Helix Energy Solutions Group, Inc.

Please stand by. Your conference call will begin momentarily. We thank you for your patience, and we ask that you please remain on the line. Thank you. Greetings and welcome to the Helix Energy Solutions fourth quarter and year-end 2023 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Tuesday, February 27th, 2024. I would now like to turn the conference over to Brent Arriga, Chief Accounting Officer. Please go ahead.

Good morning, everyone, and thanks for joining us today on our conference call for our fourth quarter 2023 earnings release. Participating on this call for Helix today are Owen Kratz, our CEO, Scotty Sparks, our COO, Eric Staffelt, our CFO, Ken Nykerk, our general counsel, and myself. Hopefully, you've had an opportunity to review our press release and the related slide presentation released last night. If you don't have a copy of these materials, both can be accessed through the For the Investor page on our website at www.helixcsg.com. The press release can be accessed under the Press Releases tab, and the slide presentation can be accessed by clicking on today's webcast icon. Before we begin our prepared remarks, Ken Nykirk will make a statement regarding forward-looking information. Ken?

During this conference call, we anticipate making certain projections and forward-looking statements based on our current expectations and assumptions as of today. Such forward-looking statements may include projections and estimates of future events, business or industry trends, or business or financial results. All statements in this conference call or in the associated presentation, other than statements of historical fact, are forward-looking statements and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual future results may differ materially from our projections and forward-looking statements due to a number and variety of risks, uncertainties, assumptions, and factors, including those set forth in slide two of our presentation and our most recently filed annual report on Form 10-K, our quarterly reports on Form 10-Q, and in our other filings with the SEC. You should not place undue reliance on forward-looking statements, and we do not undertake any duty to update any forward-looking statement. We disclaim any written or oral statements made by any third party regarding the subject matter of this conference call. Also during this call, certain non-GAAP financial disclosures may be made. In accordance with SEC rules, the final slides of our presentation provide reconciliation of certain non-GAAP measures to comparable GAAP financial measures. These reconciliations along with this presentation the earnings press release, our annual report on Form 10-K, and a replay of this broadcast will be available for the investor section of our website at www.helixesg.com. Please remember that this conference call speaks only as of today, February 27th, 2024, and therefore you are advised that any time-sensitive information may no longer be accurate as of any replay of this call. Owen? Good morning.

We hope everyone out there and their families are doing well. This morning, we'll review the fourth quarter and full year 2023 results, performance, and operations. We'll provide our outlook for the market, both what we currently are experiencing as well as our expectations beyond that, and we'll provide our guidance for 2024. Moving to the presentation, slides six through nine provide a high-level summary of our results and key highlights for the quarter. During the fourth quarter, activity levels across all segments were very strong. with the increased activity from the solid global offshore energy market driving improved rates. Highlights for the quarter include strong activity and utilization in the Gulf of Mexico, a resilient North Sea market well intervention, including a seasonal project in the Mediterranean, completion of our New Zealand Well Intervention Campaign, Robotics and Helix Alliance solid seasonal adjusted contribution, Production facilities continues to be a steady performer. And on the sales front, the Helix Producer 1 was extended an additional year to June 2025. In addition, we were awarded a 12-month extension with Trident in Brazil for the SH1. We expect to benefit from the market rate contract in 2025. We also secured a minimum six-month contract for the Q4000 in West Africa at Favorable Economics. And we just recently established a five-year joint frame agreement with TALIS for their offshore decommissioning requirements, primarily on the Gulf of Mexico shelf. Revenues for the quarter were $335 million, a decrease of $61 million from third quarter results. Our net loss was $28 million, primarily driven by a $37 million loss associated with the refinancing of our 2026 convertible senior nodes. Adjusted EBITDA for the quarter was $71 million. Our fourth quarter results were overall in line with expectations, driven by our core well intervention markets in the North Sea and Gulf of Mexico, with our robotics and shallow water abandonment segments providing good performance given the impact of the winter weather. For 2023, revenues improved by over $400 million year over year to $1.29 billion. Our gross profit improved by $150 million to $200 million. We reported a net loss of $11 million in 2023, which included a $42 million loss on the earn out associated with our shallow water abandonment acquisition and another $37 million loss associated with our refinancing efforts. Without these two losses, our net income would have been significantly positive in 2023. Nonetheless, net loss still decreased by $77 million to $11 million, despite the aforementioned losses. Our EBITDA increased to $273 million in 2023 from $121 million in 2022. Operating cash flow of the year was $152 million, resulting in free cash flow of $134 million, with both results representing significant improvements compared to 2022. The fundamental improvements in the offshore market both domestically and internationally continue to support the foundation of a multi-year recovery for our business. With the market recovery taking shape, we expect to build on our 2023 performance with incremental improvements for 2024 and a potential step change in 2025. Our expansion into shallow water abandonment services has solidified our leadership position in this re-emerging market. Helix continues to execute on its strategy of becoming the preeminent offshore energy transition company. I'd like to thank our employees for their efforts and high level of execution in 2023. Executing safe and efficient operations for our customers has established us as a leader in our industry. On to slide 10. During the fourth quarter, we executed on our express desire to restructure our balance sheet moving away from convertible notes to a more traditional debt instrument. We issued 300 million senior notes due in 2029, and following that, we repurchased 160 million of our convertible notes. In early January, we issued a redemption notice for the remaining balance of our convertible notes, a transaction we expect to close during the first quarter. This restructuring effort extends our maturity simplifies our debt structure, eliminates dilution risk from the convertible notes, and mitigates the ultimate cost of replacing our convertible notes. We believe these efforts provide clarity and predictability to our balance sheet and position our investors to benefit from the improvement in the offshore market. On to slide 11, from a balance sheet perspective, our cash balance at year end was $332 million. with liquidity of $431 million. For the year, our operating cash flow was $152 million, including $63 million of dry dot and recertification costs. We spent $20 million on CapEx, resulting in $134 million in free cash flow. At year end, we were in a net debt position of $30 million. I'll now turn the call over to Scotty for a more in-depth discussion of our operations.

