Helix Energy Solutions Group, Inc.

Thank you for standing by. My name is Eric and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2024 Helix Energy Solutions Group Incorporated earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Brent Arriaga, Chief Accounting Officer. Please go ahead.

Thank you. Good morning, everyone, and thanks for joining us today on our conference call for our first quarter 2024 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 do not have a copy of those materials, both can be accessed through the For the Investor page on our website at www.helixesg.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 Nyker 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 statements due to a number and variety of risks, uncertainties, assumptions, and factors, including those set forth in slide two of our presentation in 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 reconciliations 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 under the For the Investor section of our website at www.helixesg.com. Please remember that information on this conference call speaks only as of today, April 25, 2024, and therefore you are advised that any time-sensitive information may not be accurate as of any replay of this call. Scotty?

Thanks, Ken. Good morning, everyone. Thank you for joining our call today. We hope everybody is doing well. This morning we will review our first quarter highlights, financial performance and operations. We'll provide our view of the current market and an update of our guidance for 2024. Moving on to the presentation, slides six and seven provide a high level summary of our results and key highlights for the quarter. The teams offshore and onshore outperformed again, safely producing another very well executed quarter, considering the seasonal winter months. Revenues for the quarter were 296 million, with a gross profit of 20 million, compared to $15 million in Q1 of 2023. Our net loss was $26 million, primarily driven by pre-tax losses related to the extinguishment of the remaining convertible notes. Adjusted EBITDA was $47 million for the quarter, and operating cash flow was $64 million, resulting in a free cash flow of $61 million, both results representing significant improvements over Q1 of 2023. During the quarter, we extinguished the remaining 2026 convertible notes, resulting in a $21 million loss. This completes the restructuring of our debt initiated in Q4 of 2023, and we are happy to have established a simplified, more traditional debt structure without the impact of equity overhang. Our cash and liquidity remains strong, with cash and cash equivalents of $324 million and liquidity of $419 million. Highlights for the quarter include strong results in well intervention across all regions, commencement of Australia operations on the Q7000, restoration of production on the Funderhawk wells, and on the sales front, the HWCG contract auto-renewed through March of 2026, and as previously announced, we were awarded a 12-month extension with Trident in Brazil for the SH1 and secured a minimum six-month contract for the Q4000 in West Africa at Favorable Economics. Over to slide nine. Slide 9 provides a more detailed view of our segment results and segment utilization. In the first quarter of 2024, we continued to operate globally with minimal operational disruption with operations in Europe, Asia Pacific, Brazil, Africa, the Gulf of Mexico, and the U.S. East Coast. Our first quarter results were overall in line with expectations driven by our core weather intervention markets globally with robotics and shallow water abandonment results impacted by seasonal winter weather. Slide 10 provides further detail of our well intervention segment. Considering the seasonal winter months and regulatory docking of the well enhancer, we achieved strong utilization in the North Sea and Europe, the Gulf of Mexico, and Brazil, performing very well with solid overall uptime efficiency of 98.8% for the quarter. The Q7000 performed extremely well with 100% utilization working in Australia. The vessel is expected to continue work in Australia until the second half of this year, and then commenced transit to Brazil for the Shell decommissioning campaign. It while Enhancer completed its scheduled regulatory dry dock over 54 days in the quarter. Moving to slide 11. Slide 11 provides further detail of our robotics business. Robotics had a good quarter, considering the seasonal winter months. The business performed at high standards, operating six vessels during the quarter, working between trenching, RV support, and site survey work on renewables and oil and gas related projects globally. All six vessels worked on renewables-related projects within the quarter. The Grand Canyon III had lower utilization due to spending a good portion of the quarter having fuel-saving battery equipment permanently installed into the vessel that should lower fuel costs and emissions going forward. And we have now commenced the trenching seasons globally and expect high utilization for the rest of the year across the fleet, which we anticipate will lead robotics to have another strong year. Slide 12 provides detail of our shallow water abandonment business. Q1, as expected, had low utilization, primarily due to seasonal weather patterns in the shallow water Gulf of Mexico, with several of the vessels and spreads in stack mode for the winter, as well as a general near-term softening in the shelf abandonment markets. In Q2, with the better conditions, we should activate more of the vessels and spreads from the winter stacking mode and back into operations. Also in Q2, we will recommence work back on the larger full-field decommissioning projects after the winter break. with the project scheduled to utilize the epic heater and heavy lift barge, some of the dive vessels, support vessels and P&A spreads. In summary, other than the slow start to our shallow water operations, we are pleased with our start to 2024, with year over year improvements in our overall results. Our business segments are poised to benefit from expected increase in activity during Q2 and Q3, and I would like to thank our employees for their efforts and high level of execution. delivering safe, efficient operations for our customers has established us as a leader in our industry. Thank you. I'll now turn the call over to Brent.

