HOUSTON, Aug. 1 /PRNewswire-FirstCall/ -- Helix Energy Solutions reported second quarter net income of $65.8 million, or $0.70 per diluted share, excluding three non-recurring items recorded by its majority owned subsidiary, Cal Dive International, Inc. Including the non-recurring items, Helix reported second quarter net income of $57.7 million, or $0.61 per diluted share.
The non-recurring items recorded by Cal Dive in the second quarter include $11.8 million in non-cash equity losses and a related asset impairment charge in connection with Cal Dive's investment in Offshore Technology Solutions Limited ("OTSL"), a Trinidad and Tobago entity in which Cal Dive owns a 40% minority interest, and a $2.0 million cash settlement, subject to final negotiation of a court-approved settlement agreement, to be paid for a civil claim by the Department of Justice related to the Stolt and Torch acquisitions in 2005. Cal Dive also reported a $1.7 million gain on a sale of a portable saturation diving asset during the second quarter.
Summary of Results
(in thousands, except per share amounts and percentages)
Second Quarter First Quarter Six Months
2007 2006 2007 2007 2006
Revenues $410,574 $305,013 $396,055 $806,629 $596,661
Gross Profit 141,765 131,692 135,615 277,380 233,958
35% 43% 34% 34% 39%
Net Income 57,702 69,139 55,820 113,522 124,528
14% 23% 14% 14% 21%
Diluted Earnings 0.61 0.83 0.60 1.21 1.51
Per Share
Martin Ferron, President and Chief Executive Officer of Helix, stated, "We expected Q2 earnings to be similar to those reported for Q1 and actually posted an improved result, even after the negative impact of the non-recurring items described above. This improvement was also achieved despite another very busy quarter for marine asset maintenance, with the Intrepid and several key Cal Dive vessels undergoing regulatory drydockings during the period. That maintenance work is now largely behind us, except for the planned upgrade to the Q4000, and we are anticipating a strong second half of the year for Contracting Services.
"In our Oil and Gas business unit we had another very successful quarter with the drill bit, going six for six with exploratory wells. This takes our success record to 12 for 12 for the first half of the year and improves our proven reserve base by around 140 bcfe. On the production front we plan to bring several key shelf development projects onstream in the second half of the year, and our deepwater development projects remain on schedule to boost output next year.
"We have updated the assessment of the key variables that drive our earnings for the year and this will be covered in the conference call tomorrow. Based on our analysis we are comfortable with the present consensus earnings estimate for 2007 of $3.26/share, subject to no further significant deterioration in the natural gas price. We have created very meaningful future value in our deepwater development projects portfolio and, as set out in our initial earnings guidance, we may monetize part of that value, in order to reduce debt and contribute to near term earnings."
Financial Highlights
* Revenues: The $105.6 million increase in year-over-year second
quarter revenues was driven primarily by an increase in oil and gas
sales of $61.0 million due primarily to the production added from the
acquisition of Remington Oil and Gas Corporation. The remaining
increase was due to improvements in contracting services revenues due
to much better market conditions.
* Margins: 35% is eight points less than the year ago quarter due
primarily to significant out of service days for Cal Dive's vessels in
regulatory drydocks (373 days in 2Q 2007 vs. 89 days in 2Q 2006) and
an increased DD&A rate for oil and gas production due to the Remington
acquisition.
* SG&A: $33.4 million increased $6.0 million from the same period a
year ago due primarily to increased overhead to support our growth.
This level of SG&A was 8% of second quarter revenues, down from the 9%
in the year ago quarter.
* Equity in Earnings: Net losses of $4.7 million is comprised of the
$11.8 million impairment / equity losses in Cal Dive's minority
interest in OTSL offset by $7.0 million for our share of earnings for
the quarter of Deepwater Gateway, L.L.C.'s earnings relating to the
Marco Polo facility and demand fees relating to the Independence Hub
facility.
* Income Tax Provision: The Company's effective tax rate for the
quarter was 35%, compared to 34% for last year's second quarter due
primarily to the nondeductibility of the OTSL charges and the DOJ
reserve.
* Balance Sheet: Total consolidated debt as of June 30, 2007 was $1.4
billion. This includes $140 million under Cal Dive's revolving
facility which is non-recourse to Helix. This represents 43% net debt
to book capitalization and with $735 million of adjusted EBITDAX
during the last twelve months, this represents 1.8 times trailing
twelve month adjusted EBITDAX.
Further details are provided in the presentation for Helix's quarterly conference call (see the Investor Relations page of http://www.helixesg.com/). The call, scheduled for 9:00 a.m. Central Daylight Time on Thursday, August 2, 2007, will be webcast live. A replay will be available from the Audio Archives page on our website.
Helix Energy Solutions, headquartered in Houston, Texas, is an international offshore energy company that provides development solutions and other key life of field services to the open energy market as well as to our own oil and gas business unit. That business unit is a prospect generation, exploration, development and production company. Employing our own key services and methodologies, we seek to lower finding and development costs, relative to industry norms.
This press release contains forward-looking statements that involve risks, uncertainties and assumptions that could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements, other than statements of historical fact, are statements that could be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, any projections of revenue, gross margin, expenses, earnings or losses from operations, or other financial items; future production volumes, results of exploration, exploitation, development, acquisition and operations expenditures, and prospective reserve levels of property or wells; any statements of the plans, strategies and objectives of management for future operations; any statement concerning developments, performance or industry rankings; any statements regarding future economic conditions or performance; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include the performance of contracts by suppliers, customers and partners; employee management issues; complexities of global political and economic developments, geologic risks and other risks described from time to time in our reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K, as amended by our Form 10- K/A filed on June 18, 2007 ("2006 Form 10-K"), for the year ending December 31, 2006 and any subsequent reports on Form 10-Q. We assume no obligation and do not intend to update these forward-looking statements.
