Annual Report
2020
www.helixesg.com
ABOUT HELIX
Helix Energy Solutions is an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention and robotics operations.
|
OVERVIEW |
STRATEGY AND OUTLOOK |
Traditionally, our services have covered the lifecycle of an offshore oil or gas field. In recent years, we have seen an increasing demand for our services from the offshore renewable energy market, with a current focus on offshore wind farm projects and cable burial operations.
We have three reportable business segments: Well Intervention, Robotics and Production Facilities. Our well intervention segment includes seven purpose-built well intervention vessels, six intervention riser systems ("IRSs"), three subsea intervention lubricators and the Riserless Open-water Abandonment Module ("ROAM"). Our robotics equipment includes 44 work-class remotely operated vehicles ("ROVs"), four trenchers and one ROVDrill. We charter ROV support vessels on both long-term and spot bases to facilitate our ROV and trenching operations. 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, with all of our current Production Facilities activities located in the Gulf of Mexico.
MARKET AND COVID-19 IMPACT
Crude oil prices declined significantly in 2014 and have been volatile since then, most recently experiencing a precipitous decline through April 2020 due to the ongoing COVID-19 pandemic as well as the price war among OPEC+ nations during the first quarter 2020. The pandemic has resulted in a new period of market weakness. Most if not all of our oil and gas customers have drastically cut their spending, which has reduced the demand and rates for the services offered to our oil and gas customers. These developments have also impacted, and are expected to continue to impact, many other aspects of our industry and the global economy, including limiting access to and use of capital across various sources and markets, disrupting supply chains and increasing costs, and negatively affecting human capital resources including complicating offshore crew changes due to health and travel restrictions as well as the overall health of the global workforce.
While the full impact of the COVID-19 pandemic, including the duration of the decrease in economic activity and the resulting impact on the demand and price of oil, remains unknown, we expect that the industry will be challenged through 2021 and possibly longer.
Despite this current period of market weakness and volatility, over the longer term we expect oil and gas companies to increasingly focus on optimizing production of their existing subsea wells. As oil and gas companies re-assess and focus their budgetary spend allocations, we expect that it may be weighted towards production enhancement activities rather than exploration projects as enhancement is less expensive per incremental barrel of oil than new exploration. Moreover, as the subsea tree base expands and ages, the demand for well plug and abandonment ("P&A") services should persist. Our well intervention and robotics operations are intended to service the lifecycle of an oil and gas field as well as to provide P&A services at the end of the life of a field as required by governmental regulations. We believe that fundamentals for our business remain favorable over the longer term as the need to prolong well life in oil and gas production and safely decommission end of life wells are primary drivers of demand for our 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.
|
Page 2 |
Helix |
OUR OPERATIONS
We provide services primarily in deepwater in the Gulf of Mexico, Brazil, North Sea, Asia Pacific and West Africa regions.
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; inspection, repair and maintenance of production structures, trees, jumpers, risers, pipelines and subsea equipment; and related support services.
Decommissioning. Reclamation and remediation services; P&A services; pipeline 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 field in the Gulf of Mexico.
Fast Response System. Provision of the HFRS as a response resource in the Gulf of Mexico that can be identified in permit applications to U.S. federal and state agencies and respond to a well control incident.
Services we currently offer to the offshore renewable energy market worldwide include:
Site Clearance. Site preparation for construction of offshore wind farms, underwater unexploded ordnance identification and disposal and boulder relocation.
Trenching. Cable protection via jetting and/or cutting by self-propelled trenching ROVs.
Subsea Support. General subsea support of engineering, procurement, construction and installation contractors with ROV services standalone or with support vessels.