Thanks, Scotty. Moving to slide 14, it outlines our debt instrument's key balance sheet metrics as of March 31. During Q1, we retired our remaining convertible securities and have simplified our capital structure. Our funded debt at quarter end was $328 million. At quarter end, we also had cash of $324 million and availability under our ABL of $96 million, with resulting liquidity of $419 million. We had negative net debt of $6 million at quarter end. Following the end of the quarter, we settled the earn-out related to the Alliance acquisition, paying cash of $85 million, which reduced cash and liquidity and increased net debt by the same amount. I'll now turn the call over to Eric for discussion on our outlook for 2024 and beyond.

Thanks, Brent. Based on our first quarter performance and the continued strength of the offshore energy markets, we're maintaining guidance of certain key financial metrics from our forecast. Revenue in the 1.2 to 1.4 billion range, essentially flat to slightly positive from last year. EBITDA in the 270, 330 range with slight improvements over 23. Specifically in our well intervention partially upset by the softer shallow water been in the market free cash flow 65 to 115 million once again impacted by the Earn out payment in that we made in early April approximately 58 million capital spending in the 70 to 90 million Once again, this is a mix of regulatory maintenance on our vessels and fleet renewal for our robotics ROVs moving on to slide 17 The well enhancer completed its 54-day dry dock in Q1. The HP1 is currently mobilizing to schedule dry dock. Q7,000 will have a maintenance period during its move in Brazil. Our CapEx forecast continues to be weighted towards regulatory maintenance, which primarily falls into our operating cash flows. Reviewing our balance sheet, our funded debt stands at $320 million, reduced by the extinguishment of the 2026 convertible notes. Our next significant maturity is not until 2029. We're currently targeting 20 to 30 million of shareware purchases in our 2024 program with 5 million completed in Q1. Our quarterly financial performance in 24 is expected to follow a similar cadence as our results in 23, with the second and third quarter likely being our most active quarters and first and fourth quarters impacted by winter weather. Overall, we expect the second half to be stronger than the first half. We generated relatively strong first quarter free cash flow, and we expect a weaker free cash flow in Q2 with the Alliance earn-out payment. With the seasonal quarterly impacts and the impact of the earn-out payment, the timing of our free cash flow likely skewed to the second half of the year. Providing some key assumptions by segment and region, starting on slide 18. Well, intervention, the Gulf of Mexico continues to be a very strong market supported by the improving rates and expected strong utilization on the Q4,000, Q5,000. Q5,000 has contracted work in every quarter this year with limited white space to fill in its schedule. The Q4,000 is contracted to work into Q2 in the Gulf of Mexico. The vessel is scheduled to transit to West Africa for a minimum six-month contract in Nigeria with a paid mobilization and demob. In the UK North Sea, we expect good utilization for most of the year. The well enhancer has contracted work through Q3. The sea well is currently working in the Mediterranean before being scheduled to return to the North Sea for contracted work. We are anticipating a return to seasonally adjusted utilization in the winter months in the North Sea. Q7000 is working in Australia with projects scheduled for three different operators. The projects are expected to continue to mid-year, followed by scheduled transit to Brazil and mobilization for its contracted work in Brazil. In Brazil, the CM Helix 2 is contracted into mid-December of 24 with Petrobras. The CM Helix 1 is contracted for Formula 1 and will work for Trident into Q4 of 2025. We do expect to benefit from the Trident contract extension at market rate starting in 2025. Moving to robotics. segment continues to benefit from tight markets where oil and gas and renewables markets are extremely active, competing for assets. APAC region, we have both the Grand Canyon and CM Topaz supporting renewables projects in Taiwan into the second half of 2024. The CM Topaz, along with our T1400 trencher, are contracted and expected to remain in Taiwan through mid Q4 of this year. In the North Sea, the Grand Canyon III commenced trenching after completing its battery pack installation in mid-April. It's expected to have strong utilization into Q4. The North Sea neighbor has contracted trenching projects Q3 and Q4. Glomar Wave is forecasted to have good seasonal utilization performing site clearance operations. The U.S., the Shalia Borland, is working in the Gulf of Mexico and expected to transit for projects on the U.S. East Coast to provide wind farm support. Moving to production facilities, HP1 is on contract with no expected change. We do have variability in production as the Droschke field continues to deplete. The Thunderhawk field is producing after completion of the well clean out in January. Moving on to shallow water abandonment. After the robust 18 to 24 month period of activity, we're seeing operators scale back activities to mitigate the impact of winter weather. Following the slower Q1, we do expect the second and third quarters to be very active with potential for competition for assets if and as schedules fill out. We do anticipate this to be a seasonal business with variability in results depending in part on operator spending, but we remain confident in the long-term outlook of the business as we believe demand is likely to increase. At this time, I will turn the call back to Owen for discussion on our outlook beyond 24 and for closing comments. Owen?

