On this page of StockholderLetter.com we present the 4/5/2023 shareholder letter from HELIX ENERGY SOLUTIONS GROUP INC — ticker symbol HLX. Reading current and past HLX letters to shareholders can bring important insights into the investment thesis.
Annual Report 2022
2022 Annual Report | Helix Energy Solutions About Helix Helix is an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention, robotics and full- eld decommissioning operations. Overview Shallow Water Abandonment We provide a range of offshore services to the oil and gas and renewable energy markets primarily in the Gulf of Mexico, U.S. East Coast, Brazil, North Sea, Asia Paci c and West Africa regions. We expanded our service capabilities to the Gulf of Mexico shelf with the acquisition of the Alliance group of companies (collectively Alliance ) on July 1, 2022, which we have re-branded as Helix Alliance. Our services are segregated into four reportable business segments: Well Intervention, Robotics, Production Facilities and our new reporting segment, Shallow Water Abandonment, which was formed in the third quarter 2022 comprising the Helix Alliance business. Our Shallow Water Abandonment segment provides services in support of the upstream and midstream industries predominantly in the Gulf of Mexico shelf, through offshore oil eld decommissioning and reclamation, project management, engineered solutions, intervention, maintenance, repair, heavy lift and commercial diving services. Our Shallow Water Abandonment segment includes a diversi ed eet of marine assets including liftboats, offshore supply vessels, dive support vessels, a heavy lift derrick barge, a crew boat and plug and abandonment ( P&A ) and coiled tubing systems. Production Facilities Well Intervention Our Well Intervention segment provides services enabling our customers to safely access offshore wells for the purpose of performing well production enhancement or decommissioning operations, thereby avoiding drilling new wells by extending the useful lives of existing wells and preserving the environment by safely decommissioning aged wells and restoring the seabed. Our well intervention vessels include the Q4000, the Q5000, the Q7000, the Seawell, the Well Enhancer, and the Siem Helix 1 and Siem Helix 2 chartered vessels. Our well intervention equipment includes intervention systems such as intervention riser systems, subsea intervention lubricators and the Riserless Open-water Abandonment Module, some of which we provide on a stand-alone basis. Our Production Facilities segment includes the Helix Producer I (the HP I ), the Helix Fast Response System (the HFRS ) and our ownership of oil and gas properties. All of our current Production Facilities activities are located in the Gulf of Mexico. Services we currently offer to the offshore oil and gas market worldwide include: Development. Installation of flowlines, control umbilicals, manifold assemblies and risers; trenching and burial of pipelines; installation and tie-in of riser and manifold assembly; commissioning, testing and inspection; and cable and umbilical lay and connection. Production. Well intervention; intervention engineering; production enhancement; coiled tubing operations; IRM of production structures, trees, jumpers, risers, pipelines and subsea equipment; and related support services. Decommissioning. Reclamation and remediation services; well P&A services; pipeline, cable and umbilical abandonment services; and site inspections. Production Facilities. Provision of the HP I as an oil and natural gas processing facility. Currently, the HP I is being utilized to process production from the Phoenix eld in the Gulf of Mexico. Fast Response System. Provision of the HFRS as a response resource in the Gulf of Mexico that can be identi ed in permit applications to U.S. federal and state agencies and respond to a well control incident. Robotics Our Robotics segment provides trenching, seabed clearance, offshore construction and inspection, repair and maintenance ( IRM ) services to both the oil and gas and the renewable energy markets globally, thereby assisting the delivery of affordable and reliable energy and supporting the responsible transition away from a carbon-based economy. Additionally, our Robotics services are used in and complement our well intervention services. Our Robotics segment includes remotely operated vehicles ( ROVs ), trenchers, the IROV boulder grab and robotics support vessels under term charters as well as spot vessels as needed.
Helix Energy Solutions | 2022 Annual Report Services we currently offer to the offshore renewable energy market worldwide include: Site Clearance. Site preparation for construction of offshore wind farms, including boulder relocation and underwater unexploded ordnance identi cation and disposal. Trenching. Cable burial via jetting and/or cutting by self-propelled trenching ROVs and plough trenching. Subsea Support. General subsea support of engineering, procurement, construction and installation contractors with ROV services standalone or with support vessels. Industry In uences Demand for our services is primarily in uenced by the condition of the oil and gas and the renewable energy markets and, in particular, the willingness of offshore energy companies to spend on operational activities and capital projects. The performance of our business is largely affected by the prevailing market prices for oil and natural gas. Oil and gas prices reached ten-year highs during the middle of 2022 and experienced moderate declines and volatility during the remainder of 2022. Global demand for oil and gas continues to recover as supply has been disrupted by regional con icts. We expect oil and gas prices will remain robust for the near term, which should lead to higher customer spending for the industry. However, despite the current strong commodity price environment, there remain headwinds to commodity price stability, including those regional con icts, high in ation and in particular governments and central banks efforts to taper economic growth, COVIDrelated uncertainties, various governmental and customer environmental, social and governance initiatives, continued shifting of resource allocation to renewable energy, and most recently wavering market con dence in light of turmoil within the banking industry. We expect these factors will continue to contribute to commodity price volatility and may temper customer spending for oil and gas projects. Strategy and Outlook Over the near-term, with the current commodity price environment we expect oil and gas companies to invest in new long-cycle exploration projects in addition to maintaining and/or increasing production from their remaining reserves. As historically production enhancement through well intervention is less expensive per incremental barrel of oil than exploration, we continue to expect oil and gas companies to increasingly focus on optimizing production of their existing subsea wells. We support the energy transition to renewables through our services in offshore wind farm developments, primarily including subsea cable trenching and burial as well as seabed