What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-07-27 compared with 2022-04-27 · 123 added, 55 removed, 208 unchanged (46% of the section changed)

15 unchanged sentences

● statements regarding potential developments, industry trends, performance or industry ranking;

● statements regarding our Environmental, Social and Governance (“ESG”) initiatives and the successes thereon or regarding our environmental efforts, including greenhouse gas emissions targets;

● statements regarding our ESG initiatives and the successes thereon or regarding our environmental efforts, including greenhouse gas emissions targets;

● statements regarding global, market or investor sentiment with respect to fossil fuels;

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● the results of corporate initiatives such as alliances, partnerships, joint ventures, mergers, acquisitions, divestitures and restructurings, or the determination not to pursue or effect such initiatives;

● the impact of inflation and our ability to recoup rising costs in the rates we charge to our customers;

● the impact of any potential cancellation, deferral or modification of our work or contracts by our customers;

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● the impact of general, market, industry or business conditions;

● the impact of inflation and our ability to recoup rising costs in the rates we charge to our customers.

● the factors generally described in Item 1A.

Risk Factors in our 2021 Form 10-K.

Our actual results could also differ materially from those anticipated in any forward-looking statements as a result of a variety of factors, including those described in Item 7.

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We are an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention and robotics operations.

The services we offer to the oil and gas market cover the lifecycle of an offshore oil or gas field, and the services we offer to the renewable energy market are currently focused on offshore wind farm projects, including trenching and cable burial and seabed clearance operations.

Our services are centered on a three-legged business model well positioned for a global energy transition by maximizing production of remaining oil and gas reserves, decommissioning end-of-life oil and gas reserves and supporting renewable energy developments.

Our well intervention fleet includes seven purpose-built well intervention vessels and 10 intervention systems.

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The performance of our business is largely affected by the prevailing market prices for oil and natural gas, which are impacted by domestic and global economic conditions, hydrocarbon production and capacity, geopolitical issues, weather, global health, and various other factors.

Oil and gas prices experienced recent highs during the first quarter 2022 as global demand continued to recover from COVID-19 related restrictions and supply was disrupted by regional conflicts.

Oil and gas prices experienced recent highs during the first half of 2022 as global demand continued to recover and supply was disrupted by regional conflicts.

The increases in oil prices, as well as the outlook for higher sustained oil prices, should lead to higher customer spending for the industry.

However, despite the current strong commodity price environment, there are broad headwinds to commodity price stability.

The headwinds include those regional conflicts, high inflation, ongoing COVID-related uncertainties, various governmental and customer ESG initiatives and continued shifting of resource allocation to renewable energy.

These headwinds include those regional conflicts, high inflation, ongoing COVID-related uncertainties, various governmental and customer ESG initiatives and continued shifting of resource allocation to renewable energy.

We expect this will contribute to commodity price volatility and may temper customer spending for oil and gas projects.

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Our customers have used drilling rigs on existing long-term contracts (rig overhang) to perform well intervention work instead of new drilling activities.

Current volumes of work, the day rates quoted by drilling rig contractors and existing rig overhang affect the utilization and/or rates we can achieve for our assets and services.

Current volumes of work, rig utilization rates, the day rates quoted by drilling rig contractors and existing rig overhang affect the utilization and/or rates we can achieve for our assets and services.

The COVID-19 pandemic resulted in new market dynamics and challenges to us, including contributing significantly to oil and gas price volatility and increased costs related to our supply chain, logistics and human capital resources.

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Inflation rates have been relatively low and stable over the previous three decades;

however, in 2021 due in part to supply chain disruptions and the effects of the COVID-19 pandemic, inflation rates began to rise significantly and remained high through the first quarter 2022.

however, in 2021 due in part to supply chain disruptions and the effects of the COVID-19 pandemic, inflation rates began to rise significantly and remained high through the second quarter 2022.

Although we are able to reduce some of our exposure to price increases through the rates we charge, we bear the costs of operating and maintaining our assets, including labor and material costs as well as recertification and dry dock costs.

