Helix Energy Solutions Group, Inc. (HLX) Q4 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to the review of the Fourth Quarter 2012 Results Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Thursday, February 21, 2013. And I would now like to turn the conference over to Terrance Jamerson, Director, Investor Relations. Please go ahead.

Thanks. Good morning everyone, and thanks for joining us today. Joining me today we have Owen Kratz, our CEO, Tony Tripodo, our CFO; Cliff Chamblee, Executive Vice President and Chief Operating Officer, Alisa Johnson, our General Counsel; and Lloyd Hajdik, our Senior VP of Finance. Hopefully, you’ve had an opportunity to review our press release and the related slide presentation released last night. If you do not have a copy of these materials, both can be accessed through the Investor Relations page on our website at www.helixesg.com. The press release can be accessed under the Press Releases tab and the slide presentation can be accessed by clicking on today’s webcast icon. Before we begin our prepared remarks, Alisa Johnson will make a statement regarding forward-looking information.

During this conference call, we anticipate making certain projections and forward-looking statements based on our current expectations. All statements in this conference call or in the associated presentation, other than statements of historical facts are forward-looking statements and are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual future results may differ materially from our projections and forward-looking statements due to a number and variety of factors, including those set forth in our slide two and in our Annual Report on Form 10-K for the year ended December 31, 2011 and subsequent forms 10-Q. Also during this call, certain non-GAAP financial disclosures maybe made. In accordance with SEC rules, the final slides 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 the replay of this broadcast are available on our website. Owen will now make some opening remarks.

Good morning everyone. We’re going to begin with slide five, which is a high-level summary of fourth-quarter results. Quarter four results were undoubtedly messy due to the impairment charges we booked on the announced sales of both the oil and gas business and the sale of the Caesar. When regarding the impact of the strategic transactions, our real operating business continue to perform nicely and produced 113 million of EBITDAX although these results are slightly below Q3 EBITDAX of 127 million, most of the decline as a result of typically lower seasonal activities associated with our robotics business. Overall for the year, 2012 we finished with a cummatively big debts of 601 million. On slide six and seven, we have enumerated the impact of the impairment charges on our strategic divestiture on this slide so I won’t recite what was recited on slide six. I will note that we achieved very high utilization 94% for our well intervention fleet. Although we operated 10 robots robotic support vessels during Q4, four long-term and six – but our actual robotics fleet was only 69% utilized and we incurred in the extraordinary level of uncompensated mode and the demode cost. Turn to slide seven, closing the book so to speak on our oil and gas business our production totaled 1.4 million barrels of oil equivalent in Q4 compared to 1.5 equivalent in Q3. We continue to realize relatively high pricing for our oil production $99.32 in Q4. However, the real highlight in Q4 was from the oil and gas business related to the successful drilling and discovery of our Wang oil project. We completed this well in January, and although we have now closed on the sale of the oil and gas business, we have a continuing economic interest in the Wang well in the form of an overriding royalty interest on future production. The Wang well is expected to commence production in April. From the balance sheet perspective our cash and liquidity levels remain strong, cash decreased from 584 million at September 30, to 437 million at December 31 mainly attributable to the retirement of 104 – 54 million of convertible notes. Our liquidity levels of more than 900 million remains high. I will now turn the call over to Cliff for an in-depth discussion of our contracting services results.

