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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to__________
Commission File Number: 001-32936
https://cdn.kscope.io/686eae5dc43b1c9f6dfa8f712b2a501d-hlx-20200930_g1.jpg
HELIX ENERGY SOLUTIONS GROUP, INC.
(Exact name of registrant as specified in its charter)
Minnesota
95-3409686
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
3505 West Sam Houston Parkway North
Suite 400 
Houston Texas77043
(Address of principal executive offices) 
 (Zip Code)
 
(281) 618–0400
(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:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockHLXNew York Stock Exchange
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.  Yes  No
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).  Yes  No
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.
Large accelerated filer
Accelerated filer 
Non-accelerated filer 
Smaller reporting companyEmerging 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).  Yes  No
As of October 16, 2020, 150,160,665 shares of common stock were outstanding.




TABLE OF CONTENTS
PART I. FINANCIAL INFORMATIONPAGE
Item 1. Financial Statements: 
  
  
  
  
  
Item 2. 
Item 3. 
Item 4. 
PART II. OTHER INFORMATION 
Item 1. 
Item 1A.
Item 2. 
Item 6. 
  
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PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30,
2020
December 31,
2019
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$259,334 $208,431 
Restricted cash 54,130 
Accounts receivable, net of allowance for credit losses of $3,172 and $0, respectively
157,834 125,457 
Other current assets104,117 50,450 
Total current assets521,285 438,468 
Property and equipment2,911,362 2,922,274 
Less accumulated depreciation(1,135,352)(1,049,637)
Property and equipment, net1,776,010 1,872,637 
Operating lease right-of-use assets162,052 201,118 
Other assets, net46,127 84,508 
Total assets$2,505,474 $2,596,731 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable$66,320 $69,055 
Accrued liabilities84,657 62,389 
Current maturities of long-term debt73,401 99,731 
Current operating lease liabilities52,160 53,785 
Total current liabilities276,538 284,960 
Long-term debt283,545 306,122 
Operating lease liabilities112,957 151,827 
Deferred tax liabilities118,411 112,132 
Other non-current liabilities4,958 38,644 
Total liabilities796,409 893,685 
Redeemable noncontrolling interests3,579 3,455 
Shareholders equity:
Common stock, no par, 240,000 shares authorized, 150,136 and 148,888 shares issued, respectively
1,325,520 1,318,961 
Retained earnings460,478 445,370 
Accumulated other comprehensive loss(80,512)(64,740)
Total shareholders equity
1,705,486 1,699,591 
Total liabilities, redeemable noncontrolling interests and shareholders equity
$2,505,474 $2,596,731 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts) 
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Net revenues$193,490 $212,609 $573,658 $581,160 
Cost of sales158,862 157,535 507,444 469,898 
Gross profit34,628 55,074 66,214 111,262 
Gain on disposition of assets, net440  913  
Goodwill impairment  (6,689) 
Selling, general and administrative expenses(16,053)(16,076)(48,256)(48,923)
Income from operations19,015 38,998 12,182 62,339 
Equity in losses of investment(11)(13)(33)(82)
Net interest expense(7,598)(1,901)(20,407)(6,204)
Gain (loss) on extinguishment of long-term debt9,239  9,239 (18)
Other income (expense), net8,824 (2,285)(3,672)(2,430)
Royalty income and other208 362 2,526 2,897 
Income (loss) before income taxes29,677 35,161 (165)56,502 
Income tax provision (benefit)5,232 3,539 (16,132)6,739 
Net income24,445 31,622 15,967 49,763 
Net loss attributable to redeemable noncontrolling interests(54)(73)(2,044)(104)
Net income attributable to common shareholders$24,499 $31,695 $18,011 $49,867 
Earnings per share of common stock:
Basic$0.16 $0.21 $0.10 $0.33 
Diluted$0.16 $0.21 $0.10 $0.33 
Weighted average common shares outstanding:
Basic149,032 147,575 148,956 147,506 
Diluted149,951 148,354 149,824 148,086 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Net income$24,445 $31,622 $15,967 $49,763 
Other comprehensive income, net of tax:
Net unrealized loss on hedges arising during the period (274)(95)(701)
Reclassifications into earnings 1,046 452 4,867 
Income taxes on hedges (156)(72)(838)
Net change in hedges, net of tax 616 285 3,328 
Foreign currency translation gain (loss)19,426 (4,301)(16,057)(4,564)
Other comprehensive income (loss), net of tax19,426 (3,685)(15,772)(1,236)
Comprehensive income43,871 27,937 195 48,527 
Less comprehensive income (loss) attributable to redeemable noncontrolling interests:
Net loss(54)(73)(2,044)(104)
Foreign currency translation gain (loss)133 (78)(115)(78)
Comprehensive gain (loss) attributable to redeemable noncontrolling interests79 (151)(2,159)(182)
Comprehensive income attributable to common shareholders$43,792 $28,088 $2,354 $48,709 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
(in thousands)
Common StockRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
Redeemable
Noncontrolling
Interests
SharesAmount
Balance, June 30, 2020150,040 $1,318,531 $436,107 $(99,938)$1,654,700 $3,372 
Net income (loss)— — 24,499 — 24,499 (54)
Foreign currency translation adjustments— — — 19,426 19,426 133 
Accretion of redeemable noncontrolling interests— — (128)— (128)128 
Equity component of convertible senior notes— 33,336 — — 33,336 — 
Re-acquisition of equity component of convertible senior notes— (18,006)— — (18,006)— 
Capped call transactions— (10,625)— — (10,625)— 