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We define backlog as firm commitments represented by signed contracts.

As of March 31, 2022, our consolidated backlog totaled $548 million, of which $263 million is expected to be performed over the remainder of 2022.

As of June 30, 2022, our consolidated backlog totaled $552 million, of which $232 million is expected to be performed over the remainder of 2022.

Our contract with Trident Energy Do Brasil LTDA.

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(“Petrobras”) to provide well intervention services offshore Brazil with the Siem Helix 2 chartered vessel, our well intervention contract with Shell Offshore Inc.

for the Q5000 and our fixed fee agreement for the HP I represented approximately 58% of our total backlog as of March 31, 2022.

for the Q5000 and our fixed fee agreement for the HP I represented approximately 54% of our total backlog as of June 30, 2022.

Backlog is not necessarily a reliable indicator of revenues derived from our contracts as services are often added but may sometimes be subtracted;

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EBITDA, Adjusted EBITDA and Free Cash Flow should not be considered in isolation or as a substitute for, but instead are supplemental to, income from operations, net income, cash flows from operating activities, or other income or cash flow data prepared in accordance with GAAP.

We define EBITDA as earnings before income taxes, net interest expense, gain or loss on extinguishment of long-term debt, net other income or expense, and depreciation and amortization expense.

Non-cash impairment losses on goodwill and other long-lived assets and non-cash gains and losses on equity investments are also added back if applicable.

To arrive at our measure of Adjusted EBITDA, we exclude the gain or loss on disposition of assets and the general provision (release) for current expected credit losses, if any.

In addition, we include realized losses from foreign currency exchange contracts not designated as hedging instruments, which are excluded from EBITDA as a component of net other income or expense.

We define EBITDA as earnings before income taxes, net interest expense, gains or losses on extinguishment of long-term debt, gains and losses on equity investments, net other income or expense, and depreciation and amortization expense.

Non-cash impairment losses on goodwill and other long-lived assets are also added back if applicable.

To arrive at our measure of Adjusted EBITDA, we exclude the gain or loss on disposition of assets, acquisition and integration costs and the general provision (release) for current expected credit losses, if any.

We define Free Cash Flow as cash flows from operating activities less capital expenditures, net of proceeds from sale of assets.

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Three Months Ended

Income tax provision

Six Months Ended

Income tax provision (benefit)

Net interest expense

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Depreciation and amortization

Gain on equity investment

Loss on disposition of assets, net

Acquisition and integration costs

General provision (release) for current expected credit losses

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The reconciliation of our cash flows from operating activities to Free Cash Flow is as follows (in thousands):

Three Months Ended

Six Months Ended

Cash flows from operating activities

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Free Cash Flow

Comparison of Three Months Ended March 31, 2022 and 2021

Comparison of Three Months Ended June 30, 2022 and 2021

We have three reportable business segments:

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(2) Represents the average utilization rate, which is calculated by dividing the total number of days the vessels or robotics assets generated revenues by the total number of calendar days in the applicable period.

Utilization rates of chartered robotics vessels during the three-month periods ended March 31, 2022 and 2021 included 136 and three spot vessel days, respectively, at near full utilization.

Utilization rates of chartered robotics vessels during the three-month periods ended June 30, 2022 and 2021 included 116 and 61 spot vessel days, respectively, at near full utilization.

(3) Consists of ROVs and trenchers.

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Net Revenues.

Our consolidated net revenues for the three-month period ended March 31, 2022 decreased by 8% as compared to the same period in 2021, reflecting lower revenues from our Well Intervention segment, offset in part by higher revenues from our Robotics and Production Facilities segments.

Our Well Intervention revenues decreased by 20% for the three-month period ended March 31, 2022 as compared to the same period in 2021, primarily reflecting lower rates and vessel utilization in Brazil and the North Sea, offset in part by higher utilization in West Africa.

Our Brazil operations were on legacy contract rates with Petrobras with near full utilization during the first quarter 2021.