Thanks, Owen, and good morning, everyone. Contracting services revenues remain strong from Q3 to Q4, primarily due to very strong utilization of the well intervention assets at the well hence returned to service at the beginning of the quarter after 52 day drydock. However gross profit for contracting services down in the fourth quarter mainly due to normal seasonal decline in robotics as well as one-time mobilization and decommissioning costs incurred at the end of the year, which I will get into more detail on the robotics slide here in a minute. We also had unexpected idle time on Express in December due to permitting delays for the client, which ultimately move the schedule into the quarter one of this year. Over all these operational issues contributed to a gross profit being approximately $12 million lower in the fourth quarter than quarter three. Moving on to the next slide, slide 10, again as I mentioned in the previous slide are well intervention assets had a very strong utilization for the fourth quarter and the same can be said for the outlook in well intervention for 2013 and beyond. Q4000 was 100% utilized in the quarter and remains booked solid through 2014. Based on our latest schedule from the shipyard we now expect the Helix 534 to be placed in the service in Q3 and she is also fully booked through the end of 2014. On the Northeast side our well intervention vessels average 91% utilization across a variety of well intervention projects during the quarter. Both vessels now have full schedules for the remainder of the year. Our charter well intervention vessel at Skandi Constructor is still in schedule to begin work in the middle of the year, and the customer interest for this vessel remain strong as we continue to booked for her beyond initial 75 days assign backlog that we have now. We move on to slide 11. On the robotics side. We saw declines in utilization in both vessels and in ROVs vessels, mainly due to as we stated previously the normal seasonal declines. We also had increased costs due to mobilization of the Trencher 1200 under the Grand Canyon, as well as mobilizing two of our vessels from the North sea to the Gulf of Mexico, which one of those vessels return back to the North Sea after the project during the fourth quarter as well. Our newly chartered vessel, the Grand Canyon was placed into service along with two new work class ROVs during the fourth quarter as we returned another vessel to the Island Pioneer back to the owner after five years of service in our fleet. In December, the Grand Canyon kicked-off 150 day wind farm contract utilizing to 1200 trencher and in 2012 renewable energy accounted for approximately 15% which is about $54 million of our total revenues on the Robotics side. So we move on to slide 12, on the subsea construction pipelay side. We had lower than expected utilization on Express due to the customer permitting issues in December resulting in delays that move the road into the first quarter of 2013. The Caesar continued its accommodations work down in Mexico, and with recent schedule delays in December to sell Express is now expected to occur in mid-May and the Caesar remains on schedule for our sale in July. If you move on to slide 13, I’ll just leave this slide for detailing the vessel utilization for your reference and with that I’ll turn it over to Tony for the oil and gas operations.

Thanks, Cliff and good morning. We recite our normal operating statistics for oil and gas on slides 14 and 15. However given the closing of the sale of this business on Feb 6th, I will leave the information on these slides for your reference and more important note, as indicated, we close the sale of ERT on February 6th receiving proceeds of 624 million, which represents the base sale price of 620 million, plus certain closing adjustments. After estimated tax leakage and transaction expenses, we expect net after-tax proceeds of approximately 550 million. We will continue to benefit from an overriding royalty interest on the Wang well and certain other exploration prospects, thus our estimated total pre tax value on the sale of ERT when considering a basket of contingent consideration is closer to 700 million. Over to you, Lloyd.

Thanks, Tony. Turning to slide 17, this slide provides an update on our growth and net debt levels as of the end of the year. In December, the holders of $154 million of our convertible senior notes that we issued in 2005, put their bonds to Helix and we subsequently repurchased them. This left about $3.5 million of these 2005 convertible notes outstanding that we subsequently called and repurchased in early February. And as a result we paid off the entire outstanding balance of these 2005 issued convertible senior notes. Further in conjunction with the sale of our oil and gas business as Tony mentioned in early February, we were required under our credit agreement to take 60% of the after-tax proceeds and pay down senior secured debt. So immediately after the closing of the sale, we were paid a total of 318 million of our credit agreement. We paid off 100% of the outstanding balance of our term loan B, which totaled $271 million and paid on our term loan A and revolver with the balance. And as frame of reference since the second half of 2011 through today, we’ve reduced our gross debt levels by $533 million. At year-end 2012, our net debt-to-book cap ratio was 29%, a slight improvement from that 30% at the end of 2011 and significantly better than the 43% at the end of 2010. Turning over to slide 18. Our liquidity which is defined as our cash on hand in our borrowing availability under the revolver, continues to be at a very robust level. At year-end, liquid totaled 925 million after taking into consideration the 154 million of cash we used for paying off the convertible notes, as well as our ongoing CapEx for our major well intervention projects the Q5000 and Helix 534 and also the drilling of the Wang oil well and Canyon 237. I’ll turn the call back over to Tony to take you through our 2013 outlook. Tony?