Activity in company stock plans, net and other96 193 — — 193 — 
Share-based compensation— 2,091 — — 2,091 — 
Balance, September 30, 2020150,136 $1,325,520 $460,478 $(80,512)$1,705,486 $3,579 
Common StockRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
Redeemable
Noncontrolling
Interests
SharesAmount
Balance, June 30, 2019148,759 $1,314,163 $405,748 $(71,515)$1,648,396 $3,383 
Net income (loss)— — 31,695 — 31,695 (73)
Foreign currency translation adjustments— — — (4,301)(4,301)(78)
Unrealized gain on hedges, net of tax— — — 616 616 — 
Accretion of redeemable noncontrolling interests— — (25)— (25)25 
Activity in company stock plans, net and other43 214 — — 214 — 
Share-based compensation— 2,428 — — 2,428 — 
Balance, September 30, 2019148,802 $1,316,805 $437,418 $(75,200)$1,679,023 $3,257 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
(in thousands)
Common StockRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
Redeemable
Noncontrolling
Interests
SharesAmount
Balance, December 31, 2019148,888 $1,318,961 $445,370 $(64,740)$1,699,591 $3,455 
Net income (loss)— — 18,011 — 18,011 (2,044)
Expected credit losses recognized in retained earnings upon adoption of ASU 2016-13— — (620)— (620)— 
Foreign currency translation adjustments— — — (16,057)(16,057)(115)
Unrealized gain on hedges, net of tax— — — 285 285 — 
Accretion of redeemable noncontrolling interests— — (2,283)— (2,283)2,283 
Equity component of convertible senior notes— 33,336 — — 33,336 — 
Re-acquisition of equity component of convertible senior notes— (18,006)— — (18,006)— 
Capped call transactions— (10,625)— — (10,625)— 
Activity in company stock plans, net and other1,248 (4,320)— — (4,320)— 
Share-based compensation— 6,174 — — 6,174 — 
Balance, September 30, 2020150,136 $1,325,520 $460,478 $(80,512)$1,705,486 $3,579 
Common StockRetained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
Redeemable
Noncontrolling
Interests
SharesAmount
Balance, December 31, 2018148,203 $1,308,709 $383,034 $(73,964)$1,617,779 $ 
Net income (loss)— — 49,867 — 49,867 (104)
Reclassification of deferred gain from sale and leaseback transaction to retained earnings— — 4,560 — 4,560 — 
Foreign currency translation adjustments— — — (4,564)(4,564)(78)
Unrealized gain on hedges, net of tax— — — 3,328 3,328 — 
Issuance of redeemable noncontrolling interests— — — — — 3,396 
Accretion of redeemable noncontrolling interests— — (43)— (43)43 
Activity in company stock plans, net and other599 (765)— — (765)— 
Share-based compensation— 8,861 — — 8,861 — 
Balance, September 30, 2019148,802 $1,316,805 $437,418 $(75,200)$1,679,023 $3,257 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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HELIX ENERGY SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands) 
Nine Months Ended
September 30,
20202019
Cash flows from operating activities:
Net income$15,967 $49,763 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization99,552 84,420 
Goodwill impairment6,689  
Amortization of debt discounts5,094 4,642 
Amortization of debt issuance costs2,401 2,752 
Share-based compensation6,394 8,979 
Deferred income taxes3,901 2,347 
Equity in losses of investment33 82 
Gain on disposition of assets, net(913) 
(Gain) loss on extinguishment of long-term debt(9,239)18 
Unrealized gain on derivative contracts, net(601)(2,351)
Unrealized foreign currency loss2,891 636 
Changes in operating assets and liabilities:
Accounts receivable, net(35,276)(45,399)
Income tax receivable(26,342)(3,143)
Other current assets(28,036)12,215 
Accounts payable and accrued liabilities32,042 (15,401)
Other, net(15,929)(9,683)
Net cash provided by operating activities58,628 89,877 
Cash flows from investing activities:
Capital expenditures(19,193)(45,636)
STL acquisition, net (4,081)
Proceeds from sale of assets938 2,550 
Net cash used in investing activities(18,255)(47,167)
Cash flows from financing activities:
Proceeds from convertible senior notes200,000  
Repayment of convertible senior notes(183,150) 
Proceeds from term loan 35,000 
Repayment of term loans(2,625)(34,567)
Repayment of Nordea Q5000 Loan(26,786)(26,786)
Repayment of MARAD Debt(7,200)(6,858)
Capped call transactions(10,625) 
Debt issuance costs(7,075)(1,544)
Payments related to tax withholding for share-based compensation(5,161)(1,345)
Proceeds from issuance of ESPP shares622 462 
Net cash used in financing activities(42,000)(35,638)
Effect of exchange rate changes on cash and cash equivalents and restricted cash(1,600)(191)
Net increase (decrease) in cash and cash equivalents and restricted cash(3,227)6,881 
Cash and cash equivalents and restricted cash:
Balance, beginning of year262,561 279,459 
Balance, end of period$259,334 $286,340 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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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 2019 Annual Report on Form 10-K (our “2019 Form 10-K”) with the exception of the impact of adopting the new credit loss accounting standard in 2020 (see below). 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 and statements of cash flows, as applicable. The operating results for the three- and nine-month periods ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. Our balance sheet as of December 31, 2019 included herein has been derived from the audited balance sheet as of December 31, 2019 included in our 2019 Form 10-K. These unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto included in our 2019 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.
 