clearance and preparation services. Demand for our services in the renewable energy market is affected by various factors, including the pace of consumer shift towards renewable energy sources, global electricity demand, technological advancements that increase the production and/or reduce the cost of renewable energy, expansion of offshore renewable energy projects to deeper water, and government subsidies for renewable energy projects. We expect growth in our renewables services as the energy market transitions to continued renewable energy developments. Once end-of-life oil and gas wells have depleted their production, we decommission wells and infrastructure in our Well Intervention and Shallow Water Abandonment segments. As the subsea tree base expands and ages and customers shift resources to renewable energy, the demand for P&A services should persist. Our operations service the life cycle of an oil and gas eld and provide P&A services at the end of the life of a eld as required by governmental regulations, and we believe that we have a competitive advantage in performing these services efficiently.
2022 Annual Report | Helix Energy Solutions Letter to Shareholders Dear Shareholders, We long described 2022 as a transitional year for Helix, and that has borne itself out. We entered 2022 with a post-COVID recovery market that lacked direction, which was quickly impacted by the onset of the Ukrainian con ict. Last year at this time we didn t have much market visibility, and we were navigating the challenges of long-term contracts rolling off and a difficult rate environment. Our Company persevered and remained committed to our core values. We have witnessed the continued migration towards renewables, and the collective realization that Energy Security is an essential component of an energy transition. Today, Helix has the best visibility for the foreseeable future that we ve had in years. In 2022 we delivered meaningful nancial improvements with EBITDA increasing to $121 million and Revenue growing to $873 million, and we marked our fth consecutive year of generating positive Free Cash Flow. Signi cant to our committed strategy, in July we acquired the Alliance group of companies, enhancing our capabilities and expanding our services to the shallow waters predominantly in the Gulf of Mexico shelf, and establishing Helix as a provider of full eld decommissioning services. Additional operational highlights in 2022 included: entering into new longer-term deepwater well intervention and decommissioning contracts for the Siem Helix 1, Siem Helix 2 and Q7000, as well as the extension of our Helix Producer 1 contract; establishing new time charter agreements for vessels supporting operations in multiple regions; acquiring a majority interest in the Thunder Hawk Field which is currently producing in the Gulf of Mexico; and strategically acquiring niche equipment such as intervention systems, trenchers and a boulder grab. We maintained the nancial discipline to fully redeem our Convertible Notes due 2022, and ended the year with approximately $75 million of Net Debt while funding our growth opportunities with cash on hand. Each of these highlights underscores our three-legged business model of facilitating a global energy transition by Maximizing Production of remaining oil and gas reserves, supporting Renewable Energy developments, and Decommissioning end-of-life oil and gas elds. Our Well Intervention services are naturally hedged between maximizing reserves and decommissioning, depending on commodity price and political winds, with both representing mature end-of-life oil and gas activities. Our Robotics group continues Helix s strong position within the offshore wind farm space for trenching and site preparation work. The Alliance acquisition expanded our service offering into shallow water and has further established Helix as a full- eld decommissioning company, along with its other services supporting the full life cycle of offshore elds. We understand the important role Helix plays as a steward of the people, communities and environments we serve. Sustainability lies at the heart of our business model and the services we provide: we allow customers to maximize production and avoid drilling new wells, we support renewable energy initiatives, and we safely and effectively decommission elds to restore the ocean s seabeds. In our most recent Corporate Sustainability Report published in November 2022 we reported on our GHG Emissions metrics for the prior three years and our current reduction targets. We are proud of our long-established environmental stewardship efforts and strong ESG record. Our ESG efforts place us at the forefront of a global energy transition, and we believe that translates to long-term value for our shareholders. Looking ahead in 2023, we are expecting to continue the improvements seen in the second half of 2022. We have multiregional optionality and pricing leverage with a strong near-term outlook for each of our operating segments. Our strategy will be to maintain capital spending discipline and focus on Free Cash Flow generation.
Helix Energy Solutions | 2022 Annual Report In light of this outlook our Board has approved a $200 million Share Repurchase Program. We envision targeting an allocation of approximately 25% of our Free Cash Flow to share hare repurchases, the timing of which we expect to generally align with ourr cash generation. This was a signi cant announcement in Helix s story, a goall we ve long communicated to our investors, and we look forward to deploying oying capital to execute on the Program and Return Value to our shareholders. olders. In addition to executing ing on the Share Repurchase Program, we currently intend to cash settle our outstanding debt commitments, likely reserving a portion of cash for smaller maller incremental additions to our capabilities. Helix employees form the backbone of our Company, and I am grateful for their hard work. The past ast few years have been challenging, whether working through a pandemic or navigating an energy industry under signi cant pressure. The Helix Family has persevered and enabled us to be where we are today. We have ve grown that family with the addition of Alliance, and as we look for opportunities unities to continue to build and shape our Company, we want to be known as an industry leader and a place where our people are proud to work. As always, my sincerest thanks to our employees for everything you do. Our strategy and focus us have positioned us well for this improved energy market, and we have begun to see the rewards of our efforts. Ours is a cyclical ical and volatile industry, so while our outlook is strong we will also be balanced in our execution. I believe we have positioned ourselves for future success, and d I thank you for your continued con dence e and support. Owen Kratz President and Chief Executive Officer Helix Energy Solutions Group, Inc. Sustainability lies at the heart of our business model and the services we provide...
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HLX 4/5/2023 Shareholder/Stockholder Letter Transcript:

Annual
Report
2022

2022 Annual Report | Helix Energy Solutions
About Helix
Helix is an international offshore energy services company that provides
specialty services to the offshore energy industry, with a focus on well
intervention, robotics and full-   eld decommissioning operations.
Overview
Shallow Water Abandonment
We provide a range of offshore services to the oil and gas
and renewable energy markets primarily in the Gulf of Mexico,
U.S. East Coast, Brazil, North Sea, Asia Paci   c and West Africa
regions. We expanded our service capabilities to the Gulf
of Mexico shelf with the acquisition of the Alliance group of
companies (collectively    Alliance   ) on July 1, 2022, which we have
re-branded as Helix Alliance. Our services are segregated into
four reportable business segments: Well Intervention, Robotics,
Production Facilities and our new reporting segment, Shallow
Water Abandonment, which was formed in the third quarter
2022 comprising the Helix Alliance business.
Our Shallow Water Abandonment segment provides services
in support of the upstream and midstream industries
predominantly in the Gulf of Mexico shelf, through offshore
oil   eld decommissioning and reclamation, project management,
engineered solutions, intervention, maintenance, repair,
heavy lift and commercial diving services. Our Shallow Water
Abandonment segment includes a diversi   ed    eet of marine
assets including liftboats, offshore supply vessels, dive support
vessels, a heavy lift derrick barge, a crew boat and plug and
abandonment (   P&A   ) and coiled tubing systems.
Production Facilities
Well Intervention
Our Well Intervention segment provides services enabling our
customers to safely access offshore wells for the purpose of
performing well production enhancement or decommissioning
operations, thereby avoiding drilling new wells by extending
the useful lives of existing wells and preserving the environment
by safely decommissioning aged wells and restoring the
seabed. Our well intervention vessels include the Q4000,
the Q5000, the Q7000, the Seawell, the Well Enhancer, and
the Siem Helix 1 and Siem Helix 2 chartered vessels. Our well
intervention equipment includes intervention systems such
as intervention riser systems, subsea intervention lubricators
and the Riserless Open-water Abandonment Module, some
of which we provide on a stand-alone basis.
Our Production Facilities segment includes the Helix Producer I
(the    HP I   ), the Helix Fast Response System (the    HFRS   ) and
our ownership of oil and gas properties. All of our current
Production Facilities activities are located in the Gulf of Mexico.
Services we currently offer to the offshore oil and gas market
worldwide include:

Development. Installation of flowlines, control
umbilicals, manifold assemblies and risers; trenching
and burial of pipelines; installation and tie-in of riser
and manifold assembly; commissioning, testing and
inspection; and cable and umbilical lay and connection.