Okay, turning to slide 20 to 22, slide 20 presents our initial 2013 outlook. We are forecasting total reported EBITDAX of 300 million plus for 2013, however when backing up this tough impact of our discontinued operations, for oil and gas for the month of January and six days of February and pipe lay and then filling into the equation our pro forma full years impact of the two vessels that will be entering the fleet in 2013, the Skandi Constructor and the Helix 534 or pro forma exit rate EBITDA for 2013 is more like 350 million. We have also broken out revenues by product line with Well Intervention showing a 20% increase in 2013 over 2012. While robotic revenues are forecast to be slightly lower in 2013, we actually anticipate profitability to actually increase as a result of more favorable mix of trenching and ROVDrill activity. Our CapEx spending for 2013 is forecasted at 350 million. Major items represented a $350 number were as follows, progress payments and spending in the Q5 currently under construction in Singapore at 140 million, modifications and improvements of the H-534 Well Intervention vessel also currently in the shipyard in Singapore at 55 million, additional intervention riser system operations for Well Intervention operations of 35 million. Additional robotics vessels and trenchers of 35 million and then life extension expenditures for the Seawell of 12 million, again, these are isolated to 2013 only, the actual total project costs are higher given the money that has been spent previously in 2012 and beyond. We wound up the year with $800 million of backlog most of which is in the well intervention business and this provides a very solid foundation for our forecast in 2013 and beyond. For example, in Q4000 is spoken for through 2014 with additional commitments in progress beyond. The Seawell and Well Enhancer have backlog into the fourth quarter of 2013 and we have strong customer interest beyond. The Helix 534 is fully booked for 2013 and 2014, once she enters service. The Skandi Constructor has backlog for 75 plus days in 2013. So when you look at the well intervention business, we are really fully booked for 2013 and the real variable is operational execution. Canyon our robotics unit continues to expand its technological and market envelope. For example, we continue to develop our world-class trenching technology for example, the London Array wind farm project utilizing the Grand Canyon vessel at the T1200 trenchers currently in progress and is one of the biggest trenching progress we’ve ever worked on. The commercial development of our well drilled technology should accelerate in 2013, for example, we are currently engaged on the subsea mining project offshore in Japan. But stepping back from an overall standpoint to two key variables for 2013 relate to our ability to have both the H-534 and Skandi Constructor successfully enter service as scheduled. Our outlook assumes the H-534 enter service mid-quarter three and the Gulf of Mexico, while the Skandi Constructor entered service in the North Sea mid-year, again, both vessels have work ready for it so it is a matter of these vessels coming out and going to work. I’ll skip slides 24 and 25, and leave them for your reference. And at this time, I’ll turn the call back over to Owen for closing remarks.

Thanks, Tony. For the past few years, we’ve articulated a plan for renewing the strength and growth of Helix. First was to restore the balance sheet to manageable levels, we reduced net debt of 1.2 billion since 2008. I’m sorry we’ve reduced net debt to 1.2 billion since 2008, from over 1.8 billion, to 582 million at year end 2012. Our net debt to cap ratio is again below the 30% target that we communicated as being a comfortable level. The sales of the ERT and the pipelay assets would put us in virtually a no net debt position, the sale of ERT is behind us now and the sale of the Express and Caesar, following completion of currently contracted work. Handovers are anticipated to be finalized by midyear with receipt of balance of another 190 million. Second, was to simplify the business model with renewed focus on contracting services, specifically in well intervention and robotics where we hold our strongest competitive market positions for deepwater applications. Third, we’ve said we’ll aggressively add assets for the explosively growing non-rig well intervention market, as well as in robotics were steady consistent growth is expected. As a result we’ve added three intervention vessels to our current fleet of three. This will be double our capacity by 2015. We’re also adding three new intervention system to our current fleet of five intervention systems. Our long-term plans are to add additional vessels and systems in well intervention beyond this. In robotics we’ve added eight work class vehicles and a new trencher in the last year. Going forward, we plan to continue the run rate of about six work class vehicles per year with an ROV drill and a trencher every other year based on the current market outlook that we see. This could accelerate. We have also committed two addition – we’ve committed to two additional new build charter vessels coming into the fleet by 2015. All of this is either done or in progress. It’s being done at a pace within our resource capacity and balance sheet. We anticipate being able to fund this growth primarily out of cash flow with very little reliance on that. Therefore we’ll have the capacity to consider other opportunities. All of this is being considered and planned with close dialogue with our customer partners. Going into 2013, we are about a $300 million EBITDA service company and as Tony said with a run rate of about 350 million, once all of the transactions are completed. Given our current outlook on the market and growth plans, we anticipate a compounded EBITDA growth rate in excess of 20% annually from just the current plans in the next few years. We feel this is a conservative plan and one that doesn’t tax our resources or stress our balance sheet. It’s very important to us that our customers and our investors have confidence that we do what we say we will do. The company is in good condition, great position, and at this time we’ll be happy to open it up and take any questions. Operator?

