helix’s subsidiary CDI – Title XI issued its U.S. Government Guaranteed Ship Financing Bonds, Q4000 Series, to refinance the construction financing originally granted in 2002 of the Q4000 vessel (the “MARAD Debt”). The MARAD Debt is guaranteed by the U.S. government pursuant to Title XI of the Merchant Marine Act of 1936, administered by the Maritime Administration (“MARAD”). The obligation of CDI Title XI to reimburse MARAD in the event CDI Title XI fails to repay the MARAD Debt is collateralized by the Q4000 and is guaranteed
Other
We previously had a credit agreement with a syndicated bank lending group for a term loan (the “Nordea Q5000 Loan”) to finance the construction of the Q5000. The loan was secured by the Q5000 and its charter earnings. In January 2021, we repaid the remaining principal amount of $
We previously had another credit agreement (and the amendments made thereafter, collectively the “Credit Agreement”) with a group of lenders led by Bank of America. The Credit Agreement was comprised of a term loan (the “Term Loan”) and a revolving credit facility (the “Revolving Credit Facility”) with a maximum availability of $
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In accordance with the ABL Facility, the 2022 Notes, the 2023 Notes, the 2026 Notes and the MARAD Debt, we are required to comply with certain covenants, including a springing fixed charge coverage ratio and minimum liquidity with respect to the ABL Facility and the maintenance of net worth, working capital and debt-to-equity requirements with respect to the MARAD Debt. As of March 31, 2022, we were in compliance with these covenants.
The following table details the components of our net interest expense (in thousands):
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Interest expense | | $ | |
| $ | |
Interest income | |
| ( |
| | ( |
Net interest expense | | $ | |
| $ | |
Note 6 — Income Taxes
We operate in multiple jurisdictions with complex tax laws subject to interpretation and judgment. We believe that our application of such laws and the tax impact thereof are reasonable and fairly presented in our condensed consolidated financial statements.
For the three-month periods ended March 31, 2022 and 2021, we recognized income tax expense of $
Note 7 — Revenue from Contracts with Customers
Disaggregation of Revenue
Our revenues are primarily derived from short-term and long-term service contracts with customers. Our service contracts generally contain either provisions for specific time, material and equipment charges that are billed in accordance with the terms of such contracts (dayrate contracts) or lump sum payment provisions (lump sum contracts). We record revenues net of taxes collected from customers and remitted to governmental authorities. Contracts are classified as long-term if all or part of the contract is to be performed over a period extending beyond 12 months from the effective date of the contract. Long-term contracts may include multi-year agreements whereby the commitment for services in any one year may be short in duration.
| | Well | | | | Production | | Intercompany | | Total | |||||
|
| Intervention |
| Robotics |
| Facilities |
| Eliminations |
| Revenue | |||||
Three months ended March 31, 2022 | |
|
| |
|
| |
|
| |
|
| |
|
|
Short-term | | $ | | | $ | | | $ | — | | $ | ( | | $ | |
Long-term | |
| | |
| | |
| | |
| ( | |
| |
Total | | $ | | | $ | | | $ | | | $ | ( | | $ | |
| | | | | | | | | | | | | | | |
Three months ended March 31, 2021 | |
|
| |
|
| |
|
| |
|
| |
|
|
Short-term | | $ | | | $ | | | $ | — | | $ | — | | $ | |
Long-term | |
| | |
| | |
| | |
| ( | |
| |
Total | | $ | | | $ | | | $ | | | $ | ( | | $ | |
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Contract Balances
Accounts receivable are recognized when our right to consideration becomes unconditional.
Contract assets are rights to consideration in exchange for services that we have provided to a customer when those rights are conditioned on our future performance. Contract assets generally consist of (i) demobilization fees recognized ratably over the contract term but invoiced upon completion of the demobilization activities and (ii) revenue recognized in excess of the amount billed to the customer for lump sum contracts when the cost-to-cost method of revenue recognition is utilized. Contract assets are reflected in “Other current assets” in the accompanying condensed consolidated balance sheets (Note 3). Contract assets were $
Contract liabilities are obligations to provide future services to a customer for which we have already received, or have the unconditional right to receive, the consideration for those services from the customer. Contract liabilities may consist of (i) advance payments received from customers, including upfront mobilization fees allocated to a single performance obligation and recognized ratably over the contract term and/or (ii) amounts billed to the customer in excess of revenue recognized for lump sum contracts when the cost-to-cost method of revenue recognition is utilized. Contract liabilities are reflected as “Deferred revenue,” a component of “Accrued liabilities” and “Other non-current liabilities” in the accompanying condensed consolidated balance sheets (Note 3). Contract liabilities totaled $
We report the net contract asset or contract liability position on a contract-by-contract basis at the end of each reporting period.
Performance Obligations
As of March 31, 2022, $
For the three-month periods ended March 31, 2022 and 2021, revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were immaterial.
Contract Fulfillment Costs
Contract fulfillment costs consist of costs incurred in fulfilling a contract with a customer. Our contract fulfillment costs primarily relate to costs incurred for mobilization of personnel and equipment at the beginning of a contract and costs incurred for demobilization at the end of a contract. Mobilization costs are deferred and amortized ratably over the contract term (including anticipated contract extensions) based on the pattern of the provision of services to which the contract fulfillment costs relate. Demobilization costs are recognized when incurred at the end of the contract. Deferred contract costs are reflected as “Deferred costs,” a component of “Other current assets” and “Other assets, net” in the accompanying condensed consolidated balance sheets (Note 3). Our deferred contract costs totaled $
For additional information regarding revenue recognition, see Notes 2 and 12 to our 2021 Form 10-K.
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Note 8 — Earnings Per Share
We have shares of restricted stock issued and outstanding that are currently unvested. Because holders of shares of unvested restricted stock are entitled to the same liquidation and dividend rights as the holders of our unrestricted common stock, we are required to compute basic and diluted earnings per share (“EPS”) under the two-class method in periods in which we have earnings. Under the two-class method, net income or loss attributable to common shareholders for each period is allocated based on the participation rights of both common shareholders and the holders of any participating securities as if earnings for the respective periods had been distributed. For periods in which we have a net loss we do not use the two-class method as holders of our restricted shares are not obligated to share in such losses.