Thanks, Eric. Good morning. Our performance for the first quarter was marginally better than planned. Well intervention and robotics provided solid year-over-year improvements with production facilities impacted by the work over expense on the Thunderhawk field. As expected, shallow water abandonment declined, driven by winter weather and customers reassessing the pace of their abandonments. Overall, we're pleased with our performance and happy to deliver good results. With the solid start to 2024, we're maintaining our guidance. The overall strength and activity in the energy market continues to support the premise of a multi-year investment cycle in the offshore market. The well intervention market continues to show strength, as evidenced by rig activity and rates. The demand in our robotics segment benefiting from our geographical expansion in the renewables markets continues to tighten. With additional market support from the oil and gas services, the dynamics of supply and demand are working in our favor. The near term pullback and shallow water abandonment segments are more than offset by the regulatory drivers and current abandonment needs that support the longer term drivers of market activity. We believe we're in the right place, the right markets for both the near and long term. We'd like to think that we're the best at what we do, and we're looking to capitalize on this overall strong offshore energy market. To provide additional color on our markets and segments, in the North Sea UK sector, well intervention market, the demand for our services is holding consistent with incremental improvements expected on rates, with the work pretty evenly split between decommissioning and production enhancement. The variable for us is seasonality of winter work. If work continues in the winter, then there's potential upside for us. The West Africa well intervention market is becoming more significant for us. We'll be sending the Q4,000 to Nigeria, but expect it to return to the Gulf for the 2025 season. We're seeing meaningful demand in West Africa. Have only worked in Nigeria, there's significant market expansion opportunities as well for us, including in Angola and other countries. We are experiencing year over year increasing demand from 24 to 25 for the deep water intervention in the U.S. Gulf of Mexico. We'll also be looking for improving rates. The Brazilian market for well intervention is also very active with demand increasing not only from Petrobras but from other operators. The Q7000 is scheduled to be relocating from Australia to Brazil for Shell and we're in discussions with Petrobras for a multi-year contract on the SH2. All new rates would be at meaningful increases with further potential increases driven by our efficiencies and a continuation of a tight-rigged market. Australia and APAC is also another market where we're seeing increasing demand, all to say that markets are strong globally and we don't anticipate having enough supply with our current fleet to meet all the demand. As always, we're assessing our options to best capture this market. Moving to robotics, Demand is strong and expected to continue for multiple years. We're operating at near full capacity and are looking at our options for increasing capacity marginally. We're proud of the work we're doing on the renewables front, and our presence in the wind farm site clearance market is growing. We now have two vessels working in the wind farm market in Taiwan. We have three vessels working in the EU, including two vessels trenching and