Thank you Sir. (Operator Instructions) And our first question comes from the line of Jim Rollyson with Raymond James. Please go ahead. Jim Rollyson – Raymond James: Good morning, guys.

Good morning, Jim. Jim Rollyson – Raymond James: I went by my math, after the closing of the MP sale in February, it looks like you are actually in a net cash position at the moment. With that in mind, and your kind of eventual plans to look at other new build assets, what is the trigger to get you to kind of make that step? Do you risking that Q5000 through backlog and then you have got room for another quote – unquote – “spec vessel”? Because it seems like financially now you are in certainly in a position to be able to start funding your next venture Q5000+ type vessel.

I think you hit on one of them, Jim. We definitely plan to – our plans are to build another vessel. It’s a matter of just picking the right moment to initiate it, announce it. I think that depends on a couple of factors, one, you mentioned the Q5000 although we have a high degree of confidence on the Q5000 utilization. Another one I would like to see us delivered the 534. I want to make sure that we are not overcommitted to capital projects in shipyards which taxes our human resources to effectively pull the projects off on time and on budget. So that would be a second trigger. And then the third is, just watching the market. And I think that sort of argues for an accelerated pace rather than a slower pace because the market outlook that we are seeing is very robust. Jim Rollyson – Raymond James: And when you initially shopping around for a shipyard for the Q5000, I seem to recall you were kind of looking at deals to maybe build more than one vessel and trying to get a break on the price. Is that – are you too far past that initial bill point on the Q5000 that if you pull the trigger this year, you’d still be able to get a break if you went with the same shipyard?

I think the next one that we build will be a little less than the Q5000. I’d attribute that to a number of things. I do not know – you’re correct when we went to the shipyards, we ran a multiple shipyard process for a two-build slot, and got pricing accordingly. As a result, I think our partner in this whole endeavor is Jurong and we’re working well with them. They are on Board with looking at the next one and they are assisting us in the designing and engineering and moving it forward. I will say that I think Jurong is a good yard for us – and that what we are building are basically very highly specialized one of a kind type assets. And Jurong I think is very adept at our – being a customized builder of semi-submersible. So, I think it’s a great match between our aspirations and their capabilities. Jim Rollyson – Raymond James: Great and last one, Tony, just on the – your benefits you will get over time from the Wang. How the report that? Is that just going to comment on the equity income line?

We’re going to report that in other income and expense. Jim, so you will see it on that. And production as I said, is expected to start off on April 1st, so we should start to see royalties thereafter. Let me clarify one comment Jim, you made about us being in a no net-debt position, I think I would be closer to reality once we complete the sales of the Caesar and the Express. So by mid-year, we will be very close to being at a no net debt position. Jim Rollyson – Raymond James: All right. Certainly a wonderful accomplishment and congrats, guys. Thanks.

Thanks. In fact if you look at the slides, we actually did a pro forma that is more or less suggests that as well, on our debt slide.