Basic EPS is computed by dividing net income or loss available to common shareholders by the weighted average shares of our common stock outstanding. The calculation of diluted EPS is similar to that for basic EPS, except that the denominator includes dilutive common stock equivalents and the numerator excludes the effects of dilutive common stock equivalents, if any.
| | Three Months Ended | | Three Months Ended | ||||||
| | March 31, 2022 | | March 31, 2021 | ||||||
|
| Income |
| Shares |
| Income |
| Shares | ||
Basic and Diluted: |
| |
|
|
|
| |
|
|
|
Net loss attributable to common shareholders | | $ | ( | | |
| $ | ( |
|
|
Less: Accretion of redeemable noncontrolling interests | |
| — | | |
| | ( |
|
|
Net loss available to common shareholders | | ( | | | | ( |
| | ||
We had net losses for the three-month periods ended March 31, 2022 and 2021. Accordingly, our diluted EPS calculation for these periods excluded any assumed exercise or conversion of common stock equivalents. These common stock equivalents were excluded because they were deemed to be anti-dilutive, meaning their inclusion would have reduced the reported net loss per share in the applicable periods.
| | Three Months Ended | ||
| | March 31, | ||
|
| 2022 |
| 2021 |
Diluted shares (as reported) |
| |
| |
Share-based awards |
| |
| |
Total |
| |
| |
The following potentially dilutive shares related to the 2022 Notes, the 2023 Notes and the 2026 Notes were excluded from the diluted EPS calculation as they were anti-dilutive (in thousands):
| | Three Months Ended | ||
| | March 31, | ||
|
| 2022 |
| 2021 |
2022 Notes |
| |
| |
2023 Notes |
| |
| |
2026 Notes |
| |
| |
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Note 9 — Employee Benefit Plans
Long-Term Incentive Plan
As of March 31, 2022, there were
| | | | | | Grant Date | | | |
| | | | | | Fair Value | | | |
Date of Grant |
| Award Type |
| Shares/Units |
| Per Share/Unit |
| Vesting Period | |
| RSU |
| | | $ | |
| ||
| PSU |
| | | $ | |
| ||
| Restricted stock |
| | | $ | |
| ||
| (1) | Reflects grants to our executive officers. |
| (2) | Reflects grants to certain independent members of our Board of Directors (our “Board”) who have elected to take their quarterly fees in stock in lieu of cash. |
Compensation cost for restricted stock is the product of the grant date fair value of each share and the number of shares granted and is recognized over the applicable vesting period on a straight-line basis. Forfeitures are recognized as they occur.
Our performance share units (“PSUs”) that were granted prior to 2021 are to be settled solely in shares of our common stock and are accounted for as equity awards. Those PSUs, which contain a service and a market condition, are based on the performance of our common stock against peer group companies. Our PSUs granted beginning 2021 may be settled in either cash or shares of our common stock upon vesting at the discretion of the Compensation Committee of our Board and have been accounted for as equity awards. Those PSUs consist of
For PSUs that have a service and a market condition and are accounted for as equity awards, compensation cost is measured based on the grant date estimated fair value determined using a Monte Carlo simulation model and subsequently recognized over the vesting period on a straight-line basis. For PSUs that have a service and a performance condition and are accounted for as equity awards, compensation cost is initially measured based on the grant date fair value. Cumulative compensation cost is subsequently adjusted at the end of each reporting period to reflect the current estimation of achieving the performance condition. For the three-month periods ended March 31, 2022 and 2021, $
Our restricted stock units (“RSUs”) may be settled in either cash or shares of our common stock upon vesting at the discretion of the Compensation Committee and have been accounted for as liability awards. Liability RSUs are measured at their estimated fair value at each balance sheet date, and subsequent changes in the fair value of the awards are recognized in earnings for the portion of the award for which the requisite service period has elapsed. Cumulative compensation cost for vested liability RSUs equals the actual payout value upon vesting. For the three-month periods ended March 31, 2022 and 2021, $
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In 2022 and 2021, we granted fixed-value cash awards of $
Defined Contribution Plan
We sponsor a defined contribution 401(k) retirement plan. Our discretionary contributions are in the form of cash and consist of a
Employee Stock Purchase Plan
We have an employee stock purchase plan (the “ESPP”). As of March 31, 2022,
For more information regarding our employee benefit plans, including the 2005 Incentive Plan and the ESPP, see Note 14 to our 2021 Form 10-K.
Note 10 — Business Segment Information
We have
We evaluate our performance based on operating income of each reportable segment.
| | Three Months Ended | ||||
| | March 31, | ||||
| | 2022 |
| 2021 | ||
Net revenues — | | |
|
| |
|
Well Intervention | | $ | | | $ | |
Robotics | |
| | |
| |
Production Facilities | |
| | |
| |
Intercompany eliminations | |
| ( | |
| ( |
Total | | $ | | | $ | |
| | | | | | |
Income (loss) from operations — | |
|
| |
|
|
Well Intervention | | $ | ( | | $ | |
Robotics | |
| | |
| ( |
Production Facilities | |
| | |
| |
Segment operating income (loss) | |
| ( | |
| |
Corporate, eliminations and other | |
| ( | |
| ( |
Total | | $ | ( | | $ | ( |
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Intercompany segment amounts are derived primarily from equipment and services provided to other business segments.
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Well Intervention | | $ | | | $ | |
Robotics | |
| | |
| |
Total | | $ | | | $ | |
Segment assets are comprised of all assets attributable to each reportable segment. Corporate and other includes all assets not directly identifiable with our business segments.
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Well Intervention | | $ | | | $ | |
Robotics | |
| | |
| |
Production Facilities | |
| | |
| |
Corporate and other | |
| | |
| |
Total | | $ | | | $ | |
Note 11 — Asset Retirement Obligations
Asset retirement obligations (“AROs”) are recorded at fair value and consist of estimated costs for subsea infrastructure decommissioning and plug and abandonment (“P&A”) activities associated with our oil and gas properties. The estimated costs are discounted to present value using a credit-adjusted risk-free discount rate. After its initial recognition, an ARO liability is increased for the passage of time as accretion expense, which is a component of our depreciation and amortization expense. An ARO liability may also change based on revisions in estimated costs and/or timing to settle the obligations.
Our AROs relate to our Droshky oil and gas properties that we acquired from Marathon Oil Corporation (“Marathon Oil”) in January 2019. In connection with assuming the P&A obligations related to those assets, we are entitled to receive agreed-upon amounts from Marathon Oil as the P&A work is completed.
|
| 2022 |
| 2021 | ||
AROs at January 1, | | $ | | | $ | |
Accretion expense | |
| | |
| |
AROs at March 31, | | $ | | | $ | |
Note 12 — Commitments and Contingencies and Other Matters
Commitments
We have long-term charter agreements with Siem Offshore AS for the Siem Helix 1 and Siem Helix 2 vessels. During the first quarter 2022, the charter agreements for the Siem Helix 1 and the Siem Helix 2 were extended to February 2025 and February 2027, respectively, with further options to extend. We have time charter agreements for the Grand Canyon II and Grand Canyon III vessels. The expiration date of the Grand Canyon II charter was extended to December 2022, with an option to renew. The Grand Canyon III charter expires May 2023. During the first quarter 2022, we executed short-term time charter agreements for the Horizon Enabler in the North Sea and the Shelia Bordelon in the Gulf of Mexico.