Scotty? Thanks, Owen, and good morning. Moving on to slide 13. The teams offshore and onshore outperformed again, producing another very well-executed quarter, completing a very strong 2023. In the fourth quarter of 2023, we continued to operate globally with minimal operational disruption, with operations in Europe, Asia Pacific, Brazil, the Gulf of Mexico, and off the US East Coast. We continued to operate at high standards, again, with strong uptime efficiency for the quarter. During the fourth quarter, we generated revenue of $335 million and a gross profit of $49 million, a gross profit margin of 15%, compared to a gross profit of $31 million in the fourth quarter of 2022, significantly improved year over year. For the year, we generated revenue of $1.29 billion and a gross profit of $200 million and a gross profit margin of 16%, very much improved compared to a gross profit of $51 million in 2022. 2023 has been a solid year for Helix, vastly improved over 2022, and we finished the year very strong, with the fourth quarter being our best fourth quarter since 2013. Visibility in 2024 and beyond is looking very positive. We have recently secured some good contracts at better market rates compared to our legacy contracts. That also sets up 2025 potentially for further improvement. Tender activity remains strong, and our client base is increasing. Slide 14 provides a more detailed review of our well intervention business in the Gulf of Mexico during the fourth quarter. The Q5000 had excellent utilization of 96%. The vessel performed very well conducting production enhancements and abandonment campaign, utilizing our Helix SLB jointly-owned 15k subsystem. The vessel then completed work on a single production enhancement well for Shell and finished the year conducting abandonment work on one well. The vessel has numerous wells contracted for 2024 and we expect the vessel to achieve high utilization at stronger rates. The Q4000 had solid utilization of 98% in the fourth quarter. The vessel continued a multi-well production enhancement campaign for one customer and then undertook a production enhancement project for another client. The vessel then commenced production enhancement works on our Thunderhawk field. The Q4000 also has numerous wells contracted in 2024. And again, we expect high utilization at better rates. In the second half of the year, the vessel is scheduled to commence a paid transit to Nigeria to undertake a minimum six-month project, performing production enhancement works with a paid transit back to the Gulf of Mexico after. Both Q vessels continue to operate under the integrated Helix SLB subsea services alliance package. And we expect this to continue with the Q4000 whilst in Nigeria. Moving to slide 15. Our North Sea Well Intervention business continues to respond well to the increased demand in the region, having a very strong fourth quarter considering the winter period that would usually lead to a seasonal slowdown or warm stacking periods for the vessels. For the quarter, we achieved 100% utilization for both vessels. The well enhancer performed very well working for two customers, performing production enhancement work on three wells, followed by decommissioning operations on two wells. The Sea Well also had a good quarter, working for two customers, performing decommissioning works on two wells, and the vessel then completed a paid 22-day transit to the western Mediterranean to conduct a longer-term decommissioning campaign, expected to last into the summer of 2024. Demand for our services continues to improve. As mentioned, the Sea Well is fully contracted well into the summer of 2024, and following its approximate 50- to 60-day dry docking Q1, the Well Enhancer has contracted and awarded works through Q3 of 2024. starting to fill out the year with further increased rates. The Q7000 was 68% utilized, conducting the decommissioning contract in New Zealand throughout most of the fourth quarter. On completion of the work in New Zealand, the vessel has completed a paid transit to Australia to undertake several intervention scopes for free clients commencing in the fourth quarter. The Q7000 is then contracted for 12 months plus options to undertake well-abandoned work with Shell in Brazil, including the paid transit to Brazil. The work is estimated to commence towards the end of 2024, so the Q7000 is contracted for most of 2025, with options that could potentially have it working in Brazil into 2026. Moving to slide 16. In Brazil, we had good utilization of 99% for the fourth quarter. The CM Helix 1 had a strong quarter and was 100% utilized in Q4, undertaking work for Trident Energy, performing deconditioning works on six wells and production enhancement work on one well. We have recently extended our contract with Trident to take a further year and much increased market rates, commencing at the end of 2024 and for the rest of 2025. The Seam Helix II had 98% utilization in Q4, completing decommissioning activity on three wells and one production enhancement well with Petrobras. We again in 2023 won the Petrobras Rig of the Year Award, so congratulations to our teams both onshore and offshore in Brazil. We keep enhancing our position in Brazil by further extending contracts at increased market rates. So as the legacy contracts roll off, this should lead to much better results in 2025. And we look forward to bringing the Q7000 to Brazil and commencing the shale decommissioning contracts again at improved market rates. Slide 17 provides detail of our well-intentioned fleet utilization. Moving on to slide 18 for our robotics review. Robotics continued their good performance and had another strong quarter. closing out a very solid year being the best performing year in terms of revenue and EBITDA since 2015. The business performed at high standards with strong utilization, operating six vessels globally during the quarter, primarily working between trenching, RV support, and site survey work on oil and gas and renewables-related projects. In the APAC region, the Grand Canyon II had 100% utilization in Q4. The vessel completed a long-term decommissioning project in Thailand, then finished the year on an rov support project in malaysia the t1401 trenching system on board the sea of topaz a project chartered vessel continued work on a renewable trenching project in taiwan undertaking 92 days of trenching utilization in the quarter that is expected to continue into mid q4 of 2024. in the north sea the grand canyon free was utilized 95 performing an oil and gas trenching project for one customer prior to commencing a lump sum renewable trenching project for another customer. The Horizon Enabler had 100% vessel utilization, completing oil and gas trenching works for two customers, then performing works on a renewables trenching project for another customer. Also in the North Sea, the Glomar Wave completed 15 days of operations, undertaking an ROV support project for a renewables customer. The USA, the Shida Borderline, the Jones Act compliant vessel, was utilized 92% in Q4. The vessel performed works in the Gulf of Mexico with an ROV survey project for an oil and gas customer, followed by a seismic node installation project for another customer. The vessel then took a paid transit to the US East Coast for an ROV support project on renewables works. Helix Robotics performed very well in 2023. We have a good backlog in visibility globally, and we are expecting further strong performance in 2024. Slide 19 details our robotics vessels ROV entrenching utilization. Slide 20 provides an overview of our shallow water decommissioning business, Helix Alliance, for the fourth quarter. Helix Alliance had a strong quarter considering the expected seasonal slowdown. Due to better weather conditions, many of the units worked further into the fourth quarter than what we had expected. The offshore division had nine liftboats operating in Q4 with a combined utilization of 80% performing decommissioning services. Offshore also supplied six OSVs and one crew boat with a combined utilization of 71%. The Energy Services Division had operations of 1,188 days of utilisation for 20 pre and A systems deployed conducting decommissioning services. The Division had operations of 198 days of utilisation for six cool tubing systems. In Q4, the Diving and Heavy Lift Division had reduced combined utilisation of 46% across the three diving vessels due to the sensitivity of diving operations in the winter season. The H-run heavy lift barge had utilization of 76% undertaking decommissioning activities. Last quarter, we reported that we had commenced work on our largest decommissioning contract to date to decommission 39 wells, abandon 15 pipelines, and remove and dispense of seven platform structures. We've been performing well on this contract thus far. However, as planned, the work has been suspended for the winter months, and we expect to recommence work on the project with some units later in Q1 and the heavy lift work to recommence in Q2. At the end of December, our season did finally come to an end due to the winter weather conditions, leading to the stacking of a good portion of the fleet's P&A systems and cold tubing systems. We expect the first quarter of 2024 to be slow until weather conditions start to improve, leading to a slow ramp-up of the fleet in Q1 and into Q2. Slide 21 provides detail of Helix Alliance vessels and systems utilization. Looking back at 2023, we had a very good year. And yes, the market has improved. But more importantly, our global employees, offshore and offshore, excelled not only exceeding expectation in 2023, but also setting up a strong 2024. And with the recently awarded contracts, we expect an even stronger 2025. So I'd like to put out a big thank you to our employees and partners. Stay safe and keep up the good work. I'll now turn the call over to Brent.