Production. Well intervention; intervention engineering;
production enhancement; coiled tubing operations; IRM
of production structures, trees, jumpers, risers, pipelines
and subsea equipment; and related support services.

Decommissioning. Reclamation and remediation
services; well P&A services; pipeline, cable and
umbilical abandonment services; and site inspections.


Production Facilities. Provision of the HP I as an oil and
natural gas processing facility. Currently, the HP I is being utilized
to process production from the Phoenix    eld in the Gulf of Mexico.

Fast Response System. Provision of the HFRS as a response
resource in the Gulf of Mexico that can be identi   ed in
permit applications to U.S. federal and state agencies
and respond to a well control incident.
Robotics
Our Robotics segment provides trenching, seabed clearance,
offshore construction and inspection, repair and maintenance
(   IRM   ) services to both the oil and gas and the renewable
energy markets globally, thereby assisting the delivery of
affordable and reliable energy and supporting the responsible
transition away from a carbon-based economy. Additionally,
our Robotics services are used in and complement our well
intervention services. Our Robotics segment includes remotely
operated vehicles (   ROVs   ), trenchers, the IROV boulder grab
and robotics support vessels under term charters as well as
spot vessels as needed.

Helix Energy Solutions | 2022 Annual Report
Services we currently offer to the offshore renewable energy
market worldwide include:

Site Clearance. Site preparation for construction of offshore
wind farms, including boulder relocation and underwater
unexploded ordnance identi   cation and disposal.

Trenching. Cable burial via jetting and/or cutting by
self-propelled trenching ROVs and plough trenching.

Subsea Support. General subsea support of engineering,
procurement, construction and installation contractors
with ROV services standalone or with support vessels.
Industry In   uences
Demand for our services is primarily in   uenced by the
condition of the oil and gas and the renewable energy
markets and, in particular, the willingness of offshore energy
companies to spend on operational activities and capital
projects. The performance of our business is largely affected
by the prevailing market prices for oil and natural gas.
Oil and gas prices reached ten-year highs during the middle
of 2022 and experienced moderate declines and volatility
during the remainder of 2022. Global demand for oil and
gas continues to recover as supply has been disrupted by
regional con   icts. We expect oil and gas prices will remain
robust for the near term, which should lead to higher customer
spending for the industry. However, despite the current strong
commodity price environment, there remain headwinds
to commodity price stability, including those regional
con   icts, high in   ation and in particular governments    and
central banks    efforts to taper economic growth, COVIDrelated uncertainties, various governmental and customer
environmental, social and governance initiatives, continued
shifting of resource allocation to renewable energy, and
most recently wavering market con   dence in light of turmoil
within the banking industry. We expect these factors will
continue to contribute to commodity price volatility and
may temper customer spending for oil and gas projects.
Strategy and Outlook
Over the near-term, with the current commodity price
environment we expect oil and gas companies to invest
in new long-cycle exploration projects in addition to
maintaining and/or increasing production from their remaining
reserves. As historically production enhancement through
well intervention is less expensive per incremental barrel
of oil than exploration, we continue to expect oil and gas
companies to increasingly focus on optimizing production
of their existing subsea wells.
We support the energy transition to renewables through
our services in offshore wind farm developments, primarily
including subsea cable trenching and burial as well as
seabed clearance and preparation services. Demand for
our services in the renewable energy market is affected
by various factors, including the pace of consumer shift
towards renewable energy sources, global electricity
demand, technological advancements that increase the
production and/or reduce the cost of renewable energy,
expansion of offshore renewable energy projects to deeper
water, and government subsidies for renewable energy
projects. We expect growth in our renewables services
as the energy market transitions to continued renewable
energy developments.
Once end-of-life oil and gas wells have depleted their
production, we decommission wells and infrastructure in
our Well Intervention and Shallow Water Abandonment
segments. As the subsea tree base expands and ages and
customers shift resources to renewable energy, the demand
for P&A services should persist. Our operations service the
life cycle of an oil and gas    eld and provide P&A services
at the end of the life of a    eld as required by governmental
regulations, and we believe that we have a competitive
advantage in performing these services efficiently.