one performing site clearance with more demand on the horizon. We're finalizing a new deal that would add further trenching capacity in the EU, as well as potentially deploying another trencher to Taiwan. We're currently working on the wind farms off the east coast of the US, and we believe we're just beginning to see the ramp up demand from this market. Our robotics segment is strong and expected to continue improving with further upside and potential to deploy capital accretively. It's an exciting time for that business. As we've communicated, 2023 was a banner year for the shelf, and we're expecting the contribution from shallow water Gulf of Mexico decommissioning market to pull back in 2024. We do expect a robust decommissioning market in the U.S. GOM for years to come, with Helix maintaining a significant market share. Our initial expectations for this business was 30 to 40 million of EBITDA. We believe this business with the current assets could have an approximate 60 million EBITDA full cycle run rate. Our 2023 results may have been an indication that my previous expectations for earnings potential at 70 million was perhaps conservative. A few things are occurring in this market. Our 2023 results significantly benefited from work associated with the Fieldwood bankruptcy, both Apache and Exxon. leading to the extraordinary $86 million of EBITDA in 2023. This year, Apache has indicated their halting work as they reassess their plans. Cox declared bankruptcy in 2023, and we expect that the reverting work will begin towards the end of 2024, adding to demand. Similar to the Fieldwood bankruptcy, we expect a lag period for this new work to come to the market. These developments mean 2024 will be a slower year on the shelf. However, work is expected to recommence in the near future and provide significant opportunities. We still would expect this to be a full-cycle $60 million EBITDA business with our current assets with spikes up as in 2023 and down as we expect in 2024. In addition to the work flowing from bankruptcies, we expect regulatory pressure to drive decommissioning work on fields held by ongoing shelf producers. This is what led to TALIS awarding us their decommissioning work for the next five years. So big picture, while we're looking at a pullback for 2024, we remain confident in our outlook and our positioning for this market for the long term. Helix is well positioned to deliver in 2024 and beyond. Our markets have sustainable growth opportunities in each segment without the need to search for growth beyond our core competencies. We've successfully simplified our balance sheet, and the company is financially strong. After the final earn-out payment for the alliance acquisition, we have $240 million of cash on the balance sheet and with relatively low growth debt and net debt. We're now generating strong free cash flow with the potential to generate double-digit yield on free cash flow going forward. With the cash, we'll look for and be open to deploying cash for growth in the areas mentioned where we can utilize added capacity. We'll deploy for growth when the values are created to share price and we'll seek to do so on a sustained full cycle long-term basis. If the opportunities don't present for growth, then we can deploy the cash to share repurchase as marketing pricing permits, taking advantage of the 200 million buyback facility approved by the board. We'll also prioritize growing and maintaining a strong cash balance on the balance sheet. With that, I'll turn it back to Eric for Q&A.