Thanks, Scotty. Moving to slide 23. It outlines our debt instruments maturity profile as of December 31. During Q4, we initiated a refinancing of our convertible securities. We issued 300 million senior notes due 2029 and repurchased approximately 160 million principal amount of our 2026 convertible senior notes. Our fund debt at year end was 373 million. In January, we issued a redemption notice for the remainder of our 2026 convertible notes. which we expect to settle in March. Following that settlement, we will have no significant maturities until 2029. The refinancing brings us to a simplified capital structure. It eliminates dilution, overhang, and potential higher costs to settle those convertible notes in the future. Moving on, slide 24 provides an update on key balance sheet metrics, including cash, long-term debt, liquidity, and net debt levels. At year end, we had cash of $332 million, and availability under the ABL credit facility of 99 billion with resulting liquidity of 431 million. Our net debt position at year end was 30 million. As mentioned earlier, we are settling the remaining 40 million principal amount of our 2026 convertible notes. We anticipate the final redemption cost will exceed the carrying amount of those notes and any premium paid will increase our net debt. Slide 25 presents a five-year performance trend for certain financial metrics. 2023 not only marks our sixth straight year of positive free cash flow, but also represents our highest annual EBITDA since 2014 and our highest level of free cash flow since we began presenting this metric. Slide 26 presents our diversified revenue mix by segment, geography, and by the three components of our energy transition strategy for your reference. I will now turn the call over to Eric for a discussion on our outlook for 2024 and beyond.