2022 Annual Report | Helix Energy Solutions
Letter to Shareholders
Dear Shareholders,
We long described 2022 as a transitional year for Helix, and
that has borne itself out. We entered 2022 with a post-COVID
recovery market that lacked direction, which was quickly
impacted by the onset of the Ukrainian con   ict. Last year
at this time we didn   t have much market visibility, and we
were navigating the challenges of long-term contracts
rolling off and a difficult rate environment. Our Company
persevered and remained committed to our core values. We
have witnessed the continued migration towards renewables,
and the collective realization that Energy Security is an
essential component of an energy transition. Today, Helix
has the best visibility for the foreseeable future that we   ve
had in years.
In 2022 we delivered meaningful    nancial improvements
with EBITDA increasing to $121 million and Revenue growing
to $873 million, and we marked our    fth consecutive year
of generating positive Free Cash Flow. Signi   cant to our
committed strategy, in July we acquired the Alliance group
of companies, enhancing our capabilities and expanding
our services to the shallow waters predominantly in the Gulf
of Mexico shelf, and establishing Helix as a provider of full
   eld decommissioning services.
Additional operational highlights in 2022 included:


entering into new longer-term deepwater well intervention
and decommissioning contracts for the Siem Helix 1, Siem
Helix 2 and Q7000, as well as the extension of our Helix
Producer 1 contract;
establishing new time charter agreements for vessels
supporting operations in multiple regions;

acquiring a majority interest in the Thunder Hawk Field
which is currently producing in the Gulf of Mexico; and

strategically acquiring niche equipment such as
intervention systems, trenchers and a boulder grab.
We maintained the    nancial discipline to fully redeem our
Convertible Notes due 2022, and ended the year with
approximately $75 million of Net Debt while funding our
growth opportunities with cash on hand.
Each of these highlights underscores our three-legged
business model of facilitating a global energy transition
by Maximizing Production of remaining oil and gas
reserves, supporting Renewable Energy developments,
and Decommissioning end-of-life oil and gas    elds. Our
Well Intervention services are naturally hedged between
maximizing reserves and decommissioning, depending on
commodity price and political winds, with both representing
mature end-of-life oil and gas activities. Our Robotics
group continues Helix   s strong position within the offshore
wind farm space for trenching and site preparation work.
The Alliance acquisition expanded our service offering into
shallow water and has further established Helix as a full-   eld
decommissioning company, along with its other services
supporting the full life cycle of offshore    elds.
We understand the important role Helix plays as a steward
of the people, communities and environments we serve.
Sustainability lies at the heart of our business model and
the services we provide: we allow customers to maximize
production and avoid drilling new wells, we support renewable
energy initiatives, and we safely and effectively decommission
   elds to restore the ocean   s seabeds. In our most recent
Corporate Sustainability Report published in November
2022 we reported on our GHG Emissions metrics for the
prior three years and our current reduction targets. We are
proud of our long-established environmental stewardship
efforts and strong ESG record. Our ESG efforts place us at
the forefront of a global energy transition, and we believe
that translates to long-term value for our shareholders.
Looking ahead in 2023, we are expecting to continue the
improvements seen in the second half of 2022. We have
multiregional optionality and pricing leverage with a strong
near-term outlook for each of our operating segments. Our
strategy will be to maintain capital spending discipline and
focus on Free Cash Flow generation.

Helix Energy Solutions | 2022 Annual Report
In light of this outlook our Board has approved a $200 million Share Repurchase
Program. We envision targeting an allocation of approximately 25% of our
Free Cash Flow to share
hare repurchases, the timing of which we expect to
generally align with ourr cash generation. This was a signi   cant announcement
in Helix   s story, a goall we   ve long communicated to our investors, and we
look forward to deploying
oying capital to execute on the Program and Return
Value to our shareholders.
olders.
In addition to executing
ing on the Share Repurchase Program, we currently
intend to cash settle our outstanding debt commitments, likely reserving a
portion of cash for smaller
maller incremental additions to our capabilities.
Helix employees form the backbone of our Company, and I am grateful for
their hard work. The past
ast few years have been challenging, whether working
through a pandemic or navigating an energy industry under signi   cant
pressure. The Helix Family has persevered and enabled us to be where
we are today. We have
ve grown that family with the addition of Alliance, and
as we look for opportunities
unities to continue to build and shape our Company,
we want to be known as an industry leader and a place where our people
are proud to work. As always, my sincerest thanks to our employees for
everything you do.
Our strategy and focus
us have positioned us well for this improved
energy market, and we have begun to see the rewards of our
efforts. Ours is a cyclical
ical and volatile industry, so while our
outlook is strong we will also be balanced in our
execution. I believe we have positioned ourselves
for future success, and
d I thank you for your
continued con   dence
e and support.
Owen Kratz
President and Chief Executive Officer
Helix Energy Solutions Group, Inc.
   Sustainability lies at
the heart of our business
model and the services
we provide...


shareholder letter icon 4/5/2023 Letter Continued (Full PDF)
 

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