And our next question comes from the line of Igor Levi with Morgan Stanley. Please go ahead. Igor Levi – Morgan Stanley: Good morning.

Good morning. Igor Levi – Morgan Stanley: So now that you have a clean balance sheet and a very focused business it looks like you are expecting 20% EBITDA growth over the coming years funded out of free cash flow. So I was wondering what type of growth opportunities you see beyond the existing plans and what kind of growth could you achieve if you fully leverage your balance sheet?

That’s a work in progress and we will let you know as soon as we really pin that down, but we’ve got a lot of potential. Igor Levi – Morgan Stanley: Right, and if you were to order let’s say another vessel at some point in the first half of this year, when would you expect it to be realistically delivered?

Realistically, I think early 2016 would be the next delivery date. Igor Levi – Morgan Stanley: Early 2016? Within your 2013 guidance, what kind of utilization rates are you embedding for well intervention in ROVs?

Igor, for well intervention, well, really let’s say between 95% and 100% because we have full backlog. So you always have some down days for the maintenance issues, but really, again as we suggested in our commentary, we have no shortage of work, it’s a matter of just execution. On the robotic side, you typically don’t have the visibility on robotics that you do in well intervention. But we are assuming, let’s say around about maybe 75% utilization for our robotics vessels, this is kind of what our anticipation in 2013. Igor Levi – Morgan Stanley: Okay. And how many chartered vessels are you kind of expecting to average?

Well, we are going to have the four under long-term charter but we do expect to pick up spot vessels as the market dictates. For example, the road drill project for subsea mining that was in offshore Japan right now is being done with the spot market vessel. So I would say on average we might have two spot market vessels throughout the year on average. With the four long-term chartered vessels really been the foundation for our fleet there. Igor Levi – Morgan Stanley: Great, that’s very helpful. I will turn it over.

And our next question comes from the line of Joe Gibney with Capital One. Please go ahead. Joe Gibney – Capital One: Thanks, good morning. Tony, just a question on the underlying annual G&A run rate here I know there are some moving parts having pipe lay move out of the fold have some higher shortage and G&A associated with that. What is the underlying kind of annual G&A run rate that you are looking at now and I was curious what the core level component of that is?

Joe, we expect to hold G&A within the 8 to 10% range. We’re thinking in the first half of the year, we’re not really going to see a lot of G&A reduction because we still have a lot of activity associated with our legacy businesses. For example, our pipe lay business is still present, and won’t be finished until the Caesar get sold in July. Corporate is about 50 million of our G&A in total. I would say going forward, we expect to reduce G&A, we are going to be at a much more streamlined simpler company to well intervention business. It is much simpler than the subsea construction business. But I would say over all, we are still going to be in the 8 to 10% quarter and we are going to work hard to reduce our overall corporate SG&A levels. I would just say that. But I do not expect us to be any lower than 8% even going forward?

Okay, helpful. And just to clarify, the ‘13 EBITDA guidance of roughly 300 million, you indicated sort of inclusive of this 27 million step from ERT, is the Express Caesar contribution also in that roughly $300 million figure? It just wasn’t called out specifically I just want to confirm.

Yes it is. Yes it is it is. It’s not very big and by the way the 27 million that’s component of the E&P business also includes the Wang royalty estimates. Joe Gibney – Capital One: Okay. All right. Helpful. Just a vessel specific question, just curious that the timing and duration of HP I dry dock, you referenced the Seawell life extension, I just didn’t know if we should be thinking about downtime and what timing to be associated with that one.

Yes, this is Cliff. The HP dry dock right now is scheduled for September and I think we have got about 55 days scheduled in for it and that’s – our budget reflects that. And the Seawell we won’t be doing – that won’t be any effect of service or utilization in this year. Joe Gibney – Capital One: Okay, helpful.

We will be planning for it this year, but it won’t happen this year. Joe Gibney – Capital One: Okay, fair enough. And just wanted to confirm one last thing, on the net debt and cash proceeds from pipelay sales, Owen, I think you reference this, I just want to confirm, is this roughly 190 million left in cash proceeds from the pipelay sale that you’re expecting to receive, is that correct?