Thanks, Frank. Based on the continued strength of the offshore energy market, our contracted work, and the pipeline of bids and projects, we're providing guidance of certain key financial metrics from our forecast. Revenue in the range of $1.2 to $1.4 billion. We do expect revenues to be flat to slightly positive in 2024. EBITDA range of $270 to $330 million. Overall, we expect slight improvement from 2023 with improvements in the well intervention partially offset by a softer shallow water market, shallow water abandonment market. Free cash flow of 65 to 115 million. This number includes an expected $58 million impact from the earn out payment scheduled in the second quarter of 2024. Capital spend in the 70 to 90 million range. based on our expectations of a mix of regulatory maintenance on our vessels and fleet renewal robotics ROVs. Moving on to slide 30, our CAPEX forecast for 24 is already impacted by dry dock maintenance periods on our vessels and systems. The well enhancer is currently in dry dock undertaking an expected 50 to 60 day program. The HP1 is scheduled for dry dock in Q2, and the Q7000 will have a maintenance period during its mobilization in Brazil. Our CapEx range for 2024 is currently $70 to $90 million. The majority of the CapEx forecast continues to be maintenance and project related, which primarily falls into our operating cash flows. Reviewing our balance sheet, our funded debt of $373 million is expected to decrease by $49 million in 2024 with the redemption of our 2026 convertible notes. and scheduled principal payments on our MERA debt. We expect to continue our shareable purchase program with target repurchases in the 20 to 30 million range in 2024. Our forecast ranges include some key assumptions and estimates. Any significant variations from these key assumptions and estimates could cause our results to fall outside of the ranges provided. Our quarterly results will continue to be impacted by seasonal weather in the North Sea and Gulf of Mexico shelf. primarily the first quarter and fourth quarter. In addition, the timing of our vessel maintenance periods and project mobilizations will cause variations between quarters. Our quarterly financial performance in 2024 is expected to follow a similar cadence as our results in 23, with the second and third quarter being our most active quarters and first and fourth quarters impacted by winter weather. Overall, we expect the second half of 24 to be stronger than the first half. With seasonal quarter impacts, the timing of our free cash flow generation is likely skewed to the latter part of the year. Providing key assumptions by segment and region starting on slide 31, first, our well-involved Gulf of Mexico continues to be a very strong market supported by improving rates and expected strong utilization on the Q4,000 and Q5,000. Q5000 has contracted work in every quarter with limited white space to fill in its schedule. The Q4000 is contracted to work into Q2 in the Gulf of Mexico. The vessel is scheduled to then transit to West Africa for a minimum six-month contract in Nigeria with a paid mobilization and demobilization. In the UK North Sea, we expect both vessels, the well enhancer and the seawall, to have very good utilization for most of the year. The well enhancer is currently completing an approximate 50 to 60-day regulatory docking, followed by contracted work into Q3. The seawall is currently working in the Mediterranean into Q2 before being scheduled to return to the North Sea for contracted work. Since mid-2022, the activity levels in the North Sea well intervention market have significantly increased, with limited seasonal impact in 22 and 23, We are anticipating a return to its easily adjusted utilization in the winter months in the North Sea in 2024. Q7000 is currently working in Australia with projects scheduled for three different operators. Projects are expected to continue to mid-year, followed by a scheduled transit to Brazil and mobilization for its contracted work in Brazil. In Brazil, the CMU is contracted into mid-December 2024 with Petrobras. The CM Helix One is contracted to perform well-abandoned work for private, with the recent contract extending work in Q4 of 2025. We expect to benefit from the contract extension at market rates in 2025. Moving to our robotics segment, slide 32. The robotics segment continues to benefit from a tight market, where both oil and gas market and renewables market are extremely active competing for assets. In the APAC region, the Grand Canyon II is under contract supporting renewables projects in Taiwan into the second half of 2023 with expected good utilizations for the balance of the year. The CM-TOPAZ and the T1401 printer are contracted and expected to remain in Taiwan through mid Q4 2024. In the North Sea, the Grand Canyon III is currently undergoing battery pack installation. The vessel is expected to begin trenching in April and have strong utilization into Q4. The Horizon Enabler has contracted trenching projects in Q3 and Q4. The Global Bar Wave is forecasted to have good seasonal utilization, performing site clearance operations. In the U.S., the Sharia Borderline is working in the Gulf of Mexico and expected to transit to the U.S. East Coast to provide wind farm support. William production facilities, the HP one is on contract for the balance of 24 recently extended to June of 2025 with no currently expected change. We have expected variability with the production as a drop key field continues to deplete under hot field is producing after completion of a wall clean out in January. Continuing on slide 33. We're expecting to have a more traditional season in our shallow water abandonment segment with greater seasonal impacts during Q1 and Q4. After a robust 18 to 24-month period of activity, we're seeing operators scale back to mitigate the impact of winter weather. We expect the second and third quarters to be very active with potential for competition for assets if and as schedules fill out. We expect the offshore marine business to maintain good utilization on five to seven lift boats with some variability on the OSPs and crew boat. Energy services should have good utilization on 12 to 14 DNA spreads and one to three cold tubing units. There is seasonality in diving and heavy lift business where the epicutrid is currently idle with limited opportunities, but we do expect a very active season during Q2 and Q3. I'll skip the remaining slides starting with 35 and leave them for your reference. This time I'll turn the call back to Owen for a discussion on our outlook beyond 24 and closing comments.