Thanks, Owen. Operator, at this time, we're ready for questions.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of James Shum with TD Cowan. Please go ahead.

Hey, guys. Good morning. So a lot going on with the shallow water business. I just want to make sure I understand. Are we – are you – sticking by the expectation of 30 to 40 million of EBITDA this year? That's, I guess, the first part of the question. It looks like you revised the revenues lower. So just curious what your updated thoughts are on that.

Now, the 30 to 40 million of EBITDA that I mentioned was the initial guidance that we gave at the time of the acquisition. I've believe for this year, we will more than exceed that.

Okay. And then just trying to understand, you talked about the seasonality in this business. It's going to be a seasonal business. It's in the Gulf of Mexico. Your deep water well intervention in the Gulf of Mexico is not seasonal. So other than the heavy lift barge, Why is the shallow water business seasonal?

I'll take that. It's basically just down to the weather patterns. You're working in shallow water, so the seas are rougher in those shallow waters. You've got the diving facilities, not just the heavy lift barge. You've got the lift boats that are all affected by shallow water, heavy weather. Obviously, in the deeper water, we have a bit more room to play around with the vessels. It's literally just a weather pattern.

Okay, that makes sense. Thanks. And just maybe on well intervention, Owen, I think you sort of broadly touched on rate increases, but if you could give any color there, like are you pushing up leading edge rates in well intervention globally? And then specifically on the Gulf of Mexico, what does that look like? You've taken the Q4,000 out of that market, and I think you mentioned it's very tight. I think we've seen some rig rates moving a little bit up after being sort of stuck in a lull for, I don't know, 12 to 18 months. So if you could talk about rates, I'd appreciate it.

It's a mixed bag. We are pushing rates up. The rig rates are moving up. Leading edge for us constitutes a slight discount to rig rates. The rig rates that we compete against are the harsh environment rates and not the UDW floaters. So there's a step down from the UDW rates to the harsh environment rates, and then there's a slight discount down to our rates. That would be what we would consider leading market. We are pushing leading market rates, but that's compounded a little bit by the producers now seeking multi-year commitments, and of course they want a rate cut for giving you that kind of utilization. We're in negotiations on a number of these, trying to balance how far out we're willing to commit and what kind of discount are we willing to take for a multi-year commitment versus the strength of our view that the market's going to remain strong and very tight. So it's a little bit of a mixed bag. We are working off of the last of our legacy rates, I would say, that we gave during the down period. I think by the end of this year, those will be gone and will be on the new rate. So we do expect a pretty significant increase in our EBITDA contribution in 2025 just from a rollover of these legacy rates.

Oh, and maybe just to follow up on that. I know that there's so many moving pieces. There's different geographies. You've got legacy rates on a lot of these vessels. But, I mean, would you think about... leading edge rates generally on average, would they be like 10% higher this year versus last year? Or is that a decent way to think about it? Or how would you think about that?

Let's see. This is, I haven't tried to look at it from a percentage basis, but I would say we're looking at rates being, leading edge rates are roughly 15% higher.

Okay, great. Thanks so much, guys. I appreciate it.

Your next question comes from the line of Don Crist with Johnson Rice. Please go ahead.

Good morning, gentlemen. I wanted to start, Owen, with the Cox bankruptcy and the significant amount of wells that are being put back to the original operators. Where are we in discussions to put contracts in place to start doing that work. Do you think any of that kind of hits in the fourth quarter, or do you think that's still a 25 issue?

Again, it goes by operator by operator. I think it's been fairly obvious for quite a while. I mean, the bankruptcy occurred last year, but it wasn't finalized until just this past month. That was a big delay. Everyone thought it was going to be finalized at the end of last year with the work beginning this year. So that's been a little bit of a surprise. The process, like I said, varies from operator to operator. Some of them have been anticipating it and pretty much know what they want to do. They have not yet, to my knowledge, received mandates from the government and a notification of precisely which fields they're getting back. But like I said, they have a pretty good idea. Some of them have been planning. I think you could see some of that work potentially, to give you some context, the Fieldwood bankruptcy occurred in August of 20, and we really didn't see the work until July, August of 22. So that was an 18 month, or a good 12 to 18 month lag. I don't think it'll take that long on Cox because everyone's known that this was coming. You could see some work begin late this year, but I think most of the work, it's going to take them the rest of this year to figure out what properties they're getting back, how they want to handle the contracting, and then go out for the tendering and then to negotiate contracts. I think all of that takes until the fourth quarter to occur. So we haven't included anything from Cox And, of course, Apache has decided to shut down their operations for this year as they reassess the way they were doing it, and they don't expect to begin again until later on this year or early next year. So, really, that's what's driving the expectations that 24 was going to be slow. But then that's just sort of pulling back the rubber band, and everyone is talking about 25 just being, you know, just an over-the-top demand here.

Okay. And can you remind us how many wells you believe are being put back through the Cox bankruptcy?

