Helix Energy Solutions Group, Inc.

Thank you for standing by and welcome to Q1 2025 Helix Energy Solutions Group INC 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 in your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Mr. Brent Arriaga, CFO and Vice President for Finance and Accounting. Please go ahead.

Good morning, everyone, and thanks for joining us today on our conference call. We'll be reviewing our first quarter 2025 earnings release. Participating on this call for Helix today are Owen Kratz, our CEO, Scotty Sparks, our COO, Eric Sapfeld, our CFO, Ken Nykerk, our General Counsel, Daniel Stewart, our vice president of commercial, 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 these materials, both can be accessed through the investor relations page on our website at www.helixesg.com. The press release and slides can be accessed under the news and events tab. Before we begin our prepared remarks, Ken Nykerk 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 facts, 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, 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 24th, 2025, and therefore you are advised that any time-sensitive information may no longer be accurate as of any replay of this call. Owen?

Thanks, Ken, and good morning, everyone. Starting with slide five, we delivered strong first quarter results, supported by higher rates in our Brazil oil intervention business and on our Q vessels. Revenues for the quarter were $278 million, with a gross profit of $28 million, resulting net income of $3 million. Adjusted EBITDA was $52 million for the quarter, and we had positive operating cash flow of $16 million, resulting in free cash flow of $12 million. Our cash and liquidity remain strong with cash and cash equivalents of $370 million and liquidity of $405 million. Before I turn the call over to Scotty, I'd like to provide our view of the macro backdrop, briefly address the current market environment and acknowledge the uncertainty our sector is facing, and highlight the ways Helix is addressing that uncertainty. We know that earlier in the month, the U.S. announced drastic tariff hikes and OPEC announced significant increases to production. And as a consequence, we've seen a lot of upheaval in the global financial markets and oil drop to the low 60s. These events are in addition to other challenges already facing our industry, which we'll address later on. But all of this is to say we're operating in a dynamic, challenging, and uncertain market environment. Helix is in a good place to meet these challenges. At quarter end, we had approximately $1.4 billion of backlog. Our balance sheet is perhaps as strong as it's ever been, with negative net debt, no significant maturities until 2029, and a war chest of cash on hand. Even in this environment, we're still forecasting to generate $100 to $160 million in free cash flow for 2025. We're also reacting quickly, taking steps to lower costs by stacking several vessels and adjusting our capital spending. To say OFS is a cyclical business is an understatement, and to be sure, we're navigating a new set of challenges today. Our business is resilient and built to withstand these cycles. I believe in the value proposition we provide our customers, whether production enhancement, decommissioning in deep or shallow water, fossil fuels, or renewables. As we present the details of our quarterly results and our updated outlook for 2025, know that we recognize the challenges of the current macro environment and that Helix remains well positioned, perhaps uniquely, to meet these challenges. With that, I'll turn the call over to Scotty.