Thanks, Eric. As we begin a new year, I thought it would be appropriate if we just restate what Helix does. As you're aware, since 2012 the Helix business model has been focused on the late life aspects of the oil and gas market. and providing specialty support to the development of offshore wind renewables energy. As a result, we offer services in three areas key to our energy transition focus. First is maximizing existing reserves that remain of avoiding new drilling. This incorporates subsea access for production enhancement, well intervention, marginal field production processing with our FPU, blowout containment contingency services, and end-of-life operating and reservoir management with the potential for owning and operating end-of-life fields. Second is our offshore abandonment. This includes shallow water, full field abandonment of wells, pipelines, and facilities, and deep water, subsea decommissioning, including well P&A. The third leg is specialty support services for development of renewable energy projects, namely offshore wind farms. This includes jet and cutter trenching of the cables, Boulder site clearance, and recently, UXO clearance. Combined, our focus is on the energy transition and sustainable energy from end-of-life reserves through abandonment to development of offshore wind farms. Our strategy is to remain focused on these areas where we have expertise and efficiencies with a significant market position with ample growth opportunities within each of these niches. For deep water production enhancement and well abandonment, HELIX is an efficient, purpose-built alternative to the use of drill rigs for non-drilling activities. For field abandonment, HELIX offers an integrated service, including all required engineering, planning, management, and assets. For both of these, we have support of our robotics and diving, depending on water depths. Our robotics has evolved over time, allowing Helix to become a global leader in jet and cutter trenching of the wind farm cables. We've also evolved our robotics to perform site clearance for wind farms and recently added in-house UXO removal capabilities. So let's look at the market outlook for each of these segments. First, deepwater well intervention. In 2023, about 60% of our revenues were generated from our assets that compete for work historically done and largely still done by drill rigs in non-drilling mode. There's a sizable market share still done by drilling rigs. Helix pricing is understandably sensitive to drill rig rates, which are driven by market supply and demand. Drill rig rates and utilization have been rising and are expected to continue rising, as many analysts have indicated. To summarize the recent rig report, the long-duration upcycle remains healthy and solid growth is anticipated in most regions globally. Significant ultra-deepwater demand is expected in the Gulf of Mexico, Brazil, Africa, and Phil Kleisler- slower than expected reactivation of cold stack rigs and a lack of new built is expected to further drive opportunities for offshore drilling and leading edge day rates for ultra deep water floaters are expected to exceed 500,000 per day in 2025. Phil Kleisler- To put this into perspective current ultra deep water rates. are over 400,000 a day now, with harsh environment rigs that discount to this in the 350,000 a day range, which is the rate that Helix currently prices to. In our forecast, there are legacy rates that we're still working through, but our average day rate is currently around 300,000 a day. All to say, there are still meaningful increases in our rates that we expect to come over time. With blended with ongoing longer-term legacy rates, in 2025 there could be as much as a 20 to 25 increase in rates over our current average rate. Next, let me say a few things about abandonment. I've covered deepwater abandonment as it's part of what we compete for against RIGS. I would add that the volume of work and the pressure both from the public as well as the regulatory bodies is increasing. Primary basins for HELIX are the UK, Brazil, Australia, and the U.S. Gulf, all of which have substantial work for years to come. In July of 22, we acquired Alliance as a reentry into the Gulf of Mexico shallow water abandonment to complement our deep water abandonment. The year prior to the acquisition, Alliance generated low $20 million EBITDA Our expectations were for the shallow water abandonment market to significantly become active in the wake of the fieldwood bankruptcy and accelerate further following the bankruptcy of Cox. Both of these have occurred. After generating roughly $50 million of EBITDA for the full year of 2022, we initially forecasted 2023 to be $60 million with an earnings potential for that business at $70 million EBITDA. Actual results for 2023 came in at more than $85 million of EBITDA due to a greater volume of work than expected from multiple major recipients of properties from the field with bankruptcy. We can't guide to this level of activity for 2024 as clients may slow their work for 2024, and we cannot be certain that we'll recapture another large turnkey project this year, although the potential remains there. The Cox bankruptcy did occur in 2023, but it's taking time to run through the courts. We had expected this work to come to market in 2024, but that may be a bit delayed. We're forecasting the shallow water market to generate similar EBITDA levels that we guided to for 2023, which is a meaningful reduction in EBITDA contribution year over year. However, we do expect a meaningful increase from there in 2025. and believe there'll be a strong shallow water market in the Gulf of Mexico for years to come. Finally, let's take a quick look at the offshore wind market. With increased cost of capital and higher costs along the entire supply chain, we're seeing some projects delayed or canceled. This market is sustainable and will grow, but we've always tempered expectations that the growth may be less than the exponential forecast some previously thought. We're also seeing that it's a challenge to achieve margins among the contractors that rushed into the market. We prudently decided to stay within our core competencies and leverage our robotics expertise to participate as a specialty niche provider for cable, burial, and site clearance. We believe there's significant growth ahead for offshore wind as a whole to generate growth for Helix in the two niches as we explore other peripheral niches. We're continuing to grow, and our renewables work as a percentage of revenue is technically decreasing, but only because of the greater rate of growth from our other business lines. I'd like to take a few minutes and touch on points that illustrate why Helix is differentiated and has such a positive multi-year outlook. First, again, is deep water intervention. While there's competition in light well intervention that comes and goes, Helix created the light intervention market and has been at it for over 25 years. Many competitors have tried, but few have succeeded. It's just not that simple, and Helix is the leader. In rig alternative riser-based intervention, Helix is the undisputed leader and operator of five of the seven assets globally that are capable of non-rig riser-based intervention. This market is growing as the mature deepwater fields become more plentiful. Competitive encroachments, not likely. First, because