However, during the first quarter 2022, the Siem Helix 2 operated at lower rates under the extended contract with Petrobras and incurred 23 days off contract during its five-year regulatory inspection, and the Siem Helix 1 was operating on a short-term accommodations project offshore Ghana at lower rates.

The Q7000 was fully utilized in West Africa during the first quarter 2022 as compared to 67% utilized during the first quarter 2021.

Gulf of Mexico revenues were nominally changed from the prior year, with the Q5000 ’s higher-margin work on the legacy BP contract during the first quarter 2021 replaced by higher cost integrated projects during the first quarter 2022.

Our Robotics revenues increased by 69% for the three-month period ended March 31, 2022 as compared to the same period in 2021, primarily reflecting higher vessel and ROV activities.

Chartered vessel days increased to 323 days during the first quarter 2022 as compared to 165 days during the first quarter 2021, although vessel utilization was flat at 90% during both periods.

Vessel days during the first quarter 2022 included 136 spot vessel days performing seabed clearance work in the North Sea as compared to three spot vessel days during the first quarter 2021.

ROV and trencher utilization increased to 35% in the first quarter 2022 from 24% during the first quarter 2021, although trenching days decreased to 66 days during the first quarter 2022 as compared to 72 days during the first quarter 2021.

Our Production Facilities revenues increased by 11% for the three-month period ended March 31, 2022 as compared to the same period in 2021, primarily reflecting higher oil and gas prices.

Our consolidated net revenues for the three-month period ended June 30, 2022 were flat as compared to the same period in 2021, reflecting higher revenues from our Robotics and Production Facilities segments, offset by lower revenues from our Well Intervention segment.

Our Well Intervention revenues decreased by 20% for the three-month period ended June 30, 2022 as compared to the same period in 2021, primarily reflecting lower utilization on the Q7000 in West Africa and lower rates and utilization in Brazil, offset in part by higher rates and utilization in the Gulf of Mexico and higher utilization in the North Sea.

The Q7000 had minimal utilization as the vessel commenced its scheduled maintenance during the second quarter 2022 whereas it was 96% utilized during the second quarter 2021.

In Brazil, the Siem Helix 2 operated at lower rates under the extended contract with Petrobras during the second quarter 2022 whereas it was on higher legacy contract rates during the second quarter 2021.

The Siem Helix 1 transited back to Brazil after completion of the accommodations project offshore Ghana at lower rates during the second quarter 2022 whereas it was fully utilized on the extended contract with Petrobras during the second quarter 2021.

In the Gulf of Mexico, the Q5000 achieved higher utilization performing higher rate integrated projects while rates and utilization also improved for the Q4000 during the second quarter 2022 as compared to the same period in 2021.

Our Robotics revenues increased by 57% for the three-month period ended June 30, 2022 as compared to the same period in 2021, primarily reflecting higher vessel and ROV activities.

Chartered vessel days increased to 370 days during the second quarter 2022 as compared to 236 days during the second quarter 2021, although vessel utilization increased slightly to 94% in the second quarter 2022 from 93% during the second quarter 2021.

Vessel days during the second quarter 2022 included 116 spot vessel days as compared to 61 spot vessel days during the second quarter 2021, primarily performing seabed clearance work in the North Sea.

ROV and trencher utilization increased to 53% in the second quarter 2022 from 36% during the second quarter 2021, although trenching days decreased slightly to 81 days during the second quarter 2022 as compared to 84 days during the second quarter 2021.

Our Production Facilities revenues increased by 24% for the three-month period ended June 30, 2022 as compared to the same period in 2021, primarily reflecting higher oil and gas production volumes and prices.

Gross Profit (Loss).

Our consolidated gross loss was $18.6 million for the three-month period ended March 31, 2022 as compared consolidated gross profit of $14.6 million for the same period in 2021, primarily reflecting decreased profitability in our Well Intervention and Production Facilities segments, offset in part by increased profitability in our Robotics segment.