Thanks, Owen. Good morning, everyone. Continuing on slide six, highlights for the first quarter include We commenced operations with the Q7000 in Brazil for Shell on the 400-day contract plus options. The Seam Helix 2 commenced a new three-year contract continuing work for Petrobras at higher rates. And we commenced operations on the Trim, our dedicated site clearance vessel in the North Sea, and signed one of our largest trenching contracts to date for over 300 days of trenching in 2026 on the Hornsea Free Wind Farm in the UK. and renewal of the HWCG contract through March of 2027. Over to slide eight. Slide eight provides a more detailed review of our segment results and segment utilization. In the first quarter, we continued to operate globally with minimal operational disruption with operations in Europe, Asia Pacific, Brazil, Africa, the Gulf of America, and the U.S. East Coast. As Owen mentioned, our solid first quarter results were driven by our core well intervention markets globally. along with good seasonal results from our robotics group. Moving to slide nine. Slide nine provides further detail of our well intervention segment. In Q1, we achieved strong utilization in West Africa, the Gulf of America, and Brazil, performing very well with solid overall uptime efficiency. Our North Sea vessels, the well enhancer and sea well, were impacted by the winter season slowdown, resulting in lower utilization and both vessels being warm stacked through most of the quarter. The well enhancer commenced work in March, and the sea well completed a planned regulatory dry docking. In the North Sea, due to the windfall tax, the operator merger announcements, and combined with recent events that have resulted in a lower oil price, we are seeing some operators pause work. In response, we are adjusting our operations in the region to align with the decreasing activity, and are now in the process of stacking the sea well at a low cost base for the remainder of 2025. The Q7000 completed its paid transit to Brazil and then completed a 47-day planned regulatory docking prior to commencing work for Shell on the 400-day plus options decommissioning campaign. Staying with Brazil, in January, the SH2 commenced a new three-year contract with Petrobras at higher rates, and the SH1 also recognized the full quarter of Trident one-year contract extension at higher rates. We had a very strong quarter for both the US-based Q units, The Q4000 continued operations in Nigeria, and she is currently transiting back to the Gulf of America and is contracted with work once she returns. The Q5000 worked the entire quarter for Shell in the Gulf of America, and in Q2 she will undertake a planned regulatory docking period. Moving to slide 10. Slide 10 provides further detail of our robotics business. Robotics had a strong quarter considering the seasonal winter conditions. The business performed at high standards, operating six vessels during the quarter, working between trenching, ROV support and site survey work on renewables and oil and gas-related projects globally. Robotics worked four vessels on renewables-related projects within the quarter and had good seasonal vessel utilisation overall. With two vessels working on trenching projects, the GC3 and the North Sea Enabler are trenching in Europe, while the Golemar Wave and the recently contracted Trim support vessel are working on renewables site clearance work in Europe. The Shilila borderline in the Gulf of America and the GC2 in the Asia Pacific region both completed planned regulatory docking periods in the quarter. And the GC2 then completed an ultra-deepwater salvage project offshore Japan. Our renewables and trenching outlook remain very robust with numerous contracted works in 2025, 26 and 27. The long-term outlook for the global renewables market is very strong with tender activity as far out as 2032. Slide 11 provides further detail of our shallow water abandonment business. Q1 activity levels reflect the expected low seasonal utilization, and we are now starting to see activity levels increase with the commencement of the season and expect the shallow water abandonment business to have improved utilization in Q2 and Q3. We have temporarily stacked several of the smaller vessels as a cost reduction measure based on the current market levels, but continue to believe in the long-term outlook of this segment, as well as continue to wage and customers reduce their decommissioning obligations. In summary, we had another very good quarter, considering the seasonal factors, and I would like to thank our employees for their efforts, delivering a gain at a high level of execution, and for securing a strong backlog and long-term contracts to produce what should still be a strong year for Helix, despite the current uncertainty. I will now turn the call over to Brent.

Thanks, Scotty. Moving to slide 13, it outlines our debt instruments and key balance sheet metrics as of March 31. At quarter end we had 370 million of cash and availability under the ABL facility of 63 million with resulting liquidity of 405 million. Our funded debt was 319 million and we had negative net debt of 59 million at quarter end. Our balance sheet is strong and is expected to strengthen further as we continue to anticipate generating meaningful free cash flow and have minimal debt obligations between now and 2029. Slide 14 has been provided to illustrate the impact that seasonality has historically had on our overall results. I will now turn the call over to Eric for discussion on our outlook.