Contingencies and Claims
We believe that there are currently no contingencies that would have a material adverse effect on our financial position, results of operations or cash flows.
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Litigation
We are involved in various legal proceedings, some involving claims for personal injury under the General Maritime Laws of the United States and the Jones Act. In addition, from time to time we receive other claims, such as contract and employment-related disputes, in the normal course of business.
We are currently involved in several lawsuits filed by current and former offshore employees seeking overtime compensation. These suits are brought as collective actions and are in various stages of litigation. In one such lawsuit, during the third quarter 2021 the United States Court of Appeals for the Fifth Circuit issued a ruling adverse to us that may also have implications for some of the other cases in which we are involved, as well as the way offshore personnel are compensated throughout our industry. We further appealed that matter and continue to vigorously defend these lawsuits. Notwithstanding that we believe we retain valid defenses, we have established a liability for probable losses in certain of these matters. The final outcome of these matters remains uncertain and the ultimate liability to us could be more or less than the liability established.
Note 13 — Statement of Cash Flow Information
We define cash and cash equivalents as cash and all highly liquid financial instruments with original maturities of three months or less. We classify cash as restricted when there are legal or contractual restrictions for its withdrawal.
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Interest paid | | $ | | | $ | |
Income taxes paid | |
| | |
| |
Our capital additions include the acquisition of property and equipment for which payment has not been made. These non-cash capital additions totaled $
Note 14 — Allowance for Credit Losses
We estimate current expected credit losses on our accounts receivable at each reporting date based on our credit loss history, adjusted for current factors including global economic and business conditions, offshore energy industry and market conditions, customer mix, contract payment terms and past due accounts receivable.
The following table sets forth the activity in our allowance for credit losses (in thousands):
|
| 2022 |
| 2021 | ||
Balance at January 1, | | $ | | | $ | |
Additions (reductions) (1) | |
| ( | |
| |
Write-offs (2) | | | — | | | ( |
Balance at March 31, | | $ | | | $ | |
| (1) | Additions (reductions) in allowance for credit losses reflect credit loss reserves (releases) during the respective periods. |
| (2) | The write-offs of allowance for credit losses reflect certain receivables related to our Robotics segment that were previously reserved and subsequently deemed to be uncollectible. |
21
Note 15 — Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value accounting rules establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| ● | Level 1. Observable inputs such as quoted prices in active markets; |
| ● | Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
| ● | Level 3. Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Assets and liabilities measured at fair value are based on one or more of three valuation approaches as follows:
| (a) | Market Approach. Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. |
| (b) | Cost Approach. Amount that would be required to replace the service capacity of an asset (replacement cost). |
| (c) | Income Approach. Techniques to convert expected future cash flows to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models). |
Our financial instruments include cash and cash equivalents, receivables, accounts payable and long-term debt. The carrying amount of cash and cash equivalents, trade and other current receivables as well as accounts payable approximates fair value due to the short-term nature of these instruments.
The principal amount and estimated fair value of our long-term debt are as follows (in thousands):
| | March 31, 2022 | | December 31, 2021 | ||||||||
| | Principal | | Fair | | Principal | | Fair | ||||
|
| Amount (1) |
| Value (2) |
| Amount (1) |
| Value (2) | ||||
MARAD Debt (matures February 2027) | | $ | | | $ | | | $ | | | $ | |
2022 Notes (mature May 2022) | |
| | |
| | |
| | |
| |
2023 Notes (mature September 2023) | |
| | |
| | |
| | |
| |
2026 Notes (mature February 2026) | |
| | |
| | |
| | |
| |
Total debt | | $ | | | $ | | | $ | | | $ | |
| (1) | Principal amount includes current maturities and excludes any related unamortized debt issuance costs. See Note 5 for additional disclosures on our long-term debt. |
| (2) | The estimated fair value of the 2022 Notes, the 2023 Notes and the 2026 Notes was determined using Level 1 fair value inputs under the market approach. The fair value of the MARAD Debt was estimated using Level 2 fair value inputs under the market approach, which was determined using a third-party evaluation of the remaining average life and outstanding principal balance of the indebtedness as compared to other obligations in the marketplace with similar terms. |
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS AND ASSUMPTIONS
This Quarterly Report on Form 10-Q contains or incorporates by reference various statements that contain forward-looking information regarding Helix and represent our current expectations or forecasts of future events. This forward-looking information is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995 as set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements included herein or incorporated by reference herein that are predictive in nature, that depend upon or refer to future events or conditions, or that use terms and phrases such as “achieve,” “anticipate,” “believe,” “estimate,” “budget,” “expect,” “forecast,” “plan,” “project,” “propose,” “strategy,” “predict,” “envision,” “hope,” “intend,” “will,” “continue,” “may,” “potential,” “should,” “could” and similar terms and phrases are forward-looking statements although not all forward-looking statements contain such identifying words. Included in forward-looking statements are, among other things:
| ● | statements regarding our business strategy, corporate initiatives and any other business plans, forecasts or objectives, any or all of which are subject to change; |
| ● | statements regarding projections of revenues, gross margins, expenses, earnings or losses, working capital, debt and liquidity, capital expenditures or other financial items; |
| ● | statements regarding our backlog and commercial contracts and rates thereunder; |
| ● | statements regarding our ability to enter into and/or perform commercial contracts, including the scope, timing and outcome of those contracts; |
| ● | statements regarding the spot market, the continuation of our current backlog, our spending and cost reduction plans and our ability to manage changes, and the COVID-19 pandemic and oil price volatility and their respective effects and results on the foregoing as well as our protocols and plans; |
| ● | statements regarding the acquisition, construction, completion, upgrades to or maintenance of vessels, systems or equipment and any anticipated costs or downtime related thereto; |
| ● | statements regarding any financing transactions or arrangements, or our ability to enter into such transactions or arrangements; |
| ● | statements regarding potential legislative, governmental, regulatory, administrative or other public body actions, requirements, permits or decisions; |
| ● | statements regarding our trade receivables and their collectability; |
| ● | statements regarding potential developments, industry trends, performance or industry ranking; |
| ● | statements regarding our Environmental, Social and Governance (“ESG”) initiatives and the successes thereon or regarding our environmental efforts, including greenhouse gas emissions targets; |
| ● | statements regarding global, market or investor sentiment with respect to fossil fuels; |
| ● | statements regarding our existing activities in, and future expansion into, the offshore renewable energy market; |
| ● | statements regarding general economic or political conditions, whether international, national or in the regional or local markets in which we do business; |
| ● | statements regarding our human capital resources, including our ability to retain our senior management and other key employees; |
| ● | statements regarding the underlying assumptions related to any projection or forward-looking statement; and |
| ● | any other statements that relate to non-historical or future information. |
