Q1 2024 Earnings Summary
- Improved EBITDA Outlook: Management expects the EBITDA in the shallow water abandonment segment to exceed the initial $30–40 million guidance, suggesting stronger operating performance than originally anticipated.
- Strong Capital Position and Disciplined Shareholder Returns: Despite a low current share repurchase pace, the company’s robust cash balance and overall liquidity indicate it is well positioned to deploy capital for growth, reflecting confidence in its financial strength.
- Rising Well Intervention Rates: The company is pushing for leading-edge rates approximately 15% higher, supported by tight market conditions and increasing rig rates, which may further enhance future EBITDA and drive long-term growth.
- Seasonal Operational Challenges: The shallow water abandonment segment is highly seasonal, with adverse winter weather affecting vessel utilization, which could lead to delays or lower-than-expected performance in the near term.
- Contracting Uncertainties in Key Markets: Uncertainties in Petrobras’ tendering process—with unclear timelines and process-driven negotiations—pose risks to securing timely contracts and revenue realization in Brazil.
- Asset Supply Constraints: The company indicated a shortage of assets to cover high-demand regions (e.g., West Africa and Australia), suggesting that insufficient capacity could limit growth opportunities despite rising market demand.
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EBITDA Guidance
Q: Revised EBITDA outlook?
A: Management now expects to exceed the initial $30–40 million EBITDA guidance for shallow water operations, targeting a full cycle run rate of about $60 million, though 2024 will reflect a slower pace due to market reassessments and bankruptcy impacts. -
Capital Returns
Q: How return capital to shareholders?
A: They plan to deploy cash for growth where immediately accretive using a $200 million facility, and if attractive opportunities don’t emerge, they will revert to share repurchases while building a strong cash balance. -
Rate Increases
Q: How much have rates risen?
A: Management noted that leading-edge rates are roughly 15% higher than before; as legacy rates phase out, new higher rates are expected to drive significant EBITDA improvements in 2025. -
Share Repurchase Level
Q: Why only low quarterly repurchases?
A: Despite a strong cash position of about $240 million, the company is conducting minimal repurchases (around $5 million per quarter) given their better-than-expected operating performance. -
Cox Bankruptcy Impact
Q: What’s the timing of Cox work?
A: They anticipate some work from the Cox bankruptcy may begin in Q4, with about 1,860 wells potentially returning over a span of 7–20 years, though most activity is expected to pick up in 2025. -
Vessel Strategy
Q: Are cold-stacked vessels attractive?
A: The company is not pursuing cold-stacked semi-subs since the retrofit economics are not commercially viable, preferring to focus on their current, more attractive assets. -
Petrobras Tender Update
Q: Update on Siem Helix 2 tender?
A: They were the low bidder on both two riser vessels and one riserless vessel, and have begun negotiations; further details will be provided as the process unfolds. -
Deepwater Fleet Shortage
Q: Is there a deepwater vessel shortage?
A: Yes, the firm remains short of an asset to cover West Africa and another for Australia, prompting them to explore options, although no final decision has been made.
Research analysts covering HELIX ENERGY SOLUTIONS GROUP.