Thanks, Brent. As we provide an outlook for the remaining balance of 2025, we must account for the significant impact the current geopolitical environment has had on our energy sector, our offshore market, and our near-term activities. We have a negative UK North Sea market driven by difficult regulatory environment, low oil prices, and operational paralysis from M&A activity. We have a negative oil supply dynamics with greater than expected supply increases by OPEC, and we have negative oil demand dynamics and ongoing uncertainty from the global tariff war and other political regulatory developments. With a challenging macro... backdrop, and lower oil prices, market risk for our spot assets and services has increased. The decision to stack the sea well due to the weak North Sea well intervention market is the primary driver for the adjustment to our outlook. In our outlook, we have endeavored to account for the increased uncertainty and risk in our markets. We are adjusting our outlook as follows. Revenue, approximately $1.3 billion. with a range of 1.25 to 1.41 billion. Revenues are decreasing with the stacking of the seawell. EBITDA, approximately 275 million, with a range plus or minus 10%, decreasing with the stacking of the seawell and the overall negative market. Free cash flow, approximately 130 million, with a range plus or minus 30 million, variability driven by our ultimate EBITDA as well as working capital movements. Capital expense, $65 to $75 million. Our spending is primarily a mix of regulatory maintenance on our vessels, intervention system, and fleet renewal of robotics ROV. These ranges include some key assumptions and estimates adjusting for the current market environment and with any significant variation from these key assumptions and estimates causing results that could fall outside the estimates and ranges provided. Our quarterly results typically follow a seasonal pacing with a more active summer months and slower winter months. The timing our vessel maintenance periods and project mobilizations will cause variances between quarters. For 2025, our second quarter will be impacted by the Q5000 maintenance period and the Q4000 transiting back to the Gulf of America. With these non-revenue periods, we expect our second quarter results to be approximate our first quarter results. With these quarterly impacts and capital spend expected to be front-loaded, the timing of our free cash flow generation is still expected to be skewed to the latter part of the year. Providing key assumptions by segments and regions starting on slide 17. First, our well intervention segment. The Q4000, as I said, currently returning to the Gulf of America with completion of its Africa campaign in early April. The Q5000 has contracted work in every quarter with limited white space to fill its schedule. We expect both vessels to have good utilization this year, with some gaps to fill late in the year. As we have discussed, the UK North Sea is significantly weaker than we had planned. The combination of basin-specific issues, weaker oil prices, and operator M&A has stalled activity. As a result, we have stacked the seawell, and we're focusing work on the well enhancer. Even so, there is continued risk to our UK well intervention outlook. Q7000 is operating for Shell in Brazil on a firm 400-day project. The CM Helix 2 is on contract for Petrobras. The CM Helix 1 is performing well-abandonment work for Trident, with contracted work into the second half of 2025, followed by a three-year contract with Petrobras. The vessel is expected to have an approximate 30-day off-hire period between contracts. Moving to robotics. The robotics market is a mixed bag with some positive developments against a challenging backdrop. We recently announced the significant trenching contract in the North Sea, representing over 300 days of trenching. Bidding activity has been and continues to be extremely active. The moratorium on U.S. wind farm development and the recent stop work order by the Department of Interior are counter to the positive market, but provides examples of this uncertain climate. In the APAC region, the Grand Canyon II has contracted work through Q3 with identified opportunities thereafter. The T1400-1 trencher is working on a client-provided vessel and is expected to remain in Taiwan through the end of 2025. In the North Sea, the Grand Canyon III is expected to have an active trenching season with overall strong utilization. The North Sea enabler has contracted trenching projects in Q3 and Q4. The Glomar wave is forecasted to have good utilization performing site clearance operation. The trim site clearance vessel commenced operations in March and is expected to have good utilization through Q3. The T-1400-2 trencher is contracted for its first work in the Mediterranean. In the U.S., the Shalia borderline has contracted work in the Gulf of America and the US East Coast into Q3, although some of that East Coast work is now in question with the stop work order on the Empire Wind Project. The HP-1 is on contract for the balance of 2025, recently extended to June of 26 with no currently expected change. We have expected variability with production as Droschke Field continues to deplete and Thunderhawk is shut in. Continuing to shallow water abandonment, Our shallow water abandonment segment will have seasonal variability with greater impacts in Q1 and Q4. We have reduced our cost structure commensurate with our current market, but we are retaining the ability to scale back up if the market improves. We expect the market to be flat to marginally better than 24, absent any regulatory developments, albeit also impacted by the current macro environment. We expect the offshore business to maintain good utilization on five to seven lift boats with some variability seasonality on the OSVs and crew boats. The energy services should have seasonal utilization for up to 12 P&A spreads and three cold tubing units. There is seasonality in the diving and heavy lift business where the epicadron is currently idle and it is expected to mobilize in May. We do expect an active season during Q2 and Q3. Moving to slide 18, our CAPEX forecasts for 2025 is heavily impacted by the dry docks and maintenance period on our vessels. The Sewell and Q7000 completed their dry docks in Q1. The Q5000 is currently in dry dock with a forecasted completion at the end of May. We are lowering our CAPEX range for 2025 to 65 to 75 million. The majority of our 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 319 million at March 31st is expected to decrease by a further 4 million and 25 with the scheduled principal payments on our merit debt. We expect to execute on our share repurchase program with a target repurchase of at least 25% of free cash flow to coincide with our cash generation. At this time, I'll turn the call back to Elwood for discussion on our outlook for 25 and beyond and for closing comments.