Our Well Intervention segment had a gross loss of $28.4 million for the three-month period ended March 31, 2022 as compared to a gross profit of $8.7 million for the same period in 2021, primarily reflecting lower segment revenues as well as lower margins in the Gulf of Mexico due to higher integrated project costs.

Our Robotics segment had a gross profit of $3.5 million for the three-month period ended March 31, 2022 as compared to a gross loss of $0.9 million for the same period in 2021, primarily reflecting higher revenues due to increased ROV activity and a higher number of vessel days.

Our consolidated gross loss was $1.4 million for the three-month period ended June 30, 2022 as compared consolidated gross profit of $3.1 million for the same period in 2021, primarily reflecting decreased profitability in our Well Intervention segment, offset in part by increased profitability in our Robotics and Production Facilities segments.

Our Well Intervention gross loss increased by $16.8 million for the three-month period ended June 30, 2022 as compared to the same period in 2021, primarily reflecting lower segment revenues, offset in part by a net reduction in operating costs due to lower Q7000 utilization and reduced charter costs in Brazil.

Our Robotics gross profit increased by $9.3 million for the three-month period ended June 30, 2022 as compared to the same period in 2021, primarily reflecting higher revenues due to increased ROV activity and a higher number of vessel days.

Our Production Facilities gross profit increased by $1.6 million for the three-month period ended June 30, 2022 as compared to the same period in 2021, primarily reflecting higher revenues.

Selling, General and Administrative Expenses.

Our selling, general and administrative expenses were $14.4 million for the three-month period ended March 31, 2022 as compared to $15.2 million for the same period in 2021, primarily reflecting lower employee incentive compensation costs.

Our selling, general and administrative expenses were $17.6 million for the three-month period ended June 30, 2022 as compared to $13.4 million for the same period in 2021, primarily reflecting higher employee incentive compensation costs and Alliance acquisition related costs during the second quarter 2022 (Note 16).

Equity in Earnings of Investment.

Equity in earnings of investment was $8.2 million for the three-month period ended June 30, 2022 primarily reflecting the cash distribution as a result of the sale of the “Independence Hub” platform (Note 2).

Net Interest Expense.

Our net interest expense totaled $4.8 million for the three-month period ended June 30, 2022 as compared to $5.9 million for the same period in 2021, primarily reflecting the repayment of certain indebtedness (Note 5).

Other Income (Expense), Net.

Net other expense was $3.9 million for the three-month period ended March 31, 2022 primarily due to foreign currency transaction losses reflecting the weakening of the British pound.

Net other expense was $13.5 million for the three-month period ended June 30, 2022 primarily due to foreign currency transaction losses reflecting the weakening of the British pound.

Net other income was $1.0 million for the same period in 2021 primarily due to foreign currency transaction gains reflecting the strengthening of the British pound.

Income Tax Provision.

Income tax provision was $2.1 million for the three-month period ended March 31, 2022 as compared to $0.1 million for the same period in 2021.

The effective tax rates for the three-month periods ended March 31, 2022 and 2021 were (5.4)% and (4.0)%, respectively.

Income Tax Provision (Benefit).

Income tax provision was $1.4 million for the three-month period ended June 30, 2022 as compared to an income tax benefit of $2.0 million for the same period in 2021.

The effective tax rates for the three-month periods ended June 30, 2022 and 2021 were (5.1)% and 12.6%, respectively.

These variances were primarily attributable to the earnings mix between our higher and lower tax rate jurisdictions as well as losses for which no financial statement benefits have been recognized (Note 6).

Comparison of Six Months Ended June 30, 2022 and 2021

We have three reportable business segments:

Well Intervention, Robotics and Production Facilities.

All material intercompany transactions between the segments have been eliminated in our condensed consolidated financial statements, including our condensed consolidated results of operations.