COVID-19
 
Beginning in the first quarter 2020, the COVID-19 pandemic led to worldwide shutdowns and halting of commercial and interpersonal activity, as governments around the world imposed regulations in efforts to control the spread of COVID-19 such as shelter-in-place orders, quarantines, executive orders and similar restrictions. As a result, the global economy has been marked by significant slowdown and uncertainty, which has resulted in a decline in oil prices in response to demand concerns and global storage considerations. Lower oil prices have resulted in a significantly weaker outlook for oil and gas producers, many of which have cut their capital and operating budgets for 2020 and beyond. Our financial statements for the three- and nine-month periods ended September 30, 2020 reflect the impact of these events and current market conditions, which include reduced utilization on our vessels due to customers deferring work, increased operating costs related to the current environment, our recognition of goodwill impairment losses (Note 6) and tax benefits resulting from the U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (Note 8). The continued spread of, or failure to contain, COVID-19 or continued oil price volatility could result in further adverse impact on our results of operations, cash flows and financial position, including further asset impairments.
 
New accounting standards adopted
 
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Measurement of Credit Losses on Financial Instruments,” which was updated by subsequent amendments. This ASU replaces the current incurred loss model for measurement of credit losses on financial assets (including trade receivables) with a forward-looking expected loss model based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance became effective for us as of January 1, 2020 and resulted in the recognition of $0.6 million (net of deferred taxes of $0.2 million) of allowances for expected credit losses related to our accounts receivable through a cumulative effect offset to retained earnings. The new credit loss standard is expected to accelerate recognition of credit losses on our accounts receivable. See Note 17 for additional information regarding allowance for credit losses on our accounts receivable.
 
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New accounting standards issued but not yet effective
 
In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity's Own Equity,” which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, this ASU removes from GAAP the liability and equity separation model for convertible instruments with conversion features that are not required to be bifurcated as a derivative under ASC Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. The embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. The adoption of this ASU is expected to increase the net book value of our long-term debt and reduce shareholders’ equity as we reclassify the conversion features associated with our various outstanding convertible senior notes (Note 7). Subsequent to its adoption, the ASU is also expected to reduce our interest expense. Additionally, the ASU no longer permits the treasury stock method and instead requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (“EPS”). The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis. We are currently evaluating when to adopt the ASU and the impact it will have on our consolidated financial statements.
 