Thanks, Eric. Well, it's very hard to process the pace and impact from all the changes that are occurring in the market since last quarter. It'd be easy to tell you that we just don't know what to expect and to not provide guidance revisions. However, we felt the right thing to do is to let you know where we believe 2025 could shake out and what the future holds based on what we know and expect at present. Last quarter we reported to you that we felt good about where we are and that we were confident as we were looking forward. This is still true for the long-term. The long-term demand for our services is still strong. The multi-year contracts we put in place on the Q5, Q7, SH1, and SH2 are solid examples of that customer demand and provide meaningful resilience to any near or mid-term volatility. Helix is performing well with a few market-driven exceptions. The most significant negative impact to our previously expected results is in the UK sector of the North Sea. Much of the previously identified work has simply been canceled for 2025, not fully due to tariffs, but due to government policy from the current administration. M&A activities such as Repsol merging with NEO and Shell combining its UK assets with Equinor has frozen somewhat the work to a large extent that these giants were planning. The UK government is seemingly hell-bent on their no-oil stance, with permits difficult to obtain and the windfall profits tax remaining in place despite yielding lower tax revenues. On top of this, there's the forecast for lower commodity pricing, resulting in all producers lowering their spending levels. These factors would be expected to accelerate abandonment work, and it likely will, but it just won't be in 2025. The UK North Sea is, for the most part, a spot market, so this will meaningfully impact us. We're stacking the seawelt potentially for all of 2025, or potentially repurposing her to another region, depending on what the indications are for 2026. The rest of the company is performing well with puts and takes too numerous to cover, but should allow us to achieve results consistent with previous market consensus, with the exception of the UK. We estimate the net negative impact to 2025 expectations to be approximately $75 million, so accordingly we're revising our guidance for 2025 to $275 plus or minus 10%. As we are seeing on a real-time basis, things can and do always change. The U.K. government could capitulate on its anti-oil stance, or the abandonment work could proceed sooner. The U.S. shallow-water Gulf of Mexico work could proceed sooner than our expectations of 2026. Our robotics work could be stronger or weaker given the dynamic market factors for offshore wind, with global positive bias offset by potential softness in the U.S. East Coast. There are many variables, but this is our transparent and prudent assessment at this time. As I mentioned at the opening of this call, we believe in the existing opportunities in the market we serve. We believe in our ability to provide value-enhancing services to our customers. We believe in our ability to provide value to our shareholders. Our results will be subject to the volatile, cyclical nature of our industry, and our sector is under pressure. But Helix is resilient, and with significant backlog and robust balance sheet, we're well-positioned to weather the storm. Eric?

Thanks, Owen. Operator, at this time, we'll take questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to redraw your question, simply press star 1 again. If you are called upon to ask your question and are listening by a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Jim Rolison with Raymond James. Your line is now open.

Hey, good morning, Owen, Eric, and everyone. Scotty. One, Eric, just to confirm, so the $70 million revenue change in well intervention revenues, that is essentially all North Sea revenue?

Yeah, there are some positives in there. So, yeah, that's the net overall. I think the net impact to the North Sea is actually greater than 70 million.