LETTER TO SHAREHOLDERS
Owen Kratz, President and Chief Executive Officer
Dear Shareholders,
|
Going into 2020, we were expecting the market recovery |
near-term debt obligations and a sustained downturn. In |
|
that began in 2019 to continue. Instead, the entire world |
2020 we reduced our overall net debt by approximately |
|
was turned upside down by a global pandemic that persists |
$85 million, as we continue to de-lever our balance sheet. |
|
even today. It has been a difficult year for many people, |
More recently we fully paid off our loan on the Q5000. In |
|
and more than anything I hope you and your families are |
2019 we completed the Q7000 build, representing our |
|
staying safe and healthy through these difficult times. |
last legacy project in our capital expansion program, and |
|
in 2020 we were able to lower our costs and improve our |
|
|
It's fair to say the ongoing COVID-19 pandemic colored |
efficiencies. As with our operations groups, financially we |
|
nearly everything we did in 2020. Operationally we imple- |
believe we have responded appropriately to this environment |
|
mented numerous health and safety protocols, including |
and have positioned ourselves well for the path forward. |
|
personnel isolation and health screenings prior to travel |
We proved that we are evolving. There is a transition |
|
and crew changes, a rigorous testing regime for all offshore |
|
|
personnel, mandatory face coverings, social distancing, |
occurring in the energy sector. The market's focus on |
|
deep cleanings of our onshore facilities and offshore |
green energy has been emerging for some time now, |
|
assets, immediate quarantine and definitive response |
and in 2020 that trend continued to grow. This evolution |
|
protocols, and working remotely for office-based positions. |
is impacting E&P companies' budgets, but it should |
|
Financially, we withdrew our annual guidance early on in |
provide opportunities for smaller producers or even our |
|
the pandemic, recognizing that the full-year outlook was |
own continued oil and gas production ownership efforts. |
|
simply no longer possible to predict at that time. |
Also, as the level of activity for offshore renewable energy |
|
projects such as wind farms has increased, so has the |
|
|
We are world leaders in what we do, but we recognize |
need for reliable services and related equipment. In 2020 |
|
there's always room to grow, evolve and learn more. This |
our robotics segment derived significant revenues from |
|
pandemic has tested our team in a manner in which no |
offshore renewable energy contracts, performing services |
|
other event has previously. With our execution in 2020, |
like subsea power cable burial and seabed clearing, and |
|
we proved a lot about ourselves: |
we believe over the long term we're positioned to continue |
|
We proved that we are strong. With measures in place |
to grow our renewables offerings. The world is changing |
|
in many ways, and Helix is showing we are ready and able |
|
|
to protect our personnel, those partners with whom we |
to evolve as well. |
|
work and their collective families, in 2020 we managed to |
|
|
avoid major operational downtime related to the pandemic. |
Along with an energy transition, there can be no doubt |
|
The market was uncertain and our results were down |
that calls for corporate sustainability are resonating |
|
overall, with the largest impact being felt in our North Sea |
throughout the world, and with good reason. At our core, |
|
well intervention business with two vessels stacked for a |
Helix provides sustainable services. We recognize |
|
majority of the year. But elsewhere we delivered results |
our need to be good corporate citizens and the important |
|
largely in line with pre-COVID expectations. We generated |
role we play as a steward of the people, communities and |
|
approximately $80 million of free cash flow, something |
environments we serve. Fundamentally, Helix's business |
|
we're proud of in this environment. Like many others |
model offers our customers a variety of sustainable |
|
we got knocked back in 2020, but around the world our |
solutions, including: via production enhancement which |
|
people rose to the challenge and showed our resiliency. |
allows producers to defer and decrease their reliance on |
|
We proved that we are prudent. In the third quarter we |
drilling; decommissioning whereby end-of-life wells are |
|
plugged and abandoned in a safe and environmentally |
|
|
refinanced a significant portion of our near-term debt and |
proper manner; and through the renewables markets our |
|
pushed it out to 2026, which allows us to strengthen our |
robotics segment serves. We're proud to stand on call as |
|
liquidity position and maintain flexibility to manage our |
a first responder in the Gulf of Mexico with our Helix Fast |
|
Page 4 |
Helix Energy Solutions | 2020 Annual Report |
Response System, which helps mitigate and remediate the environmental risks associated with offshore drilling and production operations. We know our ability to deliver Environmental, Social and Governance successes represents a principal component in creating long-term value for our shareholders, and we continue to implement and improve our ESG initiatives and disclosures throughout our business.
Looking ahead to 2021 we are still facing many challenges. Vaccines are being rolled out, but the pandemic's impact on the market endures, and no one can definitively say how quickly a recovery may occur, if at all, in the coming year. Historically the demand for our services has tracked the budgets of producers, and although we are constantly diversifying and would benefit from a recovery, our work volume may suffer nonetheless. We believe we've built strong relationships with our customers in the Gulf of Mexico and Brazil, but the pandemic did not help our prospects of extending long-term contracts. Any producer that could support a long-term contract is also currently dealing
with the same uncertainties that face our entire sector, so we are anticipating a return to an entirely spot market, at more current market rates. This will put pressure on utilization for our vessel fleet, and we will need to rise to the occasion once again.
Where there are challenges, there is opportunity. We stepped up and delivered in 2020 in a variety of ways, but this coming year we will likely see even more adversity. As the world responds and recovers to the pandemic, the markets should improve, although we don't expect meaningful recovery will happen until at least 2022. For 2021, our focus will be to continue our diversification with more renewables projects, expand and strengthen our well intervention service offerings, and add production deals. Our balance sheet is strong, we'll continue to prudently manage our expenditures, and we have a plan
in place to keep lowering our debt. We're still mired in a pandemic the likes of which none of us has ever seen, and our market's cyclicality is on full display. But we believe Helix is well positioned to weather this storm, with great leverage to macro and market recoveries. Our Helix family has proven itself to be strong, prudent and evolving as we face these challenges together. We are still navigating the present, and look forward to what the future brings.
Owen Kratz
President and Chief Executive Officer
Helix Energy Solutions Group, Inc.
2020 Annual Report | Helix Energy Solutions
Attachments
Disclaimer
Helix Energy Solutions Group Inc. published this content on 06 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 April 2021 15:21:18 UTC.