The following table details various financial and operational highlights for the periods presented (dollars in thousands):

Six Months Ended

Net revenues —

Well Intervention

Production Facilities

Intercompany eliminations

Gross profit (loss) —

Well Intervention

Production Facilities

Corporate, eliminations and other

Gross margin —

Well Intervention

Production Facilities

Total company

Number of vessels or robotics assets (1) / Utilization (2)

Well intervention vessels

Robotics assets (3)

Chartered robotics vessels

(1) Represents the number of vessels or robotics assets as of the end of the period, including spot vessels and those under term charters, and excluding acquired vessels prior to their in-service dates and vessels or assets disposed of and/or taken out of service.

Utilization rates of chartered robotics vessels during the six-month periods ended June 30, 2022 and 2021 included 252 and 64 spot vessel days, respectively, at near full utilization.

(3) Consists of ROVs and trenchers.

Intercompany segment amounts are derived primarily from equipment and services provided to other business segments.

Intercompany segment revenues are as follows (in thousands):

Six Months Ended

Well Intervention

Net Revenues.

Our consolidated net revenues for the six-month period ended June 30, 2022 decreased by 4% as compared to the same period in 2021, reflecting lower revenues from our Well Intervention segment, offset in part by higher revenues from our Robotics and Production Facilities segments.

Our Well Intervention revenues decreased by 20% for the six-month period ended June 30, 2022 as compared to the same period in 2021, primarily reflecting lower rates and utilization on the Siem Helix 1 and the Siem Helix 2 in Brazil as both vessels rolled off their legacy contracts with Petrobras and lower utilization on the Q7000 in West Africa due to its scheduled maintenance during the second quarter 2022, offset in part by higher rates and utilization in the Gulf of Mexico during the second quarter 2022.

Our Robotics revenues increased by 62% for the six-month period ended June 30, 2022 as compared to the same period in 2021, primarily reflecting higher vessel and ROV activities.

Chartered vessel days increased to 693 days during the six-month period ended June 30, 2022 as compared to 401 days during the same period in 2021, although vessel utilization was flat at 92% during both periods.

Vessel days during the six-month period ended June 30, 2022 included 252 spot vessel days as compared to 64 spot vessel days during the same period in 2021, primarily performing seabed clearance work in the North Sea.

ROV and trencher utilization increased to 44% during the six-month period ended June 30, 2022 from 30% during the same period in 2021, although trenching days decreased slightly to 147 days during the six-month period ended June 30, 2022 as compared to 156 days during the same period in 2021.

Our Production Facilities revenues increased by 17% for the six-month period ended June 30, 2022 as compared to the same period in 2021, primarily reflecting higher oil and gas production volumes and prices.

Gross Profit (Loss).

Our consolidated gross loss was $20.0 million for the six-month period ended June 30, 2022 as compared consolidated gross profit of $17.8 million for the same period in 2021, primarily reflecting decreased profitability in our Well Intervention segment, offset in part by increased profitability in our Robotics and Production Facilities segments.

Our Well Intervention segment had a gross loss of $47.8 million for the six-month period ended June 30, 2022 as compared to a gross profit of $6.2 million for the same period in 2021, primarily reflecting lower segment revenues.

Our Robotics gross profit increased by $13.8 million for the six-month period ended June 30, 2022 as compared to the same period in 2021, primarily reflecting higher revenues due to increased ROV activity and a higher number of vessel days.

Our Production Facilities gross profit for the six-month period ended June 30, 2022 increased slightly as compared to the same period in 2021, primarily reflecting higher revenues.

Selling, General and Administrative Expenses.

Our selling, general and administrative expenses were $32.0 million for the six-month period ended June 30, 2022 as compared to $28.6 million for the same period in 2021, primarily reflecting higher employee incentive compensation costs and Alliance acquisition related costs (Note 16).

Equity in Earnings of Investment.

Equity in earnings of investment was $8.2 million for the six-month period ended June 30, 2022 primarily reflecting the cash distribution as a result of the sale of the “Independence Hub” platform (Note 2).

Net Interest Expense.

Our net interest expense totaled $10.0 million for the six-month period ended June 30, 2022 as compared to $12.0 million for the same period in 2021, primarily reflecting the repayment of certain indebtedness (Note 5).