Got it. And, Owen, I know we've talked in the past, but, I mean, a lot of crazy things going on at the moment. But when you think about the North Sea market over the next two, three, four, five years, it seems like there's a tremendous amount. If the government stays on the track that it's on, there's a tremendous amount of P&A. that ultimately has to get done. Maybe just kind of your view of how that plays out and how you think about the time horizon of that work.

I'll tell you, Jim, we're working on at least three really, really large P&A project tenders right now. They're due to start in 26. Given historic history, that could slide a little bit, but right now everyone is doing the engineering and the tendering process is underway. In fact, I'm on my way over there in the near future to talk directly with some of the clients. It's work that we're very well positioned for, and we do expect to see that work starting to commence in 2026.

So it kind of sets you up for a near-term drag, obviously, but pick it up on the back end, I guess. On the, you know, macro uncertainty and kind of what's happened with share prices and just in general context of what the market's seeing and doing, how do you think about, you know, last couple quarters we've talked about free cash flow and what do you do with it and, you know, the options, as I recall, were M&A potential and, and obviously share repurchases, and I believe your preference at the time was kind of maybe not oil field M&A because things were elevated in price, but maybe more on the wind side. Maybe a little color on how that's evolving, and does this downdraft make you more likely to pursue M&A or more likely to kind of keep dry powder and pursue more repurchases?

I think in this market, Jim, with the pricing levels of the companies and the uncertainty in the market, M&A, even if the opportunities exist, they're difficult to close. So I think our priority right now is always being open to M&A, but starting to really focus on the share repurchase.

Got it. I appreciate the answers. I'll turn it back for others to ask questions.

Your next question comes from the line of James Scrum with TD Cohen. Your line is now open.

Close enough. Good morning, guys. Okay, so I guess, you know, I think for me and for a lot of the investors, I think that people were surprised by the magnitude of the guide down. you know, you guys did a great job of really contracting a lot of your vessels and locking up vessels on long-term contract. And so I think maybe it'd be helpful to give us some sort of bridge on the, you know, the lowered EBITDA guidance. So where is the 75 million coming from? Clearly a lot of that is the UK North Sea, but is there a way to help us think about like, You know, UK North Sea EBITDA is a negative swing of X. Robotics is negative Y. And shallow water is going to be negative Z of that 75. I'd imagine production facilities not that much different. You know, lower oil prices on Juraski, but I would think that's only, you know, modest couple million impact to the guide. So any color there would be really helpful.

Let me just add a little color before giving the question to Eric. It's a valid question, but it's very difficult in this market right now to be precise on different segments. Having said that, if it weren't for the North Sea, I don't think that we would have changed our guidance. We might have guided to the lower half of the range, but the main reason for the lowering of our guidance here is just to try and deliver guidance that we have a high degree of confidence in, and the magnitude is primarily the North Sea.

Yeah, Owen, I think that's right. I think when you look at it as a guide down, predominantly driven by the stacking of the seawell and what's happened in that market, I think we recognize that there are, it's a little bit more of a negative undertone to the overall market, so there's been some adjustments on the fringes of some of the other ones, but nothing significant as far as that goes. We probably have lost a little bit of upside potentials that we had given the negative market tone now, but the primary driver is the North Sea.

Okay, thanks, guys. And then, you know, Maybe it would be helpful, and I don't know if this is maybe a question for Scotty, but maybe we could do a little bit of a, not a deep dive on the UK North Sea operations, but just help us frame how to think about maybe what was the peak EBITDA contribution annually from the UK North Sea assets a couple of years ago? What is the trough? look like you know assuming you sort of stack the sea well um what what are the warm stack costs per day on the sea well um and then just what do you you know finally like what's the outlook for that business i know it's tough but i mean you talk about p a accelerating Why can't they just kick the can down the road? What does 2026 look like, do you think? And why doesn't that P&A activity just get pushed to the right?