That’s correct. And that’s what between the Express and the Caesar, and they’ll fund our own – those components will fund on separate dates with the handover of each vessel. Joe Gibney – Capital One: Okay, fair enough. I appreciate it. I’ll turn it back.

(Operator Instructions) And our next question comes from the line of Michael Marino with Stephens. Please go ahead. Michael Marino – Stephens: Good morning.

Good morning. Michael Marino – Stephens: Question, Owen, you mentioned in some of your closing remarks about the committing to two new builds on the robotic side for, I guess, for long-term vessel charters, would those be in addition to kind of the four you’re running now? So the idea is to go from kind four charter boats to six, or are those...?

I think, you’ll see that announced in each year because we have the option of either carrying over older charters or rolling them off and it depends on what the market looks like in that particular year.

Yeah, and I’ll add to that, we’re going to have four charter vessels now by July, I think we pick up the fifth one of the installer, and those two boats you’re referring to, won’t come until ‘14 and ‘15 and these charters that we have vary in range from three, four, five years with options. So our intent and always has been is to play the market when those vessels are ready to come on, we can see if we want to see extend the charter options on some of the other vessels and size our fleet up or down accordingly to the market. Michael Marino – Stephens: But is kind of the idea though that, I mean, that market is getting a lot better and, I mean, it’s something you want more potential exposure to?

Yeah. The idea is to keep growing it. But what I would say we have some protection on the risk side that we can let some of those go if we need to. But, yeah, of course, the idea is to grow it. Michael Marino – Stephens: All right. What’s kind of the general market outlook for that – for the robotics business?

On the robotics side, for this year, it’s pretty flat compared to what we were seeing last year. So there is a little growth but nothing that’s negligible, I guess. But in ‘14 and ‘15, we see quite a bit of growth on the renewable side of the equation, which will require vessels and trenchers. Michael Marino – Stephens: Okay.

To give just one more data point there, our run rate anticipates acquiring six new work-class vehicles each year. Two of those, though, would be fleet replacement vehicles, as we retire older assets. So, on the fleet of 47 – in the neighborhood of 47, adding each year shows you the growth rate that we sort of anticipate. Michael Marino – Stephens: Great. That’s helpful. On the Q4000 backlog, is – should we expect, kind of, as you work through that backlog, to see higher revenue contribution from day rate increases or kind of the day rate is pretty leveled through that backlog?

I think, through the backlog of this year, it’s going to be pretty level because a lot of these are legacy and ongoing service agreements we had with some of our clients. But as those fall out and we renegotiate new longer-term agreements, then those rates are definitely going up. Michael Marino – Stephens: In order of magnitude, how much?

As much as we can get but usually probably maybe 10, 15%. Michael Marino – Stephens: Okay. And one more, Tony, on the guidance, just for clarification, does that number includes equity income contribution from Marco Polo and Independence Hub?

Yes, it does. Michael Marino – Stephens: Okay, thank you

As well as the HP one, of course. Michael Marino – Stephens: Right.

And our next question comes from the line of Martin Malloy with Johnson Rice. Please go ahead. Martin Malloy – Johnson Rice: Good morning. I was wondering, could you talk about any opportunities you are seeing out there as far as additional vessels like that the 534, that would be conversion that might help you accelerate as a deployment?

We don’t anticipate making any further acquisitions of the older vessels. I think our experience with the five before is sufficient. It’s not that easy to buy these old vessels and bring them into modern compliance and up to the standards that we demand of an intervention asset. I think our focus will be on new highly specialized of area efficient assets going forward. Having said that, though, we are – we have covered the market really well and there are a few assets that we could have access to, to contract with, but it’s not our expectations to have an equity interest in them. Martin Malloy – Johnson Rice: Okay. And then I’m sorry I missed the impact of the express delay on the 4Q results. Did you give a dollar amount?

Marty, I’m going to just off the top of my head sets probably about 3 million. Martin Malloy – Johnson Rice: Okay. Thank you.