it's not that simple to do. And second, Helix has decades of experience in refining the technology, enhancing efficiencies. Third, a majority of the work is still done by drill rigs, which are more expensive, have a larger carbon footprint, and are about 30% less efficient at work than Helix does. And of course, the drilling rigs are being used to meet drilling needs. These are expensive assets. the high cost of capital, high shipyard pricing, and the time required to deliver, we continue to be well placed in the market. Turning to shallow water abandonment, we believe the Gulf of Mexico should be a strong demand-driven market for at least the next seven years. To perform the full abandonment of fields requires a mix of a number of differing assets, resources, and capabilities. Over the downturn years, the shallow water contracting community collapsed to a great extent. It's populated by shallow water contractors rarely having the requisite ownership of assets that can perform fully integrated field abandonment. As the properties come out of bankruptcy and flow back to the successor ownership, largely the majors, the majors no longer have the requisite teams in-house to manage the work but some will reconstitute shelf deco teams and tender work through their supply chains, while others will contract project management consultants to tender and manage the work on an outsourced basis. Either way, these clients don't have all the assets. We believe the market will be strong enough that most, if not all, Gulf of Mexico assets will be utilized, as they were in 2023, and the market will be even tighter going forward. Helix Alliance is well positioned with a meaningful market share of all classes of assets. We're capable of working under any of these above contracting methods. Helix is the only contractor capable of providing the guarantee of availability to offer a truly integrated service. Managing all aspects of a full field abandonment is much simpler under a single contract with a single contractor that can guarantee the availability of the assets. We believe in the integrated value proposition we offer clients backed by Helix's decades of delivering efficient results. This capability and expertise is also scalable globally as we see strong markets developing, especially in Brazil and Australia. The last segment I'd like to comment on is robotics, specifically as we're positioned to provide offshore wind farm support. The forecasted rate for growth for the offshore wind farm work appears to be at a slower rate than most were forecasting, but it is still growing. We see this growth as being sustainable for multiple years. Helix is the global leader for jet and cutter trenching of cables, and we see continuing demand in this niche. We have one trencher system that's yet to be deployed. We're also actively renewing our work class ROV fleet to maintain quality operational credibility and continue strong performance. In 2019, we began to enter the boulder removal market for site clearance. We're adding our second robotic boulder grab and recently added an in-house capability for USO removal. We've established our credibility and see further growth building off this credibility. Our strategy is to be patient and proven with progressive growth in this market. To close, let me highlight a few things impacting 2024 as compared to our longer-term outlook. First, since the summer of 2022, the North Sea has been active throughout the full year. We can't be certain that the market won't return to a seasonal market, which could impact 2024. Second, we do expect the Q7000, SH1, and SH2 to work in Brazil for multiple years to come. The Q7000 and SH1 have now been successfully contracted through 2025. All three vessels should show significant improvements in rates for 2025. As a result, we've extended the charters on the SH-1 and SH-2. The accounting treatment to blend and extend the charter rates have a negative impact on 2024 of somewhere around 6 million EBITDA, which has been included in our guidance for 2024. But the positive impact for Brazil in 2025 is estimated to be close to 25 to 30 million EBITDA for just the SH-1 alone. Third point is the Q7000 expected to complete its work in APAC over the course of 2024. The past year, the vessel's been working under legacy rates, resulting in actually a loss for 2023. The contracts in hand for 2024 are all in APAC at a mixture of legacy rates and new rates. We expect strong improvement of the EBITDA contribution in the range of $40 million with another meaningful rate increase for 2025 as the vessel transfers to Brazil for its contract there. Fourth, the Gulf of Mexico was a strong market for our riser-based well intervention in 2023. The next year should be even better for our well-off U.S. division. Over the past few years, we've focused on expanding our geographic footprint, and we're successful in establishing our credibility in Demand for our services remains strong there in this market we'd like to maintain. With the Q7000 contracted elsewhere, we made a decision to take a contract in Nigeria primarily because of much improved rates and terms and performed its work with the Q4000. The result of this will be an even better year for Well Ops U.S. division as the Nigeria work will report through the Well Ops U.S. The Q4000 is scheduled to begin transit to Nigeria in August and then anticipated to return to the Gulf of Mexico in 2025. So while the Gulf of Mexico has been a strong market for us recently, it's good to have opportunity to go where the rates and terms take us. The fifth point is robotics. They had a great year in 2023, and we expect this should continue again in 2024 and 2025. We do have one trencher that could be deployed that was idle in 2023. We also have our startup UXO offering for the market. The sixth point is that I have covered the Gulf of Mexico shallow abandonment market. and the reasons for not expecting the overperformance of 2023 to repeat in 2024. Our expectations for 2024 are consistent with the initial guidance we gave for 23, but with the possibility of repeating the stellar 2023 again in 25. And as I mentioned earlier, we just recently established a five-year joint frame agreement with TALIS for their offshore decommissioning requirements, primarily on the shelf in the US Gulf of Mexico which we believe establishes the foundation for work for years to come. In summary, we're expecting a one-year pullback in shallow water abandonment more than offset by the strength of our other business groups. We're anticipating further meaningful growth for 2025, all of this based on just our existing assets and operating leverage. As I mentioned earlier, we recognize losses in 2023 related to the earn-out payment for shallow water abandonment acquisition and related to our refinancing efforts without which we would have been significantly higher earnings in 2024 we'll be making the final earn out payment of 85 million for the alliance acquisition we'll we'll have some noise in the accounting and p l as a result of completing the redemption of the remaining convertible notes that are still outstanding following this we have positioned ourselves to have a strong balance sheet and be meaningfully pre-cash flow positive. Helix should be enjoying growth from the existing operating leverage from existing assets with many market opportunities. So that's it, Eric.

