HOUSTON Jul 21, 2015 (Thomson StreetEvents) -- Edited Transcript of Helix Energy Solutions Group Inc earnings conference call or presentation Tuesday, July 21, 2015 at 2:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Erik Staffeldt Helix Energy Solutions Group, Inc. - Director, Finance and Treasury * Alisa Johnson Helix Energy Solutions Group, Inc. - EVP, General Counsel, Corporate Secretary * Owen Kratz Helix Energy Solutions Group, Inc. - President and CEO * Tony Tripodo Helix Energy Solutions Group, Inc. - EVP and CFO ================================================================================ Conference Call Participants ================================================================================ * Chase Mulvehill SunTrust Robinson Humphrey - Analyst * Joe Gibney Capital One Securities - Analyst * Ole Slorer Morgan Stanley - Analyst * Martin Malloy Johnson Rice & Company - Analyst * Haithum Nokta Clarkson Capital Markets - Analyst * Praveen Narra Raymond James & Associates, Inc. - Analyst * William Alpaugh Simmons & Company - Analyst * George O'Leary Tudor, Pickering, Holt & Company - Analyst * Bill Zellum - Analyst * Gregory Lewis Credit Suisse - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by. Welcome to the second-quarter 2015 earnings conference call. (Operator Instructions). As a reminder, this conference is being recorded Tuesday, July 21, 2015. I will now turn the conference over to Erik Staffeldt, Finance and Treasury Director. Please go ahead, sir. -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [2] -------------------------------------------------------------------------------- Good morning, everyone, and thanks for joining us today on our conference call for our second-quarter 2015 earnings release. Participating on this call for Helix today is Owen Kratz, our CEO; Tony Tripodo, our CFO; and Alisa Johnson, our General Counsel. Scotty Sparks, our Executive Vice President of Operations, is traveling on Helix business. Hopefully you have 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 can be accessed under the press release tab, and the slide presentation can be accessed by clicking on today's webcast icon. Before we begin our prepared remarks, Alisa Johnson will make a statement regarding forward-looking information. Alisa? -------------------------------------------------------------------------------- Alisa Johnson, Helix Energy Solutions Group, Inc. - EVP, General Counsel, Corporate Secretary [3] -------------------------------------------------------------------------------- During this conference call, we anticipate making certain projections and forward-looking statements based on our current expectations. All statements in this 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 factors, including those set forth in our slide 2 and in our annual report on Form 10-K for the year ended December 31, 2014. Also during this call, certain non-GAAP financial disclosures may be made. In accordance with SEC rules, the final slide of our presentation materials provide a reconciliation of certain non-GAAP measures to comparable GAAP financial measures. The reconciliation, along with this presentation, the earnings press release, our annual report, and a replay of this broadcast, are available on our website. Owen? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [4] -------------------------------------------------------------------------------- Good morning, everybody. Let's start right out with slide 5 and 6, which is a high-level summary of the Q1 results. From a bottom-line perspective, Q2 represented a step back from Q1 results. These results were directly attributed to very low utilization levels for our two Gulf of Mexico well intervention vessels, the Q4000 and the H534. The Q4000 spent most of the quarter in regulatory dry dock, longer than we had anticipated. The H534 was idle for 41 days in the quarter, as well. The low utilization in the Gulf of Mexico fleet was partially offset by much better performance in our North Sea-based well intervention business, as the Well Enhancer was fully utilized, and the Skandi Constructor went to work in late April and stayed productively employed the remainder of the quarter. The production facilities business improved over Q1, while robotics slipped slightly. As a result, Q2 EBITDA came in at $36 million versus $51 million of EBITDA in Q1. Turning to slide 6, more on the robotics business. We did achieve decent utilization on our robotics fleet, at 81%. However, lower dayrates for our robotics spread resulted in a relatively slight regression in results. I'm pleased to report that we took delivery of the Grand Canyon II vessel in May, and she went to work immediately thereafter on a trenching project on the Baltic Sea. On to slide 7. From a balance sheet perspective, our cash and liquidity remains strong. Cash increased to $500 million as we drew down the Q5000 loan facility in conjunction with taking delivery of the vessel at the end of April. Cash, along with the unused portion of our credit facility, has our liquidity levels at $1 billion. Net debt at quarter end was $294 million. I will now turn the call over to Erik for an in-depth discussion of our contracting service results. Erik Staffeldt has been with the Company since 2009; will take a more prominent role in Investor Relations activities. Many of you have worked with Terrence Jamerson for the past few years, and I'm pleased to say that we've promoted Terrence to head up our production facilities business. Erik? -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [5] -------------------------------------------------------------------------------- Thanks, Owen. Moving on to slide 9, in our Q2 results did take a step back from Q1 as we continue to see the effects of the weak oil industry on our performance, magnified by our scheduled vessel downtime. Our revenue in the second quarter decreased 12% over our first-quarter revenue to $166 million. Our gross profit margin decreased from 18% in Q1 to 15% in Q2, driven by the decrease in revenues. Weaker utilization in our well intervention business unit was the primary driver of lower revenues, as the Q4000 was in dry dock 64 days, 19 days longer than planned. This was partially offset by improved results from our North Sea-based well intervention units. Our robotics business unit revenue was lower by 6% quarter-over-quarter, driven by lower selling rates of our chartered vessel fleet. In the second quarter, we increased our chartered vessel fleet to 5 vessels, with the scheduled delivery of the Grand Canyon II. The performance of our production facilities business unit improved slightly, with higher revenue, and with no downtime in the second quarter compared to the first quarter; and with lower R&M. Moving on to slide 10 for our well intervention business unit. In the Gulf of Mexico, the Q4000 was in dry dock for the 64 days, 19 days longer than planned. We experienced a combination of standard shipyard delays, and delays in the refurbishment of the Q4000 thrusters. The H534 was -- utilization was 55% for the quarter. The vessel was idle the last 41 days of the quarter. Work scheduled during the quarter for the vessel was delayed, as we were not able to fill the gap. The H534 is currently idle and is scheduled for dry dock during the second half of Q3. IRS #2, our spare rental Intervention Riser System, was on hire the entire quarter. IRS #1 entered the rental market in early June on a 210-day contract. On a positive note, both of these rental units are under contract for the rest of the year. We took delivery of our newest well intervention vessel, the Q5000, at the end of April. The vessel began her transit to the Gulf of Mexico in mid-May. She is expected to arrive in early August. Upon completion of commissioning of the vessel and integration of the ROVs and intervention system, the vessel is expected to be available for work in early Q4. In the North Sea, our utilization increased to 84% during Q2. This number does not include the Seawell, which was out of service during her life extension dry dock. The Well Enhancer was again fully utilized during the quarter. The Skandi Constructor began operations on a 120-day campaign at the end