(Operator Instructions) Our next question comes from the line of Travis Bartlett with Simmons. Please go ahead. Travis Bartlett – Simmons: Hi, guys. Good morning.

Good morning. Travis Bartlett – Simmons: First one for you, I just wanted to talk as on the well intervention side, so long-term of the new well intervention vessels the Q5000, and the additional new build that you mentioned, is there any potential out there for Helix to get one of these new build vessels fully committed with the customer under some type of long-term contracts? I mean, are you guys seeing any opportunities like this out there?

That’s certainly our intent. And although you can classify these builds are as speculative, it’s not without a great deal of dialogue with the operators before we commit. But it’s not something that’s a signed contract or announceable yet. Travis Bartlett – Simmons: Right, okay. And then second one here, just looking at the exit rates EBITDA guidance of 350 million, and then looking at the pro forma business, excluding some of the discontinued operations here. What kind of run rate revenue are you guys assuming in your exit rate guidance? And then to the extent that you could break is down by Robotics and well intervention, I think that would be helpful?

Travis, we’ll come back to you later on that. Obviously its higher than the – not remember if we have in the guidance for the full year 2013, because of the contribution we expect from the 534 and the Skandi Constructor. So we’ll come back with you on that. Travis Bartlett – Simmons: Okay. And then...

We will focus more on the bottom line with respect to that guidance than the top line. Travis Bartlett – Simmons: Yeah. Sure. Understandable. Last one here, just on the Robotics side, the revenue guidance there. Can you just talk about a little bit your expectations for 2013, and just kind of curious on the revenue declines of about 5% year-over-year, what’s kind of driving at there?

Well the revenue has declined but the profitability is up slightly, and as I mentioned, we see in the scheme of things, a relatively flat year. But we do see a big increase in ‘14, and ‘15 coming on the removals entrenching side. So nothing really significantly driving it down this year. It’s just that we don’t see and as Tony mentioned earlier, one of the issues on the well intervention side, we have quite a bit of visibility in long-term contracts that are planned up front on the robotics or canyon side. It’s almost like the fire truck that we don’t usually get a lot of long-term contracts, it’s a lot of sporadic jobs and we short-term lead times on them. Travis Bartlett – Simmons: Okay, thanks very much guys I will turn it back.

(Operator instructions) And our next question comes from the line of Trey Stolz, IBERIA Capital Partners. Please go ahead. Trey Stolz – IBERIA Capital Partners: Good morning guys, couple of quick questions here. With the backlog, you’ve got on the well intervention side, I assume some of that from the Q4 got moved up, to the H-534, how should we think about rates, I know you assess every quarter but how should we think about rates and a lot of that going forward given the long lead time when you are backlog and what assessor you are having pushing rates up lately?

That’s a constant thing just trying to get the rates up and I was just the balance of what the clients are willing to pay against using other methods E I do not see them directly increasing, soon, but for the new things the new contracts that we’re discussing with clients now for the Q5000, for example, and maybe beyond that, so they’re certainly reflecting the increase from a demand side and also the ones that’s going to take on the capital side. So where that’s going to fall exactly, I hate to speculate on, but we are pushing them up.

Yeah, Trey, let me just add it, if you look at the rates we’re quoting today for our well intervention vessels to where it was two years ago, I will just use the term they’re significantly higher on average. There is a lot of factors that go into the rates, whether client is going to use our intervention riser system or their own and there is a lot of factors that go into average rates. But we look forward and we look at what we’re quoting for the Q5000, I think that the rates we’re talking about are again significantly higher, than what we’re seeing today. And it has to be that way because the capital cost to build the new vessels is significantly higher than it was 10, 12 years ago when we built the Q4000. So I think we look at it from a long-term perspective, rates have gone up considerably. And there is no doubt that’s been helped by higher semi drill rig rates.