Okay, thanks, Ellen. And operator, at this time, we'll take any questions.

Thank you. If you would like to register a question, please press the 1 followed by the 4 on your telephone You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. One moment, please, for the first question. And our first question comes from James Shrum. Please proceed.

Hey, good morning, guys. Thanks for all the detail. I think you partially answered this. I wanted you guys to quantify the increase in expenses on the blend and extend for the CM Helix 1 and 2. You said $6 million of EBITDA. Is that per vessel or is that total?

That is total in 24.

Total in 24. Is there a different number for 2025?

Yes, there will be different numbers for 2025.

But like in 24, are we just capturing, is it the delta on one of the vessels or is it like the full impact? So maybe I'll ask that, but I'll also ask, you know, is it fair to think about a cash OPEX of those vessels of close to 200,000 per day, including the new charter costs?

So I'll say this, that obviously the extension of those charters, given the strength of the market, is something that we pursued.

The impact that we're seeing in 24 is primarily related, obviously, to the return in value associated with the vessel itself. There will be some incremental increases in the services that are provided associated with that charter. So there will be additional impacts in 25.

Okay. And maybe this is for Scotty, but does that sound right, Scotty? Are we pushing close to 200,000 per day of OPEX on these vessels?

I think your number's a bit high there.

Okay. Okay. And then maybe just shifting over to, I think you partially or maybe fully answered this question, but I can't remember the last time the Q4000 was out of the Gulf of Mexico. So, I mean, is this driven by a really strong contract and a really good day rate in Nigeria, or is it some softness in the Gulf of Mexico? I know that For the offshore drilling market, we might have seen a little bit of an air pocket here. Day rates have been sort of healthy, very good, but sort of flatlined here for at least a year. So just didn't know if you're seeing any softness this year in the Gulf of Mexico.