So, Jim, I'll go ahead and start and then pass it on to Scotty to frame more of the market. I think if you go back the last couple of years, you could say for a two-vessel market, that probably represents the recent peak. for our North Sea activities. I think our biggest year was back in 2014. But if you go back the last couple years, I think they're fairly similar, generating EBITDA in the $80 million to $90 million range. I think the trough, we've had a couple of those in the recent years, obviously COVID leading one, and it really ends up being, you could just say, slightly above break-even from that standpoint. So, you know, that provides at least boundaries for peak and trough of that well intervention market.

That's really helpful. Eric, and just to clarify, that is for both vessels, right? So roughly 40 to 45 per vessel, something like that, on the peak, right?

Correct.

Yeah, okay, great. Thank you.

I think it's important to note that we haven't lost any work. The work's just been paused at the moment for all the factors that we've put out there, you know, the mergers, the the oil price, the government tax system, and it did surprise us. But the work's just been paused and pushed out to the right, and then there are some significant tenders, as Owen said, out there. We've been here before, and we've teetered around and listened to the operators and thought that we would either not stack the boat and wait around for work this year. We've just said, okay, we're going to make our own decision here. We're going to stack the boat, get down to the lowest cost base we can, rather than waiting around and getting caught out like we have done in the past. So, So we've got the vessel underway. We're reducing the staff levels right now to the minimum Coast Guard requirement to keep the vessel safe and active. And the cost should be below $30,000 a day on that vessel as we go forward. Hopefully we'll get them down lower, but that's sort of a prediction going forward from the end of this month. We're in the process of stacking the vessel right now.

Okay, great. And then just lastly on the outlook, I know it's difficult in this environment, but what do you – If this year is breakeven from an EBITDA standpoint, what's your best guess on next year?

It's hard to say right now. I'd like to think we go back into positive territory. There's a lot of work out there. If that happens, we should get back to more of a normalized year. Likewise, with the low oil price, we're concerned that that work in 26 could push out. But at the moment, what we're hearing from the operators is work is there in 26 and it should go back to a normalized year. We could actually go back to work this year and we're setting the vessel up that if we have to reactivate, we can reactivate quickly within two to three weeks. We're just making sure that we take care of our own business in this environment at this time.

And then, sorry, but it's all related. So maybe just lastly for me, How do the operators think about the activity in the oil price environment? Are we robust activity in the mid-70s and depressed activity in the low 60s? Does it dry up in the 50s? How do you think they typically respond to the different oil prices?

Again, it's sort of hard to call the North Sea right now a usual cycle because I think there's a lot of posturing between the government and the producers right now with several of the producers saying that they're going to exit the North Sea, in which case the government is saying, okay, well then abandon your properties, and that'll kick off. And that's the posture that they're taking right now, is that the North Sea is going to shift to an abandonment market, kicking off in 2026. I think most of the announcements that I've seen is big, abandonment projects between 26 and 2030. So that would be a big positive. But as I said in my comments, the stance is not good for the UK Chancellor. Increasing the excess profit tax is actually leading to lower tax revenues. So there's meaning going on and posturing occurring between the producers and the government. You do have some producers that are North Sea captives, though. They don't have assets anywhere in the rest of the world. So I think they're taking a pause this year with the uncertainty in the commodity pricing, with fears of recession and further downsizing. At $50 a barrel, I think you see we're really starting to dry up. Right now, I think it's politically motivated. As long as it stays in the 60 to 70 range, I think you can see the producers start to become more active again in the currency.

Got it.

Guys, thanks for all the color. I appreciate it.

Your next question comes from the line of David Smith with Pickering Energy Partners. Your line is now open.

Hey, good morning. Thank you for taking my question.

Good morning.

Not to beat a dead horse, but I wanted to circle back to the longer-term opportunities for the North Sea Well intervention vessels, and specifically was hoping for color on how you see opportunities for those vessels to work in other regions. Would it be opportunistic opportunities like the Sea Well's last program in the Mediterranean? Is it repurposing for other regions that could include meaningful capex? And also, when would you want to make that decision to pursue work in other regions versus holding out for a more active P&A market in the UK next year?