Although we believe that the expectations reflected in our forward-looking statements are reasonable and are based on reasonable assumptions, they do involve risks, uncertainties and other factors that could cause actual results to differ materially from those in the forward-looking statements. These factors include:
| ● | the impact of domestic and global economic conditions and the future impact of such conditions on the offshore energy industry and the demand for our services; |
| ● | the general impact of oil and gas price volatility and the cyclical nature of the oil and gas market; |
| ● | the potential effects of regional tensions that have escalated or may escalate, including into conflicts or wars, and their impact on the global economy, oil and gas market, our operations, international trade, or our ability to do business with certain parties or in certain regions, and any governmental sanctions resulting therefrom; |
| ● | the results and effects of the COVID-19 pandemic and actions by governments, customers, suppliers and partners with respect thereto; |
23
| ● | the results of corporate initiatives such as alliances, partnerships, joint ventures, mergers, acquisitions, divestitures and restructurings, or the determination not to pursue or effect such initiatives; |
| ● | the impact of any potential cancellation, deferral or modification of our work or contracts by our customers; |
| ● | the ability to effectively bid, renew and perform our contracts, including the impact of equipment problems or failure; |
| ● | the impact of the imposition by our customers of rate reductions, fines and penalties with respect to our operating assets; |
| ● | unexpected future capital expenditures, including the amount and nature thereof; |
| ● | the effectiveness and timing of our vessel and/or system upgrades, regulatory recertification and inspection as well as major maintenance items; |
| ● | unexpected delays in the delivery, chartering or customer acceptance, and terms of acceptance, of our assets; |
| ● | the effects of our indebtedness, our ability to comply with debt covenants and our ability to reduce capital commitments; |
| ● | the results of our continuing efforts to control costs and improve performance; |
| ● | the success of our risk management activities, including with respect to our cybersecurity initiatives; |
| ● | the effects of competition; |
| ● | the availability of capital (including any financing) to fund our business strategy and/or operations; |
| ● | the effectiveness of our ESG initiatives and disclosures; |
| ● | the impact of current and future laws and governmental regulations and how they will be interpreted or enforced, including related to litigation and similar claims in which we may be involved; |
| ● | the future impact of international activity and trade agreements on our business, operations and financial condition; |
| ● | the effect of adverse weather conditions and/or other risks associated with marine operations; |
| ● | the impact of foreign currency exchange controls, potential illiquidity of those currencies and exchange rate fluctuations; |
| ● | the effectiveness of our future hedging activities; |
| ● | the potential impact of a negative event related to our human capital resources, including a loss of one or more key employees; |
| ● | the impact of general, market, industry or business conditions; and |
| ● | the impact of inflation and our ability to recoup rising costs in the rates we charge to our customers. |
Our actual results could also differ materially from those anticipated in any forward-looking statements as a result of a variety of factors, including those described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Form 10-K. Should one or more of the risks or uncertainties described in this Quarterly Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.
We caution you not to place undue reliance on forward-looking statements. Forward-looking statements are only as of the date they are made, and other than as required under the securities laws, we assume no obligation to update or revise forward-looking statements, all of which are expressly qualified by the statements in this section, or provide reasons why actual results may differ. All forward-looking statements, express or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We urge you to carefully review and consider the disclosures made in this Quarterly Report and our reports filed with the SEC and incorporated by reference in our 2021 Form 10-K that attempt to advise interested parties of the risks and factors that may affect our business.
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EXECUTIVE SUMMARY
Our Business
We are an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention and robotics operations. The services we offer to the oil and gas market cover the lifecycle of an offshore oil or gas field, and the services we offer to the renewable energy market are currently focused on offshore wind farm projects, including trenching and cable burial and seabed clearance operations. Our well intervention fleet includes seven purpose-built well intervention vessels and 10 intervention systems. Our robotics equipment includes 40 work-class ROVs and four trenchers. We charter robotics support vessels on both long-term and spot bases to facilitate our ROV and trenching operations. Our well intervention and robotics operations are geographically dispersed throughout the world. Our Production Facilities segment includes the HP I, the HFRS and our ownership of oil and gas properties.
Economic Outlook and Industry Influences
Demand for our services is primarily influenced by the condition of the oil and gas and the renewable energy markets and, in particular, the willingness of offshore energy companies to spend on operational activities and capital projects. The performance of our business is largely affected by the prevailing market prices for oil and natural gas, which are impacted by domestic and global economic conditions, hydrocarbon production and capacity, geopolitical issues, weather, global health, and various other factors.
Oil and gas prices experienced recent highs during the first quarter 2022 as global demand continued to recover from COVID-19 related restrictions and supply was disrupted by regional conflicts. The increases in oil prices, as well as the outlook for higher sustained oil prices, should lead to higher customer spending for the industry. However, despite the current strong commodity price environment, there are broad headwinds to commodity price stability. The headwinds include those regional conflicts, high inflation, ongoing COVID-related uncertainties, various governmental and customer ESG initiatives and continued shifting of resource allocation to renewable energy. We expect this will contribute to commodity price volatility and may temper customer spending for oil and gas projects.
Historically, drilling rigs have been the asset class used for offshore well intervention work, and rig day rates are a pricing indicator for our services. Our customers have used drilling rigs on existing long-term contracts (rig overhang) to perform well intervention work instead of new drilling activities. Current volumes of work, the day rates quoted by drilling rig contractors and existing rig overhang affect the utilization and/or rates we can achieve for our assets and services.
The COVID-19 pandemic resulted in new market dynamics and challenges to us, including contributing significantly to oil and gas price volatility and increased costs related to our supply chain, logistics and human capital resources. While the full impact of the COVID-19 pandemic, including the duration of its impact on economic activity, remains unknown, we expect such impact may continue into the foreseeable future, including affecting our customers’ willingness to commit to future spending, limiting access to and use of capital, disrupting supply chains and increasing costs, and negatively affecting human capital resources.
Over the near-term, as oil and gas companies evaluate their budgetary spend allocations, we expect they may be weighted towards short-cycle production enhancement of existing wells rather than new long-cycle exploration projects, as historically enhancement is less expensive per incremental barrel of oil than exploration. Over the longer term, we continue to expect oil and gas companies to increasingly focus on optimizing production of their existing subsea wells. Moreover, as the subsea tree base expands and ages and customers shift resources to renewable energy, the demand for P&A services should persist. Our well intervention and robotics operations service the lifecycle of an oil and gas field and provide P&A services at the end of the life of a field as required by governmental regulations, and we believe that we have a competitive advantage in performing these services efficiently.