It depends on how you count wells. I know that sounds like a dodge, but the number I've heard is 1,860 wells coming back from Cox. But I have not seen the exact list of what's being put back. I've heard estimates on the duration of the work requiring anywhere from 7 to 20 years. Of course, that depends on the capacity in the Gulf to do the work and the pace that the producers execute the work at. But it's going to be a long, multi-year, demand-driven cycle.

Right, exactly. And switching over to the deepwater side, I know in past conference calls you had said that we were several vessels short given the current demand. But as Guiana and other kind of basins that are fairly new start to age, how do you see that as we progress? Do you still think we're a couple vessels short today and that could grow as we kind of move into the 25 and 26 seasons?

Yeah, we mentioned the need to bring back the Q4 to the Gulf of Mexico because of the demand we're seeing in the Gulf of Mexico. and the Q7 leaving the Asia Pacific market for the demand in Brazil. So that leaves us without a floating asset to cover West Africa and Australia. Last year, we did add two new intervention systems, and our thinking at that time was that rigs were going to be required to do some of the work that we can't cover. But the rig market is also very, very tight. We do have one system that is working on a rig off of Australia, so that strategy was starting to pay off. Now we're looking at the fact that the rig market is continuing to tighten further, the rates are going up, and we're still short basically an asset to cover West Africa and another asset to cover Australia. So we're starting to explore our options as to how to do that if the rig market is this tight. We don't have any conclusions right now to share, though.

I appreciate the color. Thanks, Owen.

Your next question comes from the line of Sean W. Mitchell with Daniel Energy Partners. Please go ahead.

Hey, guys. Thanks for fitting me in here. You guys have done a ton of work on the balance sheet. You currently sit in a net cash position and have kind of taken out the convert. We've seen where offshore drilling rig rates are, and with respect to intervention, there seems to be a multi-year runway for that business with significant improvements in profitability coming in 2025. Just maybe take a minute. How are you thinking about returning capital to shareholders outside of the repurchase as we move into 2021? a period in the next couple of years where free cash flow generation should be significant?

Right now we do have the $200 million facility that we're working on during share repurchase. Our plan is to continue to do at least a minimal level of share repurchase with a priority of the cash targeting some of the areas where we're really tight in the market and could add capacity. So I'd say our first priority would be to deploy cash for growth in areas where it was immediately accretive to shareholder value and the EBITDA contribution sustainable long-term. That will be the first priority, and to the extent that we don't see the opportunities or the value isn't able to be achieved, then we would revert to the share repurchase. And beyond that, I think we would like to grow the cash balance on our balance sheet a little bit. To borrow a phrase from Warren Buffett, if you're going to go searching for fast-moving white elephants, you better carry a loaded gun.

All right, thanks. Maybe one more for me. Just kind of outside of day rates continuing higher, Owen, with where rig rates have elevated to, how are you thinking about growing the well intervention business over the next few years? Are there assets you could be interested in? It seems like new assets would be a non-star just given economics, but just kind of how do you think about growing that business outside of day rates moving higher?

Well, I think new build is sort of out of the question right now. If you work back from the available day rates or even what the projected day rates are going to be, and you combine that with the cost to build and the cost of capital, we're a long ways from new building assets being commercially viable. So I'd say that's sort of off the table for consideration. When you're talking about adding floating assets in this market, it's a very tight market right now. The value propositions have soared. So they're few and far between, but there are a couple of things that might be of interest. Beyond that, you're looking at the wind market, which I think there's been a lot of talk about how it's hard to derive returns in the wind market, and you've seen some of the economics have caused some delays. I think that's just the exponential growth curves of the wind market have never been a believer in, but I do believe that it's long-term growth and sustainable. So there are other areas in the wind farm market where I think we could deploy capital to add to what we're already doing. And then finally, in the shallow water market, depending on which, we're the only ones that have all five asset classes that are required to do shallow water abandonment in the Gulf of Mexico. Depending on which asset class you look at, We own between one-third and two-thirds of all the assets. There are areas where we could add to that, but the pricing expectations, again, were a little blue sky after such a robust year of 2023. So I don't really see the pullback in 2024 as being necessarily a bad thing. If you're wanting to add capacity in that market, it could inject some rational thought among some of the sellers.

