HOUSTON, Oct. 31 /PRNewswire-FirstCall/ -- Helix Energy Solutions (NYSE: HLX) reported third quarter net income of $57.0 million, or $0.60 per diluted share.
Summary of Results (in thousands, except per share amounts and percentages) Third Quarter Second Quarter Nine Months 2006 2005 2006 2006 2005 Revenues $374,424 $209,338 $305,013 $971,085 $535,444 Gross Profit 130,470 82,928 131,692 364,428 187,220 35% 40% 43% 38% 35% Net Income 57,029 42,671 69,139 181,557 94,108 15% 20% 23% 19% 18% Diluted Earnings Per Share 0.60 0.53 0.83 2.09 1.17
Martin Ferron, President and Chief Executive Officer of Helix, stated, "This was a rare quarter when we failed to meet our earnings expectations for the following main reasons:
- Our oil and gas sales averaged 35 mcfe/d less than our projection, due primarily to pipeline shut-ins and production management issues following the acquisition of Remington.
- We had four major marine assets in the shipyard for longer than anticipated to complete maintenance or upgrade work.
- We incurred $16 million of dry hole cost related to two deepshelf wells commenced by Remington in the second quarter before the acquisition was closed.
- We had around $6 million of contracting profit elimination due to a focus on providing assets for production restoration.
- We expensed around $6 million of facility repair work caused by the hurricanes of last year. Eventually insurance proceeds should cover much of this cost.
- We incurred around $2 million of true one off integration costs linked to the acquisition of Remington.
- Spot natural gas prices were lower than expected, especially later in the quarter.
"All of these factors contributed to around $0.40 of earnings shortfall. The better news is that in Q4: we are gradually improving our production as we get access to previously shut-in pipelines; all four of the major marine assets will achieve much improved utilization; we have a new production management team in place; we have reprioritized the deep shelf drilling program; spot natural gas are higher; and we should not incur any further one time acquisition related costs.
"Due to the improved situation in Q4 we maintain the full year 2006 earnings guidance of $2.80 - $3.20/share as provided on October 2nd. We anticipate providing updated guidance for 2007 following Board approval of our budget in mid-December."
- Revenues: The $165.1 million increase in year-over-year third quarter revenues was driven primarily by significant improvements in contracting services revenues due to the introduction of newly acquired assets and much better market conditions. In addition, Oil and Gas sales increased $69.6 million due primarily to the production added from the Remington acquisition.
- Margins: 35% is five points less than the year ago quarter due primarily to the aforementioned dry hole costs and facility repair costs. Without these charges, gross margin for the third quarter 2006 would have been 41%.
- SG&A: $30.3 million increased $14.4 million from the same period a year ago due primarily to increased overhead to support the Company's growth. This level of SG&A was 8% of third quarter revenues, same as the year ago quarter.
- Equity in Earnings: $1.9 million reflects primarily our share of Deepwater Gateway, L.L.C.'s earnings for the quarter relating to the Marco Polo facility offset by a loss on our investment in OTSL (our Trinidadian investment) due primarily to mechanical issues experienced on the Witch Queen.
- Income Tax Provision: The Company's effective tax rate for the quarter was 35% which is less than the 37% rate in last year's third quarter due primarily to the Company's ability to realize foreign tax credits due to improved profitability both domestically and in foreign jurisdictions.
- Shares Outstanding: On July 1, 2006, Helix acquired Remington Oil & Gas for approximately $1.4 billion paying approximately 60% with cash and 40% with Helix stock. The additional shares were the primary cause of total diluted shares outstanding increasing to 96.9 million for the third quarter 2006 from 82.2 million in the third quarter 2005. In addition, the Board of Directors authorized the Company to buy back up to $50 million of its stock in the open market. During October approximately 1.1 million shares were purchased at a weighted average price of $29.22 per share.
- Balance Sheet: To fund the cash portion of the Remington acquisition the Company entered into an $835 million Term B facility increasing total debt to $1,277 million as of September 30, 2006. This represents 47% debt to book capitalization and with $593 million of EBITDAX during the last twelve months, this represents 2.2 times trailing twelve month EBITDAX.
Further details are provided in the presentation for Helix's quarterly conference call (see the Investor Relations page of http://www.HelixESG.com ). In addition, reconciliations of non-GAAP measures are included on the Investor Relations page of our website. The call, scheduled for 9:00 a.m. Central Standard Time on Wednesday, November 1, 2006, will be webcast live. A replay will be available from the Audio Archives page.