We do not expect any other new 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. We provide services and methodologies that we believe are critical to maximizing production economics. Our services cover the lifecycle of an offshore oil or gas field. Our services also include subsea cable burial and seabed clearing services for the offshore renewable energy sector. We provide services primarily in deepwater in the Gulf of Mexico, Brazil, North Sea, Asia Pacific and West Africa regions. Our services are segregated into three reportable business segments: Well Intervention, Robotics and Production Facilities (Note 13).
 
Our Well Intervention segment includes our vessels and/or equipment used to perform well intervention services primarily in the Gulf of Mexico, Brazil, the North Sea and West Africa. Our well intervention vessels include the Q4000, the Q5000, the Q7000, the Seawell, the Well Enhancer, and two chartered monohull vessels, the Siem Helix 1 and the Siem Helix 2. Our well intervention equipment includes intervention riser systems (“IRSs”) and subsea intervention lubricators (“SILs”), some of which we provide on a stand-alone basis.
 
Our Robotics segment includes remotely operated vehicles (“ROVs”), trenchers and a ROVDrill, which are designed to complement well intervention services and offshore construction to both the oil and gas and the renewable energy markets globally. Our Robotics segment also includes two robotics support vessels under long-term charter, the Grand Canyon II and the Grand Canyon III, as well as spot vessels as needed.
 
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”), our ownership interest in Independence Hub, LLC (“Independence Hub”) (Note 4), and our ownership of oil and gas properties. All of our current production facilities activities are located in the Gulf of Mexico.
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Note 3 — Details of Certain Accounts
 
Other current assets consist of the following (in thousands):
September 30,
2020
December 31,
2019
Contract assets (Note 10)$1,883 $740 
Prepaids17,949 12,635 
Deferred costs (Note 10)22,857 28,340 
Income tax receivable25,493 1,261 
Other receivable (1)
29,180  
Other6,755 7,474 
Total other current assets$104,117 $50,450 
(1)Agreed-upon amounts to be paid to us by Marathon Oil Corporation (“Marathon Oil”) as the required plug and abandonment (“P&A”) work associated with our Droshky oil and gas properties is completed (Note 14).
 
Other assets, net consist of the following (in thousands):
September 30,
2020
December 31,
2019
Prepaids$527 $777 
Deferred recertification and dry dock costs, net24,030 16,065 
Deferred costs (Note 10)3,284 14,531 
Charter deposit (1)
12,544 12,544 
Other receivable (2)
 27,264 
Goodwill (Note 6) 7,157 
Intangible assets with finite lives, net3,716 3,847 
Other2,026 2,323 
Total other assets, net$46,127 $84,508 
(1)This amount is deposited with the owner of the Siem Helix 2 to offset certain payment obligations associated with the vessel at the end of the charter term.
(2)Agreed-upon amounts to be paid to us by Marathon Oil as the required P&A work associated with our Droshky oil and gas properties is completed (Note 14).
 
Accrued liabilities consist of the following (in thousands):
September 30,
2020
December 31,
2019
Accrued payroll and related benefits$26,315 $31,417 
Investee losses in excess of investment (Note 4)1,940 4,069 
Deferred revenue (Note 10)9,795 11,568 
Asset retirement obligations (Note 14)30,279  
Derivative liability (Note 19) 1,002 
Other16,328 14,333 
Total accrued liabilities$84,657 $62,389 
 
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Other non-current liabilities consist of the following (in thousands):
September 30,
2020
December 31,
2019
Deferred revenue (Note 10)$2,976 $8,286 
Asset retirement obligations (Note 14) 28,258 
Other1,982 2,100 
Total other non-current liabilities$4,958 $38,644 
Note 4 — Equity Method Investments
 
We have a 20% ownership interest in Independence Hub that we account for using the equity method of accounting. Independence Hub owns the “Independence Hub” platform, which is nearing completion of its decommissioning. The remaining liability balances for our share of Independence Hub’s estimated obligations, net of remaining working capital, were $1.9 million at September 30, 2020 and $4.1 million at December 31, 2019.
Note 5 — 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
September 30,
Nine Months Ended
September 30,
2020201920202019
Operating lease cost$16,132 $18,002 $48,561 $54,191 
Variable lease cost4,204