We expect the fundamentals for our business will remain favorable over the longer term as the need to prolong well life in oil and gas production and safely decommission end of life wells are primary drivers of demand for our services. This expectation is based on multiple factors, including (1) maintaining the optimal production of a well through enhancement is fundamental to maximizing the overall economics of well production; (2) our services offer commercially viable alternatives for reducing the finding and development costs of reserves as compared to new drilling; and (3) extending the production of offshore wells not only maximizes a well’s production economics but also enables the financial benefit of delaying P&A costs, which can be substantial.
25
Demand for our services in the renewable energy market is affected by various factors, including the pace of consumer shift towards renewable energy sources, global electricity demand, technological advancements that increase the production and/or reduce the cost of renewable energy, expansion of offshore renewable energy projects to deeper water, and government subsidies for renewable energy projects.
We are subject to the effects of changing prices. Inflation rates have been relatively low and stable over the previous three decades; however, in 2021 due in part to supply chain disruptions and the effects of the COVID-19 pandemic, inflation rates began to rise significantly and remained high through the first quarter 2022. Although we are able to reduce some of our exposure to price increases through the rates we charge, we bear the costs of operating and maintaining our assets, including labor and material costs as well as recertification and dry dock costs. While the cost outlook is not certain, we believe that we can manage these inflationary pressures by introducing appropriate sales price adjustments and by actively pursuing internal cost reduction efforts. However, competitive market pressures may affect our ability to recoup these price increases through the rates we charge, which may result in reductions in our operating margins and cash flows in the future. The recent high inflation rates seen in various major economies have caused concerns for central banks’ tightening of monetary policies. These concerns have contributed to stock market volatility as well as higher interest rates, which, combined with ongoing regional conflicts and unrest and continued COVID-related disruptions throughout the globe, could provide a strained macroeconomic outlook and in turn affect energy markets.
Backlog
We define backlog as firm commitments represented by signed contracts. As of March 31, 2022, our consolidated backlog totaled $548 million, of which $263 million is expected to be performed over the remainder of 2022. Our contract with Trident Energy Do Brasil LTDA. to provide P&A services offshore Brazil with the Siem Helix 1 chartered vessel, our contract with Petróleo Brasileiro S.A. (“Petrobras”) to provide well intervention services offshore Brazil with the Siem Helix 2 chartered vessel, our well intervention contract with Shell Offshore Inc. for the Q5000 and our fixed fee agreement for the HP I represented approximately 58% of our total backlog as of March 31, 2022. Backlog is not necessarily a reliable indicator of revenues derived from our contracts as services are often added but may sometimes be subtracted; contracts may be renegotiated, deferred, canceled and in many cases modified while in progress; and reduced rates, fines and penalties may be imposed by our customers. Furthermore, our contracts are in certain cases cancelable without penalty. If there are cancellation fees, the amount of those fees can be substantially less than amounts reflected in backlog.
RESULTS OF OPERATIONS
Non-GAAP Financial Measures
A non-GAAP financial measure is generally defined by the SEC as a numerical measure of a company’s historical or future performance, financial position or cash flows that includes or excludes amounts from the most directly comparable measure under GAAP. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, our reported results prepared in accordance with GAAP. Users of this financial information should consider the types of events and transactions that are excluded from these measures.
We measure our operating performance based on EBITDA, Adjusted EBITDA and Free Cash Flow. EBITDA, Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures that are commonly used but are not recognized accounting terms under GAAP. We use EBITDA, Adjusted EBITDA and Free Cash Flow to monitor and facilitate internal evaluation of the performance of our business operations, to facilitate external comparison of our business results to those of others in our industry, to analyze and evaluate financial and strategic planning decisions regarding future investments and acquisitions, to plan and evaluate operating budgets, and in certain cases, to report our results to the holders of our debt as required by our debt covenants. We believe that our measures of EBITDA, Adjusted EBITDA and Free Cash Flow provide useful information to the public regarding our operating performance and ability to service debt and fund capital expenditures and may help our investors understand and compare our results to other companies that have different financing, capital and tax structures. Other companies may calculate their measures of EBITDA, Adjusted EBITDA and Free Cash Flow differently from the way we do, which may limit their usefulness as comparative measures. EBITDA, Adjusted EBITDA and Free Cash Flow should not be considered in isolation or as a substitute for, but instead are supplemental to, income from operations, net income, cash flows from operating activities, or other income or cash flow data prepared in accordance with GAAP.
26
We define EBITDA as earnings before income taxes, net interest expense, gain or loss on extinguishment of long-term debt, net other income or expense, and depreciation and amortization expense. Non-cash impairment losses on goodwill and other long-lived assets and non-cash gains and losses on equity investments are also added back if applicable. To arrive at our measure of Adjusted EBITDA, we exclude the gain or loss on disposition of assets and the general provision (release) for current expected credit losses, if any. In addition, we include realized losses from foreign currency exchange contracts not designated as hedging instruments, which are excluded from EBITDA as a component of net other income or expense. We define Free Cash Flow as cash flows from operating activities less capital expenditures, net of proceeds from sale of assets. In the following reconciliation, we provide amounts as reflected in the condensed consolidated financial statements unless otherwise noted.