Got it. Thanks for the color. I appreciate it.

As a reminder, if you would like to ask a question, press star followed by the one on your telephone keypad. Your next question comes from the line of James Shum with TD Cowan. Please go ahead.

Hey, thanks for letting me back in. Just maybe following up on the vessel strategy, Owen, are there any cold-stacked semi-subs that might be of interest to you at a good price? And what are the thoughts around what a potential retrofit would be, or what are the economics there?

I don't think that we're right now engaged in looking at the cold-stacked fleet. It's been cold-stacked for so long that the retrofit numbers just don't make much commercial sense. I think there are a few assets in the marketplace, and very few, but there are a few existing assets that are working that could be of interest.

Okay. And then I was wondering if you guys could give some directional comments on the cadence of earnings from 2Q, 3Q, 4Q, You've got, I think, you know, in the third quarter, you're going to transit the Q4,000 and the Q7,000. So, you know, just the way your accounting works, I'm wondering if Q3 is sort of unusually low and Q4 is unusually high this year. How should we think about that?

Yeah, I think the mix still is, Jim, the second quarter and third quarter are going to be our strongest months. You know, you do identify that in the third quarter we are going to have some unusual items that will impact that quarter that will probably make it lower than what would otherwise be if we weren't deferring the mobilizations. But still, the second and third quarter are our strongest quarters.

Okay, great. Thanks, Eric. And then just last one, you know, the CM Helix 2 – yeah, go ahead.

Just to be clear, that's deferring the accounting treatment of not deferring the mobilization.

Yes. Okay. The SIEM Helix 2 is contracted until December. There's been some reports maybe that you were the lowest bidder on some incremental work for Petrobras in Brazil. What are your expectations there? When do you think we will get an update on that vessel?

When? You'll be the first to know when we know. Petrobras has a very peculiar tendering style. Just to lay out the facts for you, there's basically one tender for two riser vessels that they issued. and another tender for a riserless vessel that was issued. The way the Petrobras process works is that you submit your commercial terms. The lowest bidders then are asked to negotiate then the contract. So where the process stands right now is that we were the low bidder on the two riser vessels as well as the riserless vessel. We have been invited to start negotiating the first of the riserless vessels, which is the SH-2 mentioned in our written presentation. The recent announcement of the riserless vessel is very, very fresh off the press. We were not only the low bidder, we were the only bidder. So quite honestly, we don't know where Petrobras is going to go with that. So that tells you exactly where we are in the process. They take everything very sequentially and are process-driven, but they don't put any times on it. So that's the best I can share with you for now.

Is there a point in time in the year where you would look to contract a vessel outside of Petrobras? I mean, keeping it in Brazil, but...

I think Petrobras in Brazil is a strategically very important market for us. I think it's the most robust oil and gas market in the world and it's also got a up and coming shallow water abandonment market as well as a potential future offshore wind market. So it's a very important market strategically. Having said that, we will, depending on the rates, we will contract the vessel to anywhere or anyone that represents greater value to the shareholders.

Okay. And then, sorry, last one for me. You've got, I think you said $240 million of cash after you pay the earn out. That's a lot of cash. You're only doing $5 million of share repo a quarter, which seems very low given the If you believe your stock is worth more than it is right now, why not get more aggressive with the share repo? And does it have something to do with the fact that maybe you're keeping your options open for additional vessels for well intervention or something else?

I wouldn't say that the main driver is keeping options open. Our options are always open and being considered. I think the fact that we've sort of underperformed on the number of share repurchases to date is just a reflection of the fact that we've actually outperformed our expectations compared to where we thought we would be at this point.

Okay. Okay. Thank you very much. I appreciate it.

There are no further questions at this time. I will now turn the call back over to Eric Staffelt for closing remarks. Please go ahead.

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

Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect your lines.