of April, after being dockside most of Q1 and most of April. Moving on to slide 11 for our robotics review. The results of our robotics business unit remained consistent quarter-over-quarter. The utilization of our ROV and trencher fleet was the same in Q2 as in Q1, 61%. We typically benefit from a seasonal increase in utilization during the second quarter, driven by spot vessel work and work on customer vessels. This did not materialize in Q2 as it has in prior years. The charter vessel fleet utilization decreased to 81% in the second quarter, despite an increase in our number of days worked. During the second quarter we increased our charter vessel fleet to five vessels with the delivery of the Grand Canyon II. After a short integration period, the vessel was mobilized with the T750 trencher on a cable burial project in the North Baltic Sea, with work carrying over to Q3. The Grand Canyon, T1200 trencher, and iTrencher were fully utilized for the quarter, working on a power cable burial project offshore Qatar. The Olympic Canyon was fully utilized in India during the quarter. The Deep Cygnus, with the T1500, worked for 57 days on a cable burial project in the North Sea. REM Installer, based in the Gulf of Mexico, worked for 49 days on various ROV projects. Moving over to slide 12, I'll leave this slide detailing vessel utilization for your reference. Moving on to slide 14, for a review of our key balance sheet metrics. Our funded debt at June 30 increased to $812 million, driven by $250 million Q5000 term loan drawn in conjunction with the delivery of the vessel. Starting in Q3, the combined amount of principal payments required by our term loans will reduce our funded debt balance by $16.4 million a quarter. Moving on to slide 15, it provides an update of our gross and net debt levels at year-end and June 30. Our net debt position increased to $294 million in the second quarter from $131 million in the first quarter. Our cash position in the second quarter increased by $85 million, with the proceeds received from the Q5000 term loan, net of CapEx spending. Our liquidity at June 30, comprised of cash and revolver availability, was approximately $1 billion. During the second quarter we amended our credit facility leverage covenant to provide greater access to our revolver during this cyclical (technical difficulty). I will now turn over the call to Tony for a discussion on our 2015 outlook. Tony? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [6] -------------------------------------------------------------------------------- Thanks, Erik. Moving over to slide 17. The disappointing second-quarter and our lower-for-longer outlook has led us to revise our full-year 2015 forecast to the range of $160 million to $190 million. That being said, we should see an improvement in quarter three over quarter two as a result of our North Sea fleet expected to be fully utilized, with the exception of the Seawell; and our Canyon fleet looks to keep busy as well in Q3. While this improvement in quarter three is expected, it is not, of course, fully assured. The key for the full year revolves around filling utilization gaps for our well intervention fleet, particularly in quarter four. On to slide 18, which provides more detailed guidance on specific assets. I'll just mention a couple of the more notable items. The H534 is scheduled for regulatory dry dock in Q3. Dependent upon how work materializes or not, the H534 may be warm stacked, and any work that develops for her may be moved over to the Q5000. The Seawell is likely to be warm stacked for the remainder of 2015, after she completes her refurbishment project. We are warm stacking these vessels for now, as both the Seawell and the H534 have opportunities in 2016. We have not made a decision yet on whether to extend the charter on the Skandi Constructor, based on how potential work develops for that vessel beyond her charter expiry of March 2016. In general, utilization for the robotics fleet looks good in quarter three, but we expect a normal seasonal drop-off in Q4. Our backlog as of June 30 held steady at $2.1 billion. Our forecasted 2015 CapEx -- I'm on now to slide 20 -- remains essentially the same at $365 million, with most of the spending associated with the Q5000 completion, which is almost all behind us now, as well as the two vessels under construction for Petrobras. The Q5000 is currently in transit, ask Erik mentioned, to the Gulf of Mexico and is expected to arrive here in the next couple of weeks. Upon arrival, we are planning to complete commissioning, and as mentioned earlier, we hope to put her to work in Q4, ahead of her scheduled start date with BP next April. We have reached agreement with the shipyard for the Q7000 to slow down and delay delivery of this vessel until 2017. This will allow us to defer over $200 million of CapEx from 2016 to 2017; and, more importantly, avoid bringing the vessel to market in the current environment. I will skip slides 21 through 22, leave them for your reference, and now turn the call over to Owen for closing remarks. Owen? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [7] -------------------------------------------------------------------------------- Thanks, Tony. Well, no doubt, Q2 was a sloppy quarter for Helix, as both the general market malaise and the Q4000 dry docking had a major impact on our results. I'd characterize the current market environment as having a kind of bouncing along the bottom feel to it. That being said, there's a lot more dialogue ongoing with our customers for well intervention work and activities in 2016. If a lot of this work materializes for us, we could see a bounce back in our well intervention business next year, which should also benefit from the commencement of the BP contract. We believe that well intervention activity will pick up over time; we just can't be certain as to the timing. However, we do see at least the potential for some recovery in 2016. We'll have to see what happens as we go through this next budgeting cycle by the industry. 2015 has been characterized by a drastic level of spending cuts, work cancellations, or deferrals by our clients. The entire industry supply chain is under pressure to reduce costs, to compensate for the customers' reduced level of cash flow due to the oil price collapse. Helix has reduced total headcount so far in the Company by 20%, lowered offshore wage packages, as well as negotiated discounts from our vendors. The entire industry is rebasing, but this will take some time to fully realize. The immediate focus for us has to be on, number one, maintaining adequate liquidity to complete our current capital obligations, which are primarily the constructions of the Siem Helix I and II, as well as the Q7000. And second, we need to continue to focus on being as cash positive from operations as possible. We're also in constant dialogue with our clients, working to find ways to preserve currently contracted work, and facilitate ways for future work to be budgeted and done. As has been widely circulated in the news, Petrobras has launched a major effort to reduce its overall spending outlays, in light of the macroeconomic factors affecting our industry. It's our understanding that Petrobras has reached out to many of the service companies it does business with, seeking assistance in this effort. Petrobras has reached out to us as well, and we're currently in discussions with them to figure out a way to we can help them that also makes sense for us as well. We will inform the market if anything is finalized that's materially different from our prior commentary on the contracts. This current situation in our industry is looking like a lower-for-longer scenario under this premise over the next year or two. This downturn will be transformative for our industry. Strong companies taking aggressive steps to manage costs will emerge stronger in the long run, but it will take time. For now, the process has to be managed day by day. And we'll share what we know when we know it, and we'll try to avoid forecasting what is for now unknowable. But just take it from us, we are on top of it. And with that, Erik, I will turn it back over for questions. -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [8] -------------------------------------------------------------------------------- Okay, operator. We're ready to take questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions). Chase Mulvehill. -------------------------------------------------------------------------------- Chase Mulvehill, SunTrust Robinson Humphrey - Analyst [2] -------------------------------------------------------------------------------- Let's talk about, under the lower-for-longer scenario, how many quarters do you think the Seawell and the H534 could be warm stacked? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [3] -------------------------------------------------------------------------------- Difficult to tell right now. As I said, we do see the work out there. There is work. But it's just the propensity of the clients to be willing to spend the money to get it done. We don't know when that's going to happen. And I'm afraid before we could give anything definitive, we're just going to have to wait and see what the budgeting process with the clients holds for us. -------------------------------------------------------------------------------- Chase Mulvehill, SunTrust Robinson Humphrey - Analyst [4] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [5] -------------------------------------------------------------------------------- Owen, let me add to that. I think it's more likely than not, both vessels will be warm stacked the rest of this year. However, the H534 has confirmed backlog for 2016. It's not a lot, but it is some; and both vessels have opportunities that they are bidding on, too. So I think there is -- certainly the H534 should go back to work next year, and the Seawell is going to be dependent upon whether some of these bids get confirmed or not. -------------------------------------------------------------------------------- Chase Mulvehill, SunTrust Robinson Humphrey - Analyst [6] -------------------------------------------------------------------------------- Okay. And what's the associated warm stacking cost? -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [7] -------------------------------------------------------------------------------- From the warm stacking cost, we feel we can reduce our operating cash expenses by two-thirds to 75%. -------------------------------------------------------------------------------- Chase Mulvehill, SunTrust Robinson Humphrey - Analyst [8] -------------------------------------------------------------------------------- Okay. And unrelated follow-up, so what about the current spot dayrates on the well intervention side? Have they taken another leg down recently, or have they stabilized? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [9] -------------------------------------------------------------------------------- I don't think that they've taken another step down. I think what's going on right now is we're just seeing different clients at different times looking for that first step down. But we haven't seen a second step down. -------------------------------------------------------------------------------- Chase Mulvehill, SunTrust Robinson Humphrey - Analyst [10] -------------------------------------------------------------------------------- Okay. All right. So it's just marking to market is kind of what you were seeing in your current results? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [11] -------------------------------------------------------------------------------- Yes, I think some clients were earlier at jumping on the bandwagon of pressing for discounts, and others are now following suit. -------------------------------------------------------------------------------- Chase Mulvehill, SunTrust Robinson Humphrey - Analyst [12] -------------------------------------------------------------------------------- Okay, got it. All right. I'll turn it back over. Thank you. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- Joe Gibney. -------------------------------------------------------------------------------- Joe Gibney, Capital One Securities - Analyst [14] -------------------------------------------------------------------------------- Just following up on the 534, Tony, you referenced that there is confirmed backlog for it. I'm just trying to get a sense of when that backlog starts, or is that subject to negotiation as well? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [15] -------------------------------------------------------------------------------- Well, it does have backlog for the rest of the year for projects that customers are seeking to delay. However, the question there is, can we move some of that backlog onto the Q5? So that's one of the variables. It does have backlog in 2016. It's firm. It's contracted. I wouldn't say it's extensive, but there's other work it's bidding for. I would expect the H534 to be going back to work, if not in Q4, in 2016, Joe. -------------------------------------------------------------------------------- Joe Gibney, Capital One Securities - Analyst [16] -------------------------------------------------------------------------------- Okay. And just in terms of time to get these assets back into the fleet out of warm stack, aside from the OpEx reduction that you gain, but what is the time frame to bring it back out? Is it roughly a quarter? Is that a reasonable assumption for -- to get recalibrated and get the asset ready to go? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [17] -------------------------------------------------------------------------------- (multiple speakers) Go ahead, Tony. -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [18] -------------------------------------------------------------------------------- Now, go ahead, Owen. You're better to answer that question than me. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [19] -------------------------------------------------------------------------------- Well, it's a much quicker than a quarter. The people are still available. The vessel is warm stacked. It is still manned with a navigating crew, so that we can move it. So it's a relatively quick process, I'd say 2 to 3 weeks. It will probably take us longer to engineer the work that needs to be done than it would be to ramp the vessel back up. -------------------------------------------------------------------------------- Joe Gibney, Capital One Securities - Analyst [20] -------------------------------------------------------------------------------- Okay. And last one for me, it just sounds like a fluid situation in working with Petrobras. But is an elongated delivery schedule possible? Or some sort of change in contract for the seven vessels possible, or sort of all things on the table as we try to negotiate and navigate the current situation? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [21] -------------------------------------------------------------------------------- Are you speaking about a specific client, or in general? -------------------------------------------------------------------------------- Joe Gibney, Capital One Securities - Analyst [22] -------------------------------------------------------------------------------- Just Petrobras specifically as it pertains to your contracts with Siem. Is this an elongated delivery a possibility now for these two boats, or change in contract structure? Just trying to understand maybe what you're alluding to, or is it still obviously a big work in progress? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [23] -------------------------------------------------------------------------------- It's actually, Joe, a big work in progress right now. We're in dialogue right now, so there's not a whole lot I'd like to talk about it right now, other than to say that we do have very firm, strong contracts with Petrobras. So it's a matter of how far are we willing to go to work with them; and, of course, they are a big client. I see a big future with them. So we're trying our best to come up with something that approaches a win-win or a lose-lose. -------------------------------------------------------------------------------- Joe Gibney, Capital One Securities - Analyst [24] -------------------------------------------------------------------------------- Sure. All right, I appreciate it. Thanks for the detail, guys. I'll turn it back. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- Ole Slorer. -------------------------------------------------------------------------------- Ole Slorer, Morgan Stanley - Analyst [26] -------------------------------------------------------------------------------- I wonder whether you could just help us understand the components of the delta in the EBITDA outlook. When it comes to the value dimension side, how much of it is driven by increased downtime in dry docking? And other kind of operationalist specific items versus customers delaying value dimension programs? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [27] -------------------------------------------------------------------------------- Ole, I would say that the majority relates to market environment versus internal specific issues. I'd say the dry docking on the Q4 cost us $4 million to $5 million of this reduced forecast. But I think almost everything else really relates to market activity issues. -------------------------------------------------------------------------------- Ole Slorer, Morgan Stanley - Analyst [28] -------------------------------------------------------------------------------- Okay. So, based on previous cycles or discussions with customers, do you see -- when it comes to the timing of resurgence of well intervention, clearly this is largely -- at least temporarily -- a discretionary spend on behalf of your customers. Although clearly, at some point, they need it to catch up again. So how do you sense that that's going to play out? And maybe a related question regarding that: do you see that you are losing market share to contracted drill rigs that are being used for well intervention? Or is it an overall lack of activity and deferral of maintenance of wells? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [29] -------------------------------------------------------------------------------- I'll take a shot at that, Tony. Ole, you mentioned a lot of factors there, and each one of them plays a part. But by far and away, on several investor presentations in the past, we've always tried to emphasize to people that utilization drives our margin and profitability far more than rate does. Right now what we're seeing in the market is certainly the rates are under pressure. But we had a lot of room between us and drill rigs on rates, and we also have the efficiency gains over drill rigs. So the drill rigs are not really hurting us. What is hurting us right now is that there has just been a flat moratorium and mandate from producer corporate offices to not spend this year. And that's caused a lot of projects not to go forward. And in quite a few cases, they have been terminated. And that's what we're seeing right now. We're also seeing -- because our guys are constantly working with the engineering staffs of our clients -- so we are seeing the backlog of the work that does need to be done. So we do know it's out there. It's just when are the producers going to release some spending. My hope is that 2015 was sort of reactionary, and it's severe in order to rebase the industry at a better cost, but the work is going to have to get done. And my hope is that some of this work that we are seeing, at least on the drawing boards for next year, does make it through the budgeting process. -------------------------------------------------------------------------------- Ole Slorer, Morgan Stanley - Analyst [30] -------------------------------------------------------------------------------- Yes, and I would agree with that, given the maintenance aspect of a lot of this stuff. So, anyways, thanks for that. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- Martin Molloy. -------------------------------------------------------------------------------- Martin Malloy, Johnson Rice & Company - Analyst [32] -------------------------------------------------------------------------------- Upon completion of the newbuild program, assuming market conditions remain relatively at these levels -- kind of bouncing along the bottom, as you described -- can you give us a range of where you think your net debt might end up? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [33] -------------------------------------------------------------------------------- Erik, you want to -- or Tony? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [34] -------------------------------------------------------------------------------- Yes, take that one, Erik. -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [35] -------------------------------------------------------------------------------- Sorry, is that at the end of our capital expansion, you mean? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [36] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Martin Malloy, Johnson Rice & Company - Analyst [37] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [38] -------------------------------------------------------------------------------- Okay, from -- obviously we've stated before that through the next couple of years, with the market in the condition that it is, that we would be consuming our cash position. We also have a fairly aggressive payback of our principal. So I believe that our net debt position would be somewhere south of $400 million at the end of the build campaign. -------------------------------------------------------------------------------- Martin Malloy, Johnson Rice & Company - Analyst [39] -------------------------------------------------------------------------------- Okay. Good. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [40] -------------------------------------------------------------------------------- I think it is worth noting that our gross debt right now is -- as of right now, I don't think our gross debt is forecasted to increase, given the amount of principal repayment that we have each year. -------------------------------------------------------------------------------- Martin Malloy, Johnson Rice & Company - Analyst [41] -------------------------------------------------------------------------------- Okay. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [42] -------------------------------------------------------------------------------- Is that a --? -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [43] -------------------------------------------------------------------------------- Yes. That's a correct statement. -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [44] -------------------------------------------------------------------------------- That's a fair statement. I think our own internal models suggest we peaked on that. If you look at capital spending this year, the majority of our CapEx spending for this year is behind us. So the majority of capital spending, going forward for the next two years, particularly with the deferral of the Q7, is really related to the two Petrobras vessels which are under contract. -------------------------------------------------------------------------------- Martin Malloy, Johnson Rice & Company - Analyst [45] -------------------------------------------------------------------------------- Okay. And then I was wondering if -- could you provide us with an update as far as the alliance with OneSubsea, and how that's going; and any commentary you might want to offer about how the Subsea 7, OneSubsea alliance might impact you all? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [46] -------------------------------------------------------------------------------- Well, the alliance has already impacted us quite a bit, in that it's opened up a lot of market areas that we weren't looking at before. So, along with OneSubsea, we are now penetrating those areas. And on top of that, we're much stronger when we go in, offering an integrated solution along with OneSubsea than we are on our own. So it has helped us there already immensely, at least in the dialogue. But like I said before, until somebody decides to start spending some money, it is all talk. But it does hold a lot of potential promise. -------------------------------------------------------------------------------- Martin Malloy, Johnson Rice & Company - Analyst [47] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [48] -------------------------------------------------------------------------------- Haithum Nokta. -------------------------------------------------------------------------------- Haithum Nokta, Clarkson Capital Markets - Analyst [49] -------------------------------------------------------------------------------- Owen, I wanted to just follow up on your earlier comments alluding to the moratorium of capital spending. Can you compare and contrast how the majors are acting in your conversations versus maybe the smaller independents? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [50] -------------------------------------------------------------------------------- Well, the independents use us much more on a spot basis; so, therefore, we typically don't called by the independents unless there's a real need. So the behavior and the relationship between us and the smaller independents has really remained unchanged. Where we're seeing the most pressure on being asked to work with them is from the majors and the large independents. And that's really consumed most of our year. -------------------------------------------------------------------------------- Haithum Nokta, Clarkson Capital Markets - Analyst [51] -------------------------------------------------------------------------------- Okay. Thanks for that. And just switching gears a little bit on the robotics side, can you give a little color on what happened in 2Q? I guess I'm a little surprised that there wasn't at least a modest tailwind seasonally following 1Q. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [52] -------------------------------------------------------------------------------- Other than just the lack of activity and the cancellation of work, that's all I can tell you. That would be my best guess at this point. We are not seeing any encroachment (multiple speakers). I'm sorry? -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [53] -------------------------------------------------------------------------------- Go ahead, Owen. Finish off. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [54] -------------------------------------------------------------------------------- I just said I don't think that we're seeing any encroachment on our market share by the competition. Rates have softened, so that's part of it. And we did pick up the extra vessel, so that might have impacted our utilization. But other than that, the utilization was not that bad for the second quarter, so it's mostly rate-related. -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [55] -------------------------------------------------------------------------------- Haithum, just to elaborate a little bit further on that. When you compare second quarter this year, let's say, even to second quarter last year, I think we reference it in our utilization chart. The number of days that we had spot vessel work associated with our robotics, I believe in Q2 of 2014 we had 160 days of spot vessel work in 2014. This year, we only had 13 days. And so, that work that typically happens during this time of year has not materialized due to the obviously weak market conditions. -------------------------------------------------------------------------------- Haithum Nokta, Clarkson Capital Markets - Analyst [56] -------------------------------------------------------------------------------- Okay. Fair enough. Thank you. -------------------------------------------------------------------------------- Operator [57] -------------------------------------------------------------------------------- Praveen Narra. -------------------------------------------------------------------------------- Praveen Narra, Raymond James & Associates, Inc. - Analyst [58] -------------------------------------------------------------------------------- It obviously doesn't look this way, given the outlook for more activity in 2016, but when you think about the breakeven analysis on cold stacking of vessel, how do you go about thinking about that process, and really -- at what point does it make sense to cold stack? What length of time does a vessel need to be idle to make that balanced? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [59] -------------------------------------------------------------------------------- It varies from vessel to vessel. The process that you go through is you just reverse calculate the number of days that you need at the expected rates to break even. It's really that simple. It doesn't take too many days to make it worthwhile bringing the vessel out. -------------------------------------------------------------------------------- Praveen Narra, Raymond James & Associates, Inc. - Analyst [60] -------------------------------------------------------------------------------- Okay. So are we talking quarters instead of years? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [61] -------------------------------------------------------------------------------- Again, it just depends on what materializes through this budgeting process. I think it's pretty much of a given that the 534 and the Seawell will remain stacked through the end of the year. And then next year, we're just going to have to wait and see what the budget holds. -------------------------------------------------------------------------------- Praveen Narra, Raymond James & Associates, Inc. - Analyst [62] -------------------------------------------------------------------------------- Okay. (multiple speakers) -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [63] -------------------------------------------------------------------------------- Yes, Owen, let me add to that. I think there's a big difference between warm stacking and cold stacking a vessel, in terms of the ability to bring that vessel back to work in a reasonable period of time. I think it's way too early for us to consider cold stacking any vessels, particularly with the prospects that are out there for 2016. So, really from our standpoint, it's not in our thinking right now. -------------------------------------------------------------------------------- Praveen Narra, Raymond James & Associates, Inc. - Analyst [64] -------------------------------------------------------------------------------- Okay, that's --. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [65] -------------------------------------------------------------------------------- I'm sorry. When I heard stacked, I just sort of assumed warm stacking, because cold stacking (technical difficulty). -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [66] -------------------------------------------------------------------------------- Yes, I don't think it's in the cards -- yes, it's not in the cards, Owen, right now. I just think we have -- I hate to use this word -- too many opportunities for 2016 to consider cold stacking a Seawell or an H534. And cold stacked really renders the vessel difficult to bring back to life, so to speak, versus a warm stacking. -------------------------------------------------------------------------------- Praveen Narra, Raymond James & Associates, Inc. - Analyst [67] -------------------------------------------------------------------------------- Okay, that's helpful. And to that point, can you give us a sense of how much of the utilization declines we've seen this year have been due to the slowdown of P&A versus other activities? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [68] -------------------------------------------------------------------------------- I don't have that breakdown, but it depends on the region as well. In the North Sea, there was a larger drop-off on P&A than in the Gulf of Mexico, because the Gulf of Mexico is more regulatory-driven than the UK is. Production enhancement, I'd say -- well, I'd say in general, the Gulf of Mexico has been more active than the North Sea. The North Sea has really taken a big hit. -------------------------------------------------------------------------------- Praveen Narra, Raymond James & Associates, Inc. - Analyst [69] -------------------------------------------------------------------------------- Okay. So does that come back next year, then? Is that part of the opportunities that are out there? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [70] -------------------------------------------------------------------------------- The P&A side? -------------------------------------------------------------------------------- Praveen Narra, Raymond James & Associates, Inc. - Analyst [71] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [72] -------------------------------------------------------------------------------- Yes, in the Gulf of Mexico I think is -- because it's regulatory-driven, it will be. In the North Sea, I don't think that the P&A comes back strongly next year. In the North Sea, I think it's more of a question of producers wanting to add to their production. So I think it's the production enhancement that you see increase next year. -------------------------------------------------------------------------------- Praveen Narra, Raymond James & Associates, Inc. - Analyst [73] -------------------------------------------------------------------------------- Okay, perfect. Thank you very much for the color. -------------------------------------------------------------------------------- Operator [74] -------------------------------------------------------------------------------- William Alpaugh. -------------------------------------------------------------------------------- William Alpaugh, Simmons & Company - Analyst [75] -------------------------------------------------------------------------------- I'm just looking -- the backlog was flat quarter-over-quarter. Can you go over what was booked, and when you should realize what was booked? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [76] -------------------------------------------------------------------------------- Well, I would say this: I wouldn't read too much into that. With $166 million of revenues, it's really a rounding [error]. We did book some work, but nothing significant. -------------------------------------------------------------------------------- William Alpaugh, Simmons & Company - Analyst [77] -------------------------------------------------------------------------------- Okay. So how much of the backlog is expected in the second half of 2015? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [78] -------------------------------------------------------------------------------- I would say the vast majority of our backlog is beyond 2015. -------------------------------------------------------------------------------- William Alpaugh, Simmons & Company - Analyst [79] -------------------------------------------------------------------------------- Okay. So in the North Sea, with the stacking of Seawell, will that impact whether you renew the Skandi? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [80] -------------------------------------------------------------------------------- Yes. That's a difficult -- yes and no (laughter). The Skandi does not have diving on board, and the Seawell does. So the types of work that they are employed on are really two separate markets. That's why -- I'm not trying to hedge the answer; it's just they work different markets. -------------------------------------------------------------------------------- William Alpaugh, Simmons & Company - Analyst [81] -------------------------------------------------------------------------------- Okay. All right. And so with the stacking, just the last one, how quickly can you all get it down, the daily OpEx? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [82] -------------------------------------------------------------------------------- Again, that's by region. It depends on how you have contracted your employees. Right now we're going through what's called the redundancy process here in the North Sea, which takes a considerable amount of time compared to the Gulf of Mexico. So the Gulf of Mexico is a fairly quick process, which we're going through right now. The North Sea would probably drag on until -- we won't see the full impacts of downsizing until the fourth quarter. -------------------------------------------------------------------------------- William Alpaugh, Simmons & Company - Analyst [83] -------------------------------------------------------------------------------- Okay. And the 534, it's going to do the work and then be stacked after the 45 days? Possibly? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [84] -------------------------------------------------------------------------------- After the dry dock. -------------------------------------------------------------------------------- William Alpaugh, Simmons & Company - Analyst [85] -------------------------------------------------------------------------------- Okay. Not before? Okay. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [86] -------------------------------------------------------------------------------- No. -------------------------------------------------------------------------------- William Alpaugh, Simmons & Company - Analyst [87] -------------------------------------------------------------------------------- So after the dry dock? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [88] -------------------------------------------------------------------------------- After the dry dock, correct. -------------------------------------------------------------------------------- William Alpaugh, Simmons & Company - Analyst [89] -------------------------------------------------------------------------------- Okay, that's what I thought. Okay. Thank you very much. You all have a good one. -------------------------------------------------------------------------------- Operator [90] -------------------------------------------------------------------------------- (Operator Instructions). Chase Mulvehill. -------------------------------------------------------------------------------- Chase Mulvehill, SunTrust Robinson Humphrey - Analyst [91] -------------------------------------------------------------------------------- So, real quick on the robotics, as we move forward into 2016, can you talk about tendering activity you are seeing, and the puts and takes of pricing and utilization as we move into 2016 versus 2015? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [92] -------------------------------------------------------------------------------- Chase, let me take that one. I think it's important to note that historically we've always had short visibility windows in the robotics business, and it's no different today. Typically you don't have visibility out any longer than six months, and oftentimes shorter than that. So, I'm going to say the current environment is no different. So it's very difficult to comment about visibility in 2016 for robotics, given that's how the business operates. So right now, it's way too early to tell how 2016 may or may not shape up. -------------------------------------------------------------------------------- Chase Mulvehill, SunTrust Robinson Humphrey - Analyst [93] -------------------------------------------------------------------------------- Okay. So what are you seeing on the leading edge for pricing for this business? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [94] -------------------------------------------------------------------------------- I would say pricing is under pressure, as Owen mentioned. We're having good utilization; we're winning work. But again, customers are expecting and demanding lower costs. So we're having to suffer through that. We do have some pricing leverage outside the oilfield space. When it comes to trenching, we've been able to maintain decent pricing in the renewable energy space, but if it's energy-related we're obviously seeing pressure there too. -------------------------------------------------------------------------------- Chase Mulvehill, SunTrust Robinson Humphrey - Analyst [95] -------------------------------------------------------------------------------- Okay. So if we were to think about leading-edge pricing, are we talking down 10%, 20%, 30%? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [96] -------------------------------------------------------------------------------- It varies, job to job. I'm guessing right now, off the top of my head, Chase, 15% to 25%. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [97] -------------------------------------------------------------------------------- I think it's fair to say, Tony, that most producers are going through a process of trying -- they are requesting a 25% reduction. Of course, that's not going to happen. You negotiate somewhere in between that, and then that amount is further reduced by your offset of what you are able to do with lowering your cost structure. That's why in my comments I said it's going to take a while for everything to rebase and really see where margins fall out. -------------------------------------------------------------------------------- Chase Mulvehill, SunTrust Robinson Humphrey - Analyst [98] -------------------------------------------------------------------------------- Okay. All right. And given the recent $10-plus sliding crude prices over the last month, have your customers now come back and requested more pricing concessions? Or is it still just too early to have those discussions yet? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [99] -------------------------------------------------------------------------------- No, it's like I said before: I think what we're seeing is clients taking their turn and coming out and asking for the first pricing concessions. We're not seeing a second tranche. And we have good relations with the clients; and I think, for the most part, our efforts to work with them have been well received. So, knock on wood, I don't anticipate further rounds of concessions. -------------------------------------------------------------------------------- Chase Mulvehill, SunTrust Robinson Humphrey - Analyst [100] -------------------------------------------------------------------------------- Okay, awesome. Thank you. -------------------------------------------------------------------------------- Operator [101] -------------------------------------------------------------------------------- George O'Leary. -------------------------------------------------------------------------------- George O'Leary, Tudor, Pickering, Holt & Company - Analyst [102] -------------------------------------------------------------------------------- I was wondering if you could just characterize the North Sea market versus the Gulf of Mexico market. And if you have any indications based on discussions with customers as to -- if one of these markets, you may have already seen a trough from an intervention project standpoint. And which market, as you look out going forward, may rebound first as we progress into 2016? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [103] -------------------------------------------------------------------------------- This is a real wag, but I would say that -- I would anticipate the Gulf of Mexico market recovering quicker than the North Sea market, because of -- it's a lower cost to produce there, and change occurs a little more rapidly in the Gulf of Mexico. It's also dominated by more independents, I think, which are a little more focused on enhancing production and generating some cash. So my guess is that we're going to see a better rebound in the Gulf than the North Sea next year. -------------------------------------------------------------------------------- George O'Leary, Tudor, Pickering, Holt & Company - Analyst [104] -------------------------------------------------------------------------------- And then you guys are currently precluded from doing P&A in certain markets as you can't pull tubing, open water. Is there any progress in that front? Are you guys working to find a solution to where that segment of the market opens back up? Or does this downturn kick that can down the road, as you have to focus on the current market more than the outlook? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [105] -------------------------------------------------------------------------------- Well, just to clarify it a little bit, there is no region that precludes or prohibits pulling tubing, open water. That's really left to the producer or client preference as to whether or not they want to do that. And we are working on solutions for being able to satisfy the client requirements, even of those that don't want to pull at open water. We're working on solutions for being able to pull that tubing as well. So, as far as the pulling tubing is concerned, I don't think that that's a major hindrance for us, especially once we get the Q7000. Right now being able to pull tubing in the North Sea -- in general, it's more difficult. But the Q7000 can do it easily. -------------------------------------------------------------------------------- George O'Leary, Tudor, Pickering, Holt & Company - Analyst [106] -------------------------------------------------------------------------------- All right. Thanks for the color, guys. -------------------------------------------------------------------------------- Operator [107] -------------------------------------------------------------------------------- [Bill Zellum]. -------------------------------------------------------------------------------- Bill Zellum, - Analyst [108] -------------------------------------------------------------------------------- First question is relative to the opportunities that you've referenced for 2016, would you talk a little bit about the split between the well intervention discussions and any robotics discussions? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [109] -------------------------------------------------------------------------------- Just on a very general sense, and I'll turn it over to Erik, because he can probably shed better light on it. But in general, well intervention fell off quicker here than robotics, because robotics is a construction support activity; and, therefore, there were a number of legacy projects carrying robotics. Going forward, no, I see intervention picking up before robotics. Again, and that's driven by eventually the producers are going to want to generate more production; therefore, they are going to want to go back into their wells and do the production enhancement. -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [110] -------------------------------------------------------------------------------- Yes, I agree, Owen. I think well intervention, as Owen mentioned, fell faster and will bounce back quicker. And a lot has to do with well intervention is a bigger-ticket cost for a customer. So when they're looking at costs to cut major dollars, a well intervention project costs a customer anywhere north of $500,000 a day. However, ultimately -- and I think this is a very important point and attribute of our business -- ultimately, when the customer has to start spending money again or they're going to deplete themselves out of business, and it's likely that the first place they will be spending money is production enhancement. And a lot of the P&A deferrals that they have managed to accomplish -- well, that's a deferral. It's not a permanent reduction. So we believe, and it's logical to assume, that well intervention will bounce back quicker. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [111] -------------------------------------------------------------------------------- And I think that it's an interesting note here in the North Sea as well, because a lot of this -- although it's not a proscriptive regulatory environment here, the government actually does not want to see cessation of production on fields. So I think there will -- as opposed to the Gulf, where there is regulatory pressure to increase P&A, I'd actually say it's the reverse here. There's certain government pressure not to accelerate P&A. And they would much prefer to see the production enhanced, and cessation of production avoided. -------------------------------------------------------------------------------- Bill Zellum, - Analyst [112] -------------------------------------------------------------------------------- That's helpful. Allow me to shift, if I may, to the Q4000. I don't believe that in this call you've talked much about the utilization that you expect here in the near term, specifically in the Q3 and Q4. Would you share with us what your window into that is at this point? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [113] -------------------------------------------------------------------------------- I'll take that, Owen. I think Q3, we're optimistic or positive that the Q4 will have high levels of utilization, but it's not 100% locked down. Q4 looks pretty good. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [114] -------------------------------------------------------------------------------- (multiple speakers) There is no other Q4 in the world right now, either. The Q5 is on the way, but the Q4 is without a doubt the preeminent intervention vessel in the world. So, I guess the reason we don't really talk about it is we almost take its utilization for granted. -------------------------------------------------------------------------------- Bill Zellum, - Analyst [115] -------------------------------------------------------------------------------- And is there a seasonality that we should be thinking about with Q4? You mentioned -- do you think there's good works in Q4. But is it less than Q3 due to a normal level of seasonality? Or is that not really a factor there? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [116] -------------------------------------------------------------------------------- That's a changing landscape. I think what the producers are looking for is to de-risk their operations. And, of course, when they do work through the wintertime, I think they are going to be pressing for contractual changes as to how weather is treated, how much flexibility do you have for going -- during certain weather windows, et cetera. So I'd say that's a little bit in flux right now. But you are going to see a little bit more pressure on returning to more of a -- a lot more demand during the season than throughout the year now. -------------------------------------------------------------------------------- Bill Zellum, - Analyst [117] -------------------------------------------------------------------------------- Thank you. And then one final question. You had taxes that flowed through the P&L, even though you had a net loss. Would you discuss that dichotomy, please? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [118] -------------------------------------------------------------------------------- Yes, sure. When you have these kind of levels of pre-tax earnings, slight nuances in where you make money will have a dramatic impact on your tax rate. That being said, for the entire year we are expecting kind of a mid-teens type of tax rate. A lot depends on where our earnings ultimately play out, North Sea versus Gulf of Mexico. But for the entire year, we're looking at approximately a mid-teens tax rate. -------------------------------------------------------------------------------- Bill Zellum, - Analyst [119] -------------------------------------------------------------------------------- Great. Thank you, gentlemen. -------------------------------------------------------------------------------- Operator [120] -------------------------------------------------------------------------------- (Operator Instructions). Gregory Lewis. -------------------------------------------------------------------------------- Gregory Lewis, Credit Suisse - Analyst [121] -------------------------------------------------------------------------------- Could we just dive a little bit more into the robotics? I know you mentioned on the call the pricing was down, call it 15%-ish plus. As we try to back into their revenue guidance for robotics, it looks like the second half is going to be similar to the first half. So, just in thinking about that, it seems like there should be a pickup in activity in the back half of the -- be either in Q3, in terms of utilization. Is that the right way to be thinking about that? -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [122] -------------------------------------------------------------------------------- I think we'll have a Q3 that has the potential of doing marginally better, and a Q4 that will see a seasonal drop-off. -------------------------------------------------------------------------------- Gregory Lewis, Credit Suisse - Analyst [123] -------------------------------------------------------------------------------- Okay. All right, perfect. And then just real quick, I realize we're coming up on the hour -- just as we think about 2016, clearly you mentioned lower-for-longer on the call. It seems like there's a real -- from your perspective, there's the ability to really just put the brakes on, on maintenance CapEx. Growth CapEx, it is what it is; it seems like there's going to be some delays. There's been one delay. There will probably be a couple more delays in terms of growth CapEx. Is it fair to think that Helix can get its -- on an ongoing maintenance CapEx? It seems like you'd be able to get it basically almost to nil, in the $20 million range. I mean, it doesn't seem like there's -- is it right that there's no scheduled dry dockings for the next one to two years? -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [124] -------------------------------------------------------------------------------- Well, our dry dockings are staggered, so we will always have probably one or two in each year. It's rare that we have none. Erik, do you know what our dry dock schedule is right now for 2016 and 2017? -------------------------------------------------------------------------------- Gregory Lewis, Credit Suisse - Analyst [125] -------------------------------------------------------------------------------- It just seems like we've had a bunch of them. -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [126] -------------------------------------------------------------------------------- I believe that there is one potentially scheduled for 2016. -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [127] -------------------------------------------------------------------------------- Yes, Helix Producer I, right? -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [128] -------------------------------------------------------------------------------- Correct. -------------------------------------------------------------------------------- Tony Tripodo, Helix Energy Solutions Group, Inc. - EVP and CFO [129] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Gregory Lewis, Credit Suisse - Analyst [130] -------------------------------------------------------------------------------- Production vessel, okay. All right, guys. Hey, thank you very much for your time. -------------------------------------------------------------------------------- Owen Kratz, Helix Energy Solutions Group, Inc. - President and CEO [131] -------------------------------------------------------------------------------- But you are correct in -- once we complete these shipyard construction contracts, our CapEx obviously comes way, way down. -------------------------------------------------------------------------------- Gregory Lewis, Credit Suisse - Analyst [132] -------------------------------------------------------------------------------- Okay. Hey, thank you very much. -------------------------------------------------------------------------------- Operator [133] -------------------------------------------------------------------------------- And there are currently no further questions on the phone lines at the moment. -------------------------------------------------------------------------------- Erik Staffeldt, Helix Energy Solutions Group, Inc. - Director, Finance and Treasury [134] -------------------------------------------------------------------------------- Okay. Well, thank you very much for joining us today. We very much appreciate your interest and participation, and look forward to having you on our third-quarter 2015 call in October. -------------------------------------------------------------------------------- Operator [135] -------------------------------------------------------------------------------- Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.
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