Other Income (Expense), Net.

Net other expense was $17.4 million for the six-month period ended June 30, 2022 primarily due to foreign currency transaction losses reflecting the weakening of the British pound.

Net other income was $2.6 million for the same period in 2021 primarily due to foreign currency transaction gains reflecting the strengthening of the British pound.

Income Tax Provision (Benefit).

Income tax provision was $3.6 million for the six-month period ended June 30, 2022 as compared to an income tax benefit of $1.9 million for the same period in 2021.

The effective tax rates for the six-month periods ended June 30, 2022 and 2021 were (5.2)% and 10.0%, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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Long-term debt

(1) Long-term debt is net of unamortized debt issuance costs.

Current maturities of our long-term debt of $43.1 million and $42.9 million, respectively, are excluded from long-term debt.

See Note 5 for information relating to our long-term debt.

Net Working Capital

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Our net working capital includes current maturities of our long-term debt.

Long-Term Debt

Long-term debt in the table above is net of unamortized debt issuance costs and excludes current maturities of $8.1 million at June 30, 2022 and $42.9 million at December 31, 2021.

See Note 5 for information relating to our long-term debt.

We define liquidity as cash and cash equivalents, excluding restricted cash, plus available capacity under our credit facility.

Our liquidity at March 31, 2022 included $229.7 million of cash and cash equivalents and $41.2 million of available borrowing capacity under the ABL Facility (Note 5) and excluded $72.9 million of restricted cash primarily related to a short-term project related letter of credit, the restriction from which is expected to be released upon completion of the project.

Our liquidity at June 30, 2022 included $260.6 million of cash and cash equivalents and $60.3 million of available borrowing capacity under the ABL Facility (Note 5) and excluded $2.5 million of restricted cash.

Our liquidity at December 31, 2021 included $253.5 million of cash and cash equivalents and $51.1 million of available borrowing capacity under the ABL Facility and excluded $73.6 million of short-term project related restricted cash.

As of June 30, 2022, we had approximately $20.5 million in Nigerian Naira, which is subject to currency exchange controls established by the Central Bank of Nigeria.

Those exchange controls have to date restricted our ability to convert our Nigerian Naira into U.S.

The COVID-19 pandemic impacted our operations and our revenues.

We responded by deferring or reducing planned capital expenditures and operating costs during the past two years.

This spending is expected to return with our outlook of increased activity.

Furthermore, we have convertible debt instruments and other term debt maturities during 2022 that we intend to settle in cash.

This spending is returning with our increased activity.

Furthermore, we fully redeemed the $35 million remaining principal amount of the 2022 Notes plus accrued interest by delivering cash upon maturity on May 1, 2022, and we have other term debt maturities during 2022 that we intend to settle in cash.

Additionally on July 1, 2022, we completed our acquisition of all of the equity interests of Alliance for approximately $120 million cash at closing plus post-closing earn-out consideration payable in 2024 in the event the Alliance business achieves certain financial metrics in 2022 and 2023 (Note 16).

We believe that our cash on hand, internally generated cash flows and availability under the ABL Facility will be sufficient to fund our operations and service our debt over at least the next 12 months.

An ongoing period of weak, or continued decreases in, industry activity may make it difficult to comply with the covenants and other restrictions in our debt agreements.

A period of weak industry activity may make it difficult to comply with the covenants and other restrictions in our debt agreements.

Our failure to comply with the covenants and other restrictions could lead to an event of default.

Decreases in our borrowing base may limit our ability to fully access the ABL Facility.

At March 31, 2022, our available borrowing capacity under the ABL Facility was $41.2 million, net of $2.3 million of letters of credit issued under that facility.

We currently do not anticipate borrowing under the ABL Facility other than for the issuance of letters of credit.

The following table provides summary data from our condensed consolidated statements of cash flows (in thousands):

Three Months Ended

Six Months Ended

Cash provided by (used in):

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Operating Activities

The decrease in our operating cash flows for the three-month period ended March 31, 2022 as compared to the same period in 2021 primarily reflects lower earnings, higher regulatory recertification costs for our vessels and systems and negative changes in net working capital.