HELIX ENERGY SOLUTIONS GROUP, INC.
Comparative Condensed Consolidated Statements of Operations
Three Months Ended Six Months Ended
(in thousands, except per June 30, June 30,
share data) 2007 2006 2007 2006
(Unaudited)
Net revenues $410,574 $305,013 $806,629 $596,661
Cost of sales 268,809 173,321 529,249 362,703
Gross profit 141,765 131,692 277,380 233,958
Gain on sale of assets, net 5,684 16 5,684 283
Selling and administrative 33,388 27,414 63,988 48,442
Income from operations 114,061 104,294 219,076 185,799
Equity in earnings of
investments (4,748) 4,520 1,356 10,756
Net interest expense and
other 14,286 2,983 27,298 5,440
Income before income taxes 95,027 105,831 193,134 191,115
Income tax provision 33,261 35,887 66,384 64,978
Minority interest 3,119 -- 11,338 --
Net income 58,647 69,944 115,412 126,137
Preferred stock dividends 945 805 1,890 1,609
Net income applicable to common
shareholders $57,702 $69,139 $113,522 $124,528
Weighted Avg. Shares
Outstanding:
Basic 90,047 78,462 90,021 78,216
Diluted 95,991 83,965 95,262 83,659
Earnings Per Share:
Basic $0.64 $0.88 $1.26 $1.59
Diluted $0.61 $0.83 $1.21 $1.51
Comparative Condensed Consolidated Balance Sheets
ASSETS
(in thousands) June 30, 2007 Dec. 31, 2006
(unaudited)
Current Assets:
Cash and equivalents $96,390 $206,264
Short term investments 10,000 285,395
Accounts receivable 368,226 370,709
Other current assets 76,832 61,532
Total Current Assets 551,448 923,900
Net Property & Equipment:
Contracting Services 928,467 800,503
Oil and Gas 1,608,929 1,411,955
Equity investments 212,319 213,362
Goodwill 828,228 822,556
Other assets, net 137,758 117,911
Total Assets $4,267,149 $4,290,187
LIABILITIES & SHAREHOLDERS' EQUITY
(in thousands) June 30, 2007 Dec. 31, 2006
(unaudited)
Current Liabilities:
Accounts payable $268,877 $240,067
Accrued liabilities 188,148 199,650
Income taxes payable -- 147,772
Current mat of L-T debt (1) 26,165 25,887
Total Current Liabilities 483,190 613,376
Long-term debt (1) 1,386,011 1,454,469
Deferred income taxes 476,094 436,544
Decommissioning liabilities 140,682 138,905
Other long-term liabilities 4,231 6,143
Minority interest 73,152 59,802
Convertible preferred stock (1) 55,000 55,000
Shareholders' equity (1) 1,648,789 1,525,948
Total Liabilities & Equity $4,267,149 $4,290,187
(1) Net debt to book capitalization - 43% at June 30, 2007. Calculated
as total debt less cash and equivalents and short-term investments
$1,305,786 divided by sum of total debt less cash and equivalents and
short-term investments, convertible preferred stock and shareholders'
equity $3,009,575
Helix Energy Solutions Group, Inc.
Reconciliation of Non GAAP Measures
Three and Six Months Ended June 30, 2007
Earnings Release:
Balance Sheet: " ... 1.8 times trailing twelve month adjusted EBITDAX."
Reconciliation From Net Income to Adjusted EBITDAX (excluding gain on sale
of Cal Dive IPO in 4Q06 and non-recurring items:
OTSL impairment and DOJ accrual in 2Q07):
2Q07 1Q07 4Q06 3Q06 2Q06
(in thousands, except ratio)
Net income applicable
to common
shareholders $57,702 $55,820 $65,948 $57,029 69,139
Preferred stock
dividends 945 945 945 804 805
Income tax provision 30,456 28,617 34,166 31,409 35,887
Net interest expense
and other 13,605 12,331 13,981 15,103 2,983
Non-cash stock
compensation expense 3,546 3,267 2,797 1,910 2,251
Depreciation and
amortization 71,918 67,558 61,809 63,879 34,346
Exploration expense 2,978 1,190 1,820 19,520 (330)
Non-recurring items 8,602 -- -- -- --
Share of equity
investments:
Depreciation 1,965 1,004 1,004 1,004 1,003
Interest expense, net (38) (57) (70) (59) (43)
Adjusted EBITDAX $191,679 $170,675 $182,400 $190,599 $146,041
Trailing Twelve
Months Adjusted
EBITDAX $735,353
Net Debt at June 30,
2007 (a) $1,305,786
Ratio 1.8
We calculate adjusted EBITDAX as earnings before net interest expense,
taxes, depreciation and amortization, exploration expense, non-cash stock
compensation expense and our share of depreciation, net interest expense
and taxes from our equity investments. Further, we reduce adjusted
EBITDAX for the minority interest in Cal Dive that we do not own.
Adjusted EBITDAX margin is defined as adjusted EBITDAX divided by net
revenues. These non-GAAP measures are useful to investors and other
internal and external users of our financial statements in evaluating our
operating performance because they are widely used by investors in our
industry to measure a company's operating performance without regard to
items which can vary substantially from company to company and help
investors meaningfully compare our results from period to period.
Adjusted EBITDAX should not be considered in isolation or as a substitute
for, but instead is supplemental to, income from operations, net income
or other income data prepared in accordance with 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 which are excluded.
(a) Total debt less cash, cash equivalents and short term investments