Helix Energy Solutions, headquartered in Houston, Texas, is an energy services company that provides innovative solutions to the oil and gas industry worldwide for marginal field development, alternative development plans, field life extension and abandonment, with service lines including diving services, shelf and deepwater construction, robotics, well operations, well engineering and subsurface consulting services, platform ownership and oil and gas production.
This press release and attached presentation contain 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 relating to services; 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 ("SEC"), including the Company's Annual Report on Form 10-K for the year ending December 31, 2005 and subsequent quarterly 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 Nine Months Ended Sep. 30, Sep. 30, (in thousands, except per share data) 2006 2005 2006 2005 (Unaudited) Net revenues $374,424 $209,338 $971,085 $535,444 Cost of sales 243,954 126,410 606,657 348,224 Gross profit 130,470 82,928 364,428 187,220 Gain on sale of assets, net 2,287 329 2,570 1,254 Selling and administrative 30,309 15,892 78,751 41,588 Income from operations 102,448 67,365 288,247 146,886 Equity in earnings of investments 1,897 3,721 12,653 8,158 Net interest expense and other 15,103 2,766 20,543 4,868 Income before income taxes 89,242 68,320 280,357 150,176 Income tax provision 31,409 25,099 96,387 54,418 Net income 57,833 43,221 183,970 95,758 Preferred stock dividends 804 550 2,413 1,650 Net income applicable to common shareholders $57,029 $42,671 $181,557 $94,108 Other Financial Data: Net income applicable to common shareholders $57,029 $42,671 $181,557 $94,108 Preferred stock dividends 804 550 2,413 1,650 Income tax provision 31,409 25,099 96,387 54,418 Net Interest expense and other 15,103 2,766 20,543 4,868 Non-cash stock compensation expense 1,910 311 5,726 708 Depreciation and amortization 63,879 28,746 131,451 83,925 Non-cash impairment --- --- --- 790 Dry hole expense 16,869 --- 37,615 --- Exploration expense 2,651 928 3,680 5,950 Share of equity investments: Depreciation 1,238 1,200 3,720 3,207 Interest expense, net 79 143 253 1,562 EBITDAX (A) $190,971 $102,414 $483,345 $251,186 Weighted Avg. Shares Outstanding: Basic 91,531 77,526 82,706 77,372 Diluted 96,918 82,160 88,209 81,962 Earnings Per Share: Basic $0.62 $0.55 $2.20 $1.22 Diluted $0.60 $0.53 $2.09 $1.17 (A) The Company calculates EBITDAX as earnings before net interest expense, taxes, depreciation and amortization, dry hole and non-cash impairments, exploration expense, non-cash stock compensation expense and the Company's share of depreciation, net interest expense and taxes from its equity investments. EBITDAX and EBITDAX margin (defined as EBITDAX divided by net revenues) are supplemental non-GAAP financial measurements used by the Company and investors in the energy industry in the evaluation of its business due to the measurements being similar to income from operations. Comparative Condensed Consolidated Balance Sheets ASSETS (000's omitted) Sep. 30, 2006 Dec. 31, 2005 (unaudited) Current Assets: Cash and equivalents $127,785 $91,080 Accounts receivable 299,980 228,058 Other current assets 102,143 52,915 Total Current Assets 529,908 372,053 Net Property & Equipment: Marine Contracting 693,563 524,890 Oil and Gas Production 1,352,931 391,472 Equity Investments 210,457 179,844 Goodwill 805,706 101,731 Other assets, net 117,382 90,874 Total Assets $3,709,947 $1,660,864 LIABILITIES & SHAREHOLDERS' EQUITY Sep. 30, 2006 Dec. 31, 2005 (unaudited) Current Liabilities: Accounts payable $208,398 $99,445 Accrued liabilities 177,192 145,752 Current mat of L-T debt (B) 14,727 6,468 Total Current Liabilities 400,317 251,665 Long-term debt (B) 1,262,098 440,703 Deferred income taxes 441,359 167,295 Decommissioning liabilities 138,713 106,317 Other long-term liabilities 4,582 10,584 Convertible preferred stock (B) 55,000 55,000 Shareholders' equity (B) 1,407,878 629,300 Total Liabilities & Equity $3,709,947 $1,660,864 (B) Debt to book capitalization -- 47% at September 30, 2006. Calculated as total debt ($1,276,825) divided by sum of total debt, convertible preferred stock and shareholders' equity ($2,739,703).
SOURCE Helix Energy Solutions
CONTACT: Wade Pursell, Chief Financial Officer of Helix Energy Solutions, +1-281-618-0400, or fax, +1-281-618-0505