The reconciliation of our net loss to EBITDA and Adjusted EBITDA is as follows (in thousands):
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Net loss | | $ | (42,031) | | $ | (3,050) |
Adjustments: | |
|
| |
|
|
Income tax provision | |
| 2,140 | |
| 116 |
Net interest expense | |
| 5,174 | |
| 6,053 |
Other (income) expense, net | |
| 3,881 | |
| (1,617) |
Depreciation and amortization | |
| 33,488 | |
| 34,566 |
EBITDA | |
| 2,652 | |
| 36,068 |
Adjustments: | |
|
| |
|
|
General provision (release) for current expected credit losses | |
| (126) | |
| 100 |
Adjusted EBITDA | | $ | 2,526 | | $ | 36,168 |
The reconciliation of our cash flows from operating activities to Free Cash Flow is as follows (in thousands):
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash flows from operating activities | | $ | (17,413) | | $ | 39,869 |
Less: Capital expenditures, net of proceeds from sale of assets | |
| (623) | |
| (1,329) |
Free Cash Flow | | $ | (18,036) | | $ | 38,540 |
27
Comparison of Three Months Ended March 31, 2022 and 2021
We have three reportable business segments: Well Intervention, Robotics and Production Facilities. All material intercompany transactions between the segments have been eliminated in our condensed consolidated financial statements, including our condensed consolidated results of operations. The following table details various financial and operational highlights for the periods presented (dollars in thousands):
| | Three Months Ended | | Increase/ |
| |||||||
| | March 31, | | (Decrease) |
| |||||||
|
| 2022 |
| 2021 |
| Amount |
| Percent |
| |||
Net revenues — |
| |
|
| |
|
| |
|
|
| |
Well Intervention | | $ | 106,367 | | $ | 133,768 | | $ | (27,401) |
| (20) | % |
Robotics | |
| 37,351 | |
| 22,156 | |
| 15,195 |
| 69 | % |
Production Facilities | |
| 18,294 | |
| 16,447 | |
| 1,847 |
| 11 | % |
Intercompany eliminations | |
| (11,887) | |
| (8,956) | |
| (2,931) |
|
| |
| | $ | 150,125 | | $ | 163,415 | | $ | (13,290) |
| (8) | % |
| | | | | | | | | | | | |
Gross profit (loss) — | |
|
| |
|
| |
|
|
|
| |
Well Intervention | | $ | (28,446) | | $ | 8,726 | | $ | (37,172) |
| (426) | % |
Robotics | |
| 3,520 | |
| (933) | |
| 4,453 |
| 477 | % |
Production Facilities | |
| 6,609 | |
| 7,213 | |
| (604) |
| (8) | % |
Corporate, eliminations and other | |
| (292) | |
| (382) | |
| 90 |
|
| |
| | $ | (18,609) | | $ | 14,624 | | $ | (33,233) |
| (227) | % |
| | | | | | | | | | | | |
Gross margin — | |
|
| |
|
| |
|
|
|
| |
Well Intervention | |
| (27) | % |
| 7 | % |
|
|
| | |
Robotics | |
| 9 | % |
| (4) | % |
|
|
|
| |
Production Facilities | |
| 36 | % |
| 44 | % |
|
|
|
| |
Total company | |
| (12) | % |
| 9 | % |
|
|
|
| |
| | | | | | | | | | | | |
Number of vessels or robotics assets (1) / Utilization (2) | |
|
| |
|
| |
|
|
|
| |
Well Intervention vessels | |
| 7 / 67 | % |
| 7 / 70 | % |
|
|
|
| |
Robotics assets (3) | |
| 45 / 35 | % |
| 47 / 24 | % |
|
|
|
| |
Chartered robotics vessels | |
| 5 / 90 | % |
| 3 / 90 | % |
|
|
|
| |
| (1) | Represents the number of vessels or robotics assets as of the end of the period, including spot vessels and those under term charters, and excluding acquired vessels prior to their in-service dates and vessels or assets disposed of and/or taken out of service. |
| (2) | Represents the average utilization rate, which is calculated by dividing the total number of days the vessels or robotics assets generated revenues by the total number of calendar days in the applicable period. Utilization rates of chartered robotics vessels during the three-month periods ended March 31, 2022 and 2021 included 136 and three spot vessel days, respectively, at near full utilization. |
| (3) | Consists of ROVs and trenchers. |
Intercompany segment amounts are derived primarily from equipment and services provided to other business segments. Intercompany segment revenues are as follows (in thousands):
| | Three Months Ended | | | | ||||
| | March 31, | | Increase/ | |||||
|
| 2022 |
| 2021 |
| (Decrease) | |||
Well Intervention | | $ | 3,850 | | $ | 2,587 | | $ | 1,263 |
Robotics | |
| 8,037 | |
| 6,369 | |
| 1,668 |
| | $ | 11,887 | | $ | 8,956 | | $ | 2,931 |
28
Net Revenues. Our consolidated net revenues for the three-month period ended March 31, 2022 decreased by 8% as compared to the same period in 2021, reflecting lower revenues from our Well Intervention segment, offset in part by higher revenues from our Robotics and Production Facilities segments.
Our Well Intervention revenues decreased by 20% for the three-month period ended March 31, 2022 as compared to the same period in 2021, primarily reflecting lower rates and vessel utilization in Brazil and the North Sea, offset in part by higher utilization in West Africa. Our Brazil operations were on legacy contract rates with Petrobras with near full utilization during the first quarter 2021. However, during the first quarter 2022, the Siem Helix 2 operated at lower rates under the extended contract with Petrobras and incurred 23 days off contract during its five-year regulatory inspection, and the Siem Helix 1 was operating on a short-term accommodations project offshore Ghana at lower rates. The Q7000 was fully utilized in West Africa during the first quarter 2022 as compared to 67% utilized during the first quarter 2021. Gulf of Mexico revenues were nominally changed from the prior year, with the Q5000’s higher-margin work on the legacy BP contract during the first quarter 2021 replaced by higher cost integrated projects during the first quarter 2022.
Our Robotics revenues increased by 69% for the three-month period ended March 31, 2022 as compared to the same period in 2021, primarily reflecting higher vessel and ROV activities. Chartered vessel days increased to 323 days during the first quarter 2022 as compared to 165 days during the first quarter 2021, although vessel utilization was flat at 90% during both periods. Vessel days during the first quarter 2022 included 136 spot vessel days performing seabed clearance work in the North Sea as compared to three spot vessel days during the first quarter 2021. ROV and trencher utilization increased to 35% in the first quarter 2022 from 24% during the first quarter 2021, although trenching days decreased to 66 days during the first quarter 2022 as compared to 72 days during the first quarter 2021.
Our Production Facilities revenues increased by 11% for the three-month period ended March 31, 2022 as compared to the same period in 2021, primarily reflecting higher oil and gas prices.
Gross Profit (Loss). Our consolidated gross loss was $18.6 million for the three-month period ended March 31, 2022 as compared consolidated gross profit of $14.6 million for the same period in 2021, primarily reflecting decreased profitability in our Well Intervention and Production Facilities segments, offset in part by increased profitability in our Robotics segment.
Our Well Intervention segment had a gross loss of $28.4 million for the three-month period ended March 31, 2022 as compared to a gross profit of $8.7 million for the same period in 2021, primarily reflecting lower segment revenues as well as lower margins in the Gulf of Mexico due to higher integrated project costs.
Our Robotics segment had a gross profit of $3.5 million for the three-month period ended March 31, 2022 as compared to a gross loss of $0.9 million for the same period in 2021, primarily reflecting higher revenues due to increased ROV activity and a higher number of vessel days.
Selling, General and Administrative Expenses. Our selling, general and administrative expenses were $14.4 million for the three-month period ended March 31, 2022 as compared to $15.2 million for the same period in 2021, primarily reflecting lower employee incentive compensation costs.
Other Income (Expense), Net. Net other expense was $3.9 million for the three-month period ended March 31, 2022 primarily due to foreign currency transaction losses reflecting the weakening of the British pound. Net other income was $1.6 million for the same period in 2021 primarily due to foreign currency transaction gains reflecting the strengthening of the British pound.