There probably is work in the rest of the world for the seawall to go do, but I'll be honest with you. Our two vessels in the North Sea are debt-limited. They were designed and built for the North Sea. Most of the other regions of the world require greater depth capability, so in order to really redeploy the Z-Well, it would take some capital upgrades. We're working on those right now, but I think it's too early to make that decision that that's what we're going to do, because as I said before, we do expect the market to start to recover in 2026. which is one of the reasons why our stacking costs are a bit high now. And as Scotty said, we could remobilize the vessel in a couple of weeks. So we're in the process of trying to assess just how strong the market will be, whether the seaweld stays there, which is obviously our first preference, or as an option, what does it cost to target the other regions where we know that there's work? But we would have to spend some capital to make the seaweld compliant.

I appreciate that.

And follow-up question, with the Q4000 departing Nigeria this month. I'm curious if there were other opportunities for work in the region that just didn't pan out in time or if it was a stronger demand pull to return to the U.S. Gulf and related. Are you seeing any signs of pricing pressure for new work in the U.S. Gulf heavy well intervention market?

Okay, so I'll take that one. Currently, we came back to the Gulf or we're on the way back to the Gulf because we completed the Exxon contract. There was other operators interested in doing work, but they didn't order long lead items in time, so that made us take our decision to come back. We also have contracted work in the Gulf, so we'll be coming back here, we'll get back around June, and then we'll be doing some modifications to the vessel and then going straight back out to work. So we've always said we want to protect our Gulf of Mexico market. I do think in the future the Q4 or the Q5 may venture back to Africa. There's definitely work scopes over there. But at this time, we have work here, and it's good work. It's well-priced work. We're not at this time seeing pricing pressure. I think we've said previously that the pricing has sort of stabilized. I don't see our prices going up very much. But we have the backstop of the shell contract that allows us to put all the other operators onto the Q4000.

I'll say that's our current state of play right now. Appreciate it. That's all from me. Thank you.

Your next question comes from the line of Greg Lewis with VTIG. Your line is now open.

Thank you and good morning and thanks for taking my question. Just two quick ones for me. One is, you know, you called out, you know, the drag in revenue and well intervention being the North Sea. Is it safe to extrapolate that you know, the weakness and the challenges in the UK are also what drove the guide downs in robotics and SWA?

Yeah, I think, Greg, I think what we did is took into consideration the current negative macro backdrop as we looked at our opportunities within those areas. I think it's just a small shift in those recognizing the current environment.

Okay, but as we think about robotics and SWA in a place like the U.S. Gulf of Mexico, that was more flattish or potentially additive like it was in well intervention?

Yes. For shallow water, it's more flattish. Year-over-year activity is expected to remain broadly flat. However, your profitability is slightly up as a consequence of our cost reduction measures, but again, broadly flat, and really the big impact is on the North Sea.

Okay, great. And then just the other one on the EBITDA guide margin at the midpoint, there was that step down. Is that really a function of You know, you have that, what was it, which one, the enhancer, which was an asset. Now it's, you know, costing money. Or is there any other drivers of that, you know, guide down in the EBITDA margin?

So by far the most significant reason for the guide down was the stacking of the CWELT. So, yeah, I think absent that, Greg, I think more than likely it would have just been a qualitative update, you know, with recognizing the negative environment and guiding towards the lower range. But with the step down on the seawall, it was a step down that we had to account for.

Super helpful. Thank you very much.

I'd just like to give a little caution on a couple of points that were mentioned on rates. Scott is right on well intervention. I don't think that we're seeing any downward pressure right now on our rates. We're able to hold those. The North Sea, I think, is a decrease in utilization more so than rates, especially if we're limiting the supply to the market. We should be able to maintain better rates. That remains to be seen. On the shallow water Gulf of America, abandonment work, I think that utilization is going to remain weak. Our cost basis is better, and we are seeing some downward pressure on the pricing there as all of the contractors become competitive in this market for this year anyway.

There are no further questions at this time. I would now like to turn the conference back over to Mr. Eric Staffeld 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 2025 call in July. Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you all for joining. You may now disconnect.