And I will jump in and join the party here with one more data point on the macro issue. If you look at the market as its been developing right now, we’re in the infancy stage of the non-rig intervention market. The assets have been by necessity priced at a discount to the historic methods, which is a drill rig. Today, there is discount, yet if you look at the efficiency of these assets versus the rig, it actually argues that there should be a premium. So there is definitely a gap between where the intervention assets are priced today relative to the value they contribute relative to a drill rig. So I think as the market matures, and pinning down the timing of that realization, is difficult but I think it’s starting to accelerate here lately which is attributing to the recent rate increases because the producers are starting to see the need, demand is increasing for this kind of asset in market. Trey Stolz – IBERIA Capital Partners: Owen, thanks, that was my next question, I guess, was how you view it relative to a deepwater rig day rate. Actually that’s due to the quicker set up and quicker overall fewer days on the job, so it saves the E&P theoretically even with a higher day rate?

Yes, I think there has been a number of studies done by producers, in collaboration with our sales and there is actually at the current day rates, there is an efficiency gain of roughly 40% by using one of our assets versus a drill rig which is significant to a producer. Trey Stolz – IBERIA Capital Partners: Got you. And you touched on this a second ago, the Q5000, and we’re talking about potential long-term contracts for these new builds, is demand for that long-term contract coming from the Gulf of Mexico, or is that likely to go elsewhere and if so, how might that affect OpEx on a daily basis for a vessel like that?

Well, I think that’s one of the exciting things about where Helix sits right now is that, we are North Sea and Gulf of Mexico centric, but the intervention market on a global basis is really starting to perk up. There has been a longstanding intervention needs down in Brazil and those demands are increasing. West Africa is opening up, that maybe a little slower in developing but it’s definitely there. So as Helix was moves forward, one of the things that we are doing right now is just really educating ourselves in looking at expanding our operations internationally and everything that that entails. Trey Stolz – IBERIA Capital Partners: Okay. Is it – I guess, is it off the think that you’d see a similar increase in OpEx operating in a market like West Africa or Brazil versus the Gulf of Mexico? Is there anything that would be different on the well intervention side?

Well, there’s different regulatory environments in each of these areas which drives are OpEx, so – but I’d say order of magnitude, OpEx is in more than 10% or 15% different region to region. Trey Stolz – IBERIA Capital Partners: Okay, got you.

Yeah. And the pricing will reflect those differences. Trey Stolz – IBERIA Capital Partners: And last year you had an offshore or deepwater driller lease intervention riser system, any additional interest from drillers in that respect, was that kind of one-off situation or is that something to think about for a potential down the road?

No, I think that’s an area of business development that we are looking at right now and sort of focus on the intervention riser system that we built as a rental is now basically fully booked for this year. So I think – and there is interest from parties in this kind of – this service being provided and it’s one that we’re exploring in broadening our offering. Trey Stolz – IBERIA Capital Partners: All right and one last one. I know you offsetted little bit more than 900 million in liquidity and with CapEx commitments coming due on the new builds, what are your thoughts on tapping the capital markets, any kind of comment there?

Well, Trey, again, we – our plans are to execute our growth plans within our existing free cash flow and our existing available liquidity. Now, without foreclosing in other options, so if we decide to build new vessels, and it would require us to go to the capital markets, we have the flexibility to do so because of where our balance sheet is today. But that’s more likely to be inexpensive form of debt than anything else. Trey Stolz – IBERIA Capital Partners: By – I guess you mean that you Q6 and Q7 being beyond what’s contemplated with free cash flow currently?

I would say the Q7 would be within our cash flow maybe even the Q6, but maybe beyond that. But I think right now it’s really a hypothetical discussion more than anything else, Trey, so – I hate to get to granular here in the discussion of how much capital we will require for a hypothetical number of units we may or may not build. Trey Stolz – IBERIA Capital Partners: No, but that’s helpful and puts us in perspective. Thank Tony.

Sure. Trey Stolz – IBERIA Capital Partners: And that’s it for me.

And we have no further questions on the telephone line at this time. I will turn the call back to you.

Okay, again. Thanks for joining us today and we very much appreciate your interest and participation and look forward to having you participate on our first quarter 2013 call in April. Thank you.

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.