No, we're seeing a strong market in the Gulf of Mexico. As usual, going into the year, there's a bit of light space in the schedule, but nothing that we didn't expect to fill up. The move to Nigeria with the Q4000 was strictly driven by the rates and the terms that we were able to get there, as well as wanting to maintain our footprint in West Africa, which we believe is going to be a strong market for years to come. And after establishing our credibility, we'd like to sort of maintain that presence.

I'll just add to that. ESSO came to us for this contract and single sourced it to us. It wasn't a competitive tender. So we're getting paid a very healthy mod B mod fee and decent day rate for the works over there. But if you look back three or four years ago, Exxon did no intervention work other than based on rigs. So this is quite a big relationship builder to keep. supporting Exxon in RISA-based intervention, non-RIC-based intervention.

Okay, great. And thanks for that. And just a quick clarification on the alliance. I just want to be clear, the EBITDA that you're guiding to for this year is, what is it exactly? Is it 60 or 70? What's the expectation there?

I think it's in that 50 to 60 million range. I think, as Owen mentioned, similar to what That's what we had expected at the start of 23, and obviously it came in much stronger, but I think we're expecting something in that range for 24 with a potential upside in 25.

I can give a little more color on that. There was one major recipient of properties from Fieldwood that did an extraordinary amount of work in 2023. That tightened the market up quite a bit and drove utilization. In addition to that, we had a very large lump sum contract that we performed very well on. I think we mentioned that during the notes, and we'll be finishing that up early this year. That major that had all of the work last year is pulling back for 24 and sort of regrouping with the intentions of beginning work again in 25. And then we also had Cox bankruptcy got held up in the courts for a little while. And that work will be flowing back to the successor owners by everyone's guess a little later than what everyone expected. And that's causing a pullback in our expectations on the shallow water abandonment for 24, but then returning to an all out demand driven market for 25.

Okay, great. Thanks for all the color, guys. Appreciate it.

Our next question is from David Smith. Please proceed with your question.

Hey, good morning, and thank you for taking my question.

Good morning.

I don't want to beat this one to death, but just revisiting the shallow water abandonment guidance. I mean, 23 was was a great year with revenue coming in 30% ahead of the guidance midpoint provided a year ago. So just wanted to make sure I understand, you know, if you could kind of compare the visibility you have for that segment today, you know, compared to a year ago, and maybe how much of that outlook is dialing in more seasonality or really just, you know, less demand visibility?

So I'll get some high levels and pass it on to Owen. But overall, once again, it is a call-off business. I think what we've seen so far this year is the first quarter with the winter weather, we've seen pullback in activity. I think we started to see that right at the end of December. So I think on a year-over-year basis, we definitely expect the first quarter to be slower. I think with that, I think we also expect activities to wrap up significantly in the second and third quarter. As we view it, obviously, is really the fourth quarter is one, are they going to continue at the pace that they're doing, or is there going to be seasonality there? So there's some variability there, but I would say at least here at the start of the first quarter, we're definitely seeing more of a seasonal impact than we did last year.

I'll just add a little bit to that. Besides the major producer that had a lot of work last year pulling back on their expectations for this year, there's the uncertainty of the Cox bankruptcy proceedings. I think this week there's a hearing for the courts to finally approve Chapter 7. That's a little later. That's much later than what everyone was expecting, the pace of it to move. We're just uncertain as to how fast that work comes to the market. It could be later on in 2024, but we don't want to guide to something that you can't bank on. So we're sort of taking the same view as we did going into 2023. And we'll see what happens with the Cox work.

Understood and appreciated. And follow up was hoping to revisit the commentary about potential well intervention pricing in 25. I think I heard the comment that we could see a 20 to 25 increase in rates versus the current average. I wanted to make sure if that 20 to 25 was referring to average day rate and not a percentage increase.

If compared to our average day rate, which we've talked about it, we have, I think, three sort of legacy contracts that are holding our rates back.

That 20 to 25, was that $1,000 per day or was that a percentage?

A percentage. And those legacy contracts rolled off in 24 and have already been replaced with much better market rates for 25.

Perfect. I appreciate that. If I could ask one clarifying question. Did I hear correctly? You all say that the CM Helix 1 repricing should add 25 to 30 million of EBITDA in 25 versus 24.

Yes, that's correct. John, thank you very much. 25 for the CM Helix 1, most likely for the 25 for the CM Helix 2, and certainly for the Q7000.

Great. That's all I have. Thank you.

And there are no further questions on the phones at this time. I'll call back to you for closing remarks.

Okay. Thank you very much for joining us today. We very much appreciate your interest and participation and look forward to having you on our first quarter 2024 call in April. Thank you very much.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.