Income Tax Provision. Income tax provision was $2.1 million for the three-month period ended March 31, 2022 as compared to $0.1 million for the same period in 2021. The effective tax rates for the three-month periods ended March 31, 2022 and 2021 were (5.4)% and (4.0)%, respectively. These variances were primarily attributable to the earnings mix between our higher and lower tax rate jurisdictions as well as losses for which no financial statement benefits have been recognized (Note 6).
29
LIQUIDITY AND CAPITAL RESOURCES
Financial Condition and Liquidity
The following table presents certain information useful in the analysis of our financial condition and liquidity (in thousands):
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Net working capital | | $ | 246,745 | | $ | 251,255 |
Long-term debt (1) | |
| 258,496 | |
| 262,137 |
Liquidity | |
| 270,983 | |
| 304,660 |
| (1) | Long-term debt is net of unamortized debt issuance costs. Current maturities of our long-term debt of $43.1 million and $42.9 million, respectively, are excluded from long-term debt. See Note 5 for information relating to our long-term debt. |
Net Working Capital
Net working capital is equal to current assets minus current liabilities. It measures short-term liquidity and operational efficiency and is important for predicting cash flow and debt requirements. Our net working capital includes current maturities of our long-term debt.
Liquidity
We define liquidity as cash and cash equivalents, excluding restricted cash, plus available capacity under our credit facility. Our liquidity at March 31, 2022 included $229.7 million of cash and cash equivalents and $41.2 million of available borrowing capacity under the ABL Facility (Note 5) and excluded $72.9 million of restricted cash primarily related to a short-term project related letter of credit, the restriction from which is expected to be released upon completion of the project. Our liquidity at December 31, 2021 included $253.5 million of cash and cash equivalents and $51.1 million of available borrowing capacity under the ABL Facility and excluded $73.6 million of short-term project related restricted cash.
The COVID-19 pandemic impacted our operations and our revenues. We responded by deferring or reducing planned capital expenditures and operating costs during the past two years. This spending is expected to return with our outlook of increased activity. Furthermore, we have convertible debt instruments and other term debt maturities during 2022 that we intend to settle in cash. We believe that our cash on hand, internally generated cash flows and availability under the ABL Facility will be sufficient to fund our operations and service our debt over at least the next 12 months.
An ongoing period of weak, or continued decreases in, industry activity may make it difficult to comply with the covenants and other restrictions in our debt agreements. Our failure to comply with the covenants and other restrictions could lead to an event of default. Decreases in our borrowing base may limit our ability to fully access the ABL Facility. At March 31, 2022, our available borrowing capacity under the ABL Facility was $41.2 million, net of $2.3 million of letters of credit issued under that facility. We currently do not anticipate borrowing under the ABL Facility other than for the issuance of letters of credit.
Cash Flows
The following table provides summary data from our condensed consolidated statements of cash flows (in thousands):
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash provided by (used in): |
| |
|
| | |
Operating activities | | $ | (17,413) | | $ | 39,869 |
Investing activities | |
| (623) | |
| (1,329) |
Financing activities | |
| (5,408) | |
| (59,885) |
30
Operating Activities
The decrease in our operating cash flows for the three-month period ended March 31, 2022 as compared to the same period in 2021 primarily reflects lower earnings, higher regulatory recertification costs for our vessels and systems and negative changes in net working capital. Operating cash flows for the three-month periods ended March 31, 2022 and 2021 included the receipt of $1.1 million and $6.6 million, respectively, in income tax refunds related to the U.S. Coronavirus Aid, Relief, and Economic Security Act.
Investing Activities
Cash flows used in investing activities for the three-month periods ended March 31, 2022 and 2021 reflect the deferral or reduction of our planned capital expenditures as our response to the adverse impact to our operations as a result of the COVID-19 pandemic.
Financing Activities
Net cash outflows from financing activities for the three-month period ended March 31, 2022 primarily reflect the repayment of $3.9 million related to the MARAD Debt (Note 5). Net cash outflows from financing activities for the three-month period ended March 31, 2021 primarily reflect the repayment of $58.2 million related to our indebtedness, including the final maturity of $53.6 million of the Nordea Q5000 Loan.
Material Cash Requirements
Our material cash requirements include our obligations to repay our long-term debt, satisfy other contractual cash commitments and fund other obligations.
Long-term debt and other contractual commitments
The following table summarizes the principal amount of our long-term debt and related debt service costs as well as other contractual commitments, which include commitments for property and equipment and operating lease obligations, as of March 31, 2022 and the portions of those amounts that are short-term (due in less than one year) and long-term (due in one year or greater) based on their stated maturities (in thousands). Our property and equipment commitments include contractually committed amounts to purchase and service certain property and equipment (inclusive of commitments related to regulatory recertification and dry dock as discussed below) but do not include expected capital spending that is not contractually committed as of March 31, 2022. Our 2022 Notes, 2023 Notes and 2026 Notes have certain early redemption and conversion features that could affect the timing and amount of any cash requirements. Although upon conversion these notes are able to be settled in either cash or shares, we intend to settle their principal amounts in cash (Note 5).
|
| Total |
| Short-Term |
| Long-Term | |||
MARAD debt | | $ | 44,930 | | $ | 8,133 | | $ | 36,797 |
2022 Notes | |
| 35,000 | |
| 35,000 | |
| — |
2023 Notes | |
| 30,000 | |
| — | |
| 30,000 |
2026 Notes | |
| 200,000 | |
| — | |
| 200,000 |
Interest related to debt | |
| 62,148 | |
| 17,362 | |
| 44,786 |
Property and equipment | |
| 9,125 | |
| 9,125 | |
| — |
Operating leases (1) | |
| 308,370 | |
| 99,767 | |
| 208,603 |
Total cash obligations | | $ | 689,573 | | $ | 169,387 | | $ | 520,186 |
| (1) | Operating leases include vessel charters and facility and equipment leases. At March 31, 2022, our commitment related to long-term vessel charters totaled approximately $268.4 million, of which $111.8 million was related to the non-lease (services) components that are not included in operating lease liabilities in the condensed consolidated balance sheet as of March 31, 2022. |
31
Other material cash requirements
Other material cash requirements include the following:
Decommissioning. We have decommissioning obligations associated with our oil and gas properties (Note 11). Those obligations approximate $31.0 million (undiscounted) as of March 31, 2022 and are all expected to be paid during the next 12 months. We are entitled to receive certain amounts from Marathon Oil Corporation as these decommissioning obligations are fulfilled.
Regulatory recertification and dry dock. Our vessels and intervention systems are subject to certain regulatory recertification requirements that must be satisfied in order for the vessels and intervention systems to operate. Recertification may require dry dock and other compliance costs on a periodic basis, usually every 30 months. These costs can vary and generally range between $3.0 million to $15.0 million per vessel and $0.5 million to $5.0 million per intervention system. The timing of these costs can vary.
We expect the sources of funds to satisfy our material cash requirements to primarily come from our ongoing operations and existing cash on hand, but may also come from availability under the ABL Facility and access to capital markets.
CRITICAL ACCOUNTING ESTIMATES AND POLICIES
Our discussion and analysis of our financial condition and results of operations, as reflected in the condensed consolidated financial statements and related footnotes, are prepared in conformity with GAAP. As such, we are required to make certain estimates, judgments and assumptions that have had or are reasonably likely to have a material impact on our financial condition or results of operations. We base our estimates on historical experience, available information and various other assumptions we believe to be reasonable under the circumstances. These estimates involve a significant level of estimation uncertainty and may change over time as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. For information regarding our critical accounting estimates, see our “Critical Accounting Estimates” as disclosed in our 2021 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of March 31, 2022, we were exposed to market risks associated with foreign currency exchange rates. We had no exposure to interest rate risk as we had no outstanding debt subject to floating rates.
Foreign Currency Exchange Rate Risk. Because we operate in various regions around the world, we conduct a portion of our business in currencies other than the U.S. dollar. As such, our earnings are impacted by movements in foreign currency exchange rates when (i) transactions are denominated in currencies other than the functional currency of the relevant Helix entity or (ii) the functional currency of our subsidiaries is not the U.S. dollar. In order to mitigate the effects of exchange rate risk in areas outside the U.S., we endeavor to pay a portion of our expenses in local currencies to partially offset revenues that are denominated in the same local currencies. In addition, a substantial portion of our contracts are denominated, and provide for collections from our customers, in U.S. dollars.
Assets and liabilities of our subsidiaries that do not have the U.S. dollar as their functional currency are translated using the exchange rates in effect at the balance sheet date, resulting in translation adjustments that are reflected in “Accumulated other comprehensive loss” in the shareholders’ equity section of our condensed consolidated balance sheets. For the three-month period ended March 31, 2022, we recorded foreign currency translation losses of $13.1 million to accumulated other comprehensive loss. Deferred taxes have not been provided on foreign currency translation adjustments as our non-U.S. undistributed earnings are permanently reinvested.
32
When currencies other than the functional currency are to be paid or received, the resulting transaction gain or loss associated with changes in the applicable foreign currency exchange rate is recognized in the condensed consolidated statements of operations as a component of “Other income (expense), net.” Foreign currency gains or losses from the remeasurement of monetary assets and liabilities as well as unsettled foreign currency transactions, including intercompany transactions that are not of a long-term investment nature, are also recognized as a component of “Other income (expense), net.” For the three-month period ended March 31, 2022, we recorded foreign currency transaction losses of $3.9 million, primarily related to our subsidiaries in the U.K.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2022. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2022 to ensure that information that is required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure.
(b) Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
See Part I, Item 1, Note 12 to the Condensed Consolidated Financial Statements, which is incorporated herein by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
| | | | | | | (c) | | |
| | | | | | | Total number | | (d) |
| | | | | | | of shares | | Maximum |
| | (a) | | (b) | | purchased as | | number of shares | |
| | Total number | | Average | | part of publicly | | that may yet be | |
| | of shares | | price paid | | announced | | purchased under | |
Period |
| purchased (1) |
| per share |
| program |
| the program (2) | |
January 1 to January 31, 2022 |
| 488,718 | | $ | 3.12 |
| — |
| 9,183,183 |
February 1 to February 28, 2022 |
| — | |
| — |
| — |
| 9,183,183 |
March 1 to March 31, 2022 |
| — | |
| — |
| — |
| 9,183,183 |
|
| 488,718 | | $ | 3.12 |
| — | | |
| (1) | Includes shares forfeited in satisfaction of tax obligations upon vesting of share-based awards under our existing long-term incentive plans. |
| (2) | Under the terms of our stock repurchase program, we may repurchase shares of our common stock in an amount equal to any equity granted to our employees, officers and directors under our share-based compensation plans, including share-based awards under our existing long-term incentive plans and shares issued to our employees under our Employee Stock Purchase Plan (Note 9), and such shares increase the number of shares available for repurchase. For additional information regarding our stock repurchase program, see Note 11 to our 2021 Form 10-K. |
33
Item 6. Exhibits
Exhibit Number |
| Description |
| Filed or Furnished Herewith or Incorporated by Reference from the Following Documents (Registration or File Number) |
3.1 | | | Exhibit 3.1 to the Current Report on Form 8-K filed on March 1, 2006 (000-22739) | |
3.2 | | Second Amended and Restated By-Laws of Helix Energy Solutions Group, Inc., as amended. | | Exhibit 3.1 to the Current Report on Form 8-K filed on September 28, 2006 (001-32936) |
31.1 | | | Filed herewith | |
31.2 | | | Filed herewith | |
32.1 | | | Furnished herewith | |
101.INS | | XBRL Instance Document. | | The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document. | | Filed herewith |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | | Filed herewith |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. | | Filed herewith |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. | | Filed herewith |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | | Filed herewith |
104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). | | Filed herewith |
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| | HELIX ENERGY SOLUTIONS GROUP, INC. |
| | | (Registrant) |
| | | |
Date: April 27, 2022 | | By: | /s/ Owen Kratz |
| | | Owen Kratz |
| | | President and Chief Executive Officer |
| | | (Principal Executive Officer) |
| | | |
Date: April 27, 2022 | | By: | /s/ Erik Staffeldt |
| | | Erik Staffeldt |
| | | Executive Vice President and |
| | | Chief Financial Officer |
| | | (Principal Financial Officer) |
35
EXHIBIT 31.1
SECTION 302 CERTIFICATION
I, Owen Kratz, the President and Chief Executive Officer of Helix Energy Solutions Group, Inc., certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Helix Energy Solutions Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: April 27, 2022
| /s/ Owen Kratz |
| Owen Kratz |
| President and Chief Executive Officer |
EXHBIT 31.2
SECTION 302 CERTIFICATION
I, Erik Staffeldt, the Executive Vice President and Chief Financial Officer of Helix Energy Solutions Group, Inc., certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Helix Energy Solutions Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: April 27, 2022
| /s/ Erik Staffeldt |
| Erik Staffeldt |
| Executive Vice President and Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350
(As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Annual Report of Helix Energy Solutions Group, Inc. (“Helix”) on Form 10-Q for the quarterly period ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Owen Kratz, as President and Chief Executive Officer, and Erik Staffeldt, as Executive Vice President and Chief Financial Officer, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Helix. |
Date: April 27, 2022
| /s/ Owen Kratz |
| Owen Kratz |
| President and Chief Executive Officer |
Date: April 27, 2022
| /s/ Erik Staffeldt |
| Erik Staffeldt |
| Executive Vice President and Chief Financial Officer |