Operating cash flows for the three-month periods ended March 31, 2022 and 2021 included the receipt of $1.1 million and $6.6 million, respectively, in income tax refunds related to the U.S.

The decrease in our operating cash flows for the six-month period ended June 30, 2022 as compared to the same period in 2021 primarily reflects lower earnings, higher regulatory recertification costs for our vessels and systems and negative changes in net working capital.

Operating cash flows for the six-month periods ended June 30, 2022 and 2021 included the receipt of $1.1 million and $6.6 million, respectively, in income tax refunds related to the U.S.

Coronavirus Aid, Relief, and Economic Security Act.

Investing Activities

Cash flows used in investing activities for the three-month periods ended March 31, 2022 and 2021 reflect the deferral or reduction of our planned capital expenditures as our response to the adverse impact to our operations as a result of the COVID-19 pandemic.

Cash flows provided by (used in) investing activities for the six-month periods ended June 30, 2022 and 2021 reflect the $7.8 million in net cash distribution from Independence Hub in May 2022 (Note 2) and the deferral or reduction of our planned capital expenditures as our response to the adverse impact to our operations as a result of the COVID-19 pandemic.

Financing Activities

Net cash outflows from financing activities for the three-month period ended March 31, 2022 primarily reflect the repayment of $3.9 million related to the MARAD Debt (Note 5).

Net cash outflows from financing activities for the three-month period ended March 31, 2021 primarily reflect the repayment of $58.2 million related to our indebtedness, including the final maturity of $53.6 million of the Nordea Q5000 Loan.

Net cash outflows from financing activities for the six-month period ended June 30, 2022 primarily reflect the repayment of $3.9 million related to the MARAD Debt and $35 million related to the 2022 Notes (Note 5).

Net cash outflows from financing activities for the six-month period ended June 30, 2021 primarily reflect the repayment of $59.1 million related to our indebtedness, including the final maturity of $53.6 million of the Nordea Q5000 Loan.

Material Cash Requirements

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Long-term debt and other contractual commitments

The following table summarizes the principal amount of our long-term debt and related debt service costs as well as other contractual commitments, which include commitments for property and equipment and operating lease obligations, as of March 31, 2022 and the portions of those amounts that are short-term (due in less than one year) and long-term (due in one year or greater) based on their stated maturities (in thousands).

Our property and equipment commitments include contractually committed amounts to purchase and service certain property and equipment (inclusive of commitments related to regulatory recertification and dry dock as discussed below) but do not include expected capital spending that is not contractually committed as of March 31, 2022.

Our 2022 Notes, 2023 Notes and 2026 Notes have certain early redemption and conversion features that could affect the timing and amount of any cash requirements.

The following table summarizes the principal amount of our long-term debt and related debt service costs as well as other contractual commitments, which include commitments for property and equipment and operating lease obligations, as of June 30, 2022 and the portions of those amounts that are short-term (due in less than one year) and long-term (due in one year or greater) based on their stated maturities (in thousands).

Our 2023 Notes and 2026 Notes have certain early redemption and conversion features that could affect the timing and amount of any cash requirements.

Although upon conversion these notes are able to be settled in either cash or shares, we intend to settle their principal amounts in cash (Note 5).

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(1) Operating leases include vessel charters and facility and equipment leases.

At March 31, 2022, our commitment related to long-term vessel charters totaled approximately $268.4 million, of which $111.8 million was related to the non-lease (services) components that are not included in operating lease liabilities in the condensed consolidated balance sheet as of March 31, 2022.

At June 30, 2022, our commitment related to long-term vessel charters totaled approximately $246.5 million, of which $101.3 million was related to the non-lease (services) components that are not included in operating lease liabilities in the condensed consolidated balance sheet as of June 30, 2022.

Other material cash requirements

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We have decommissioning obligations associated with our oil and gas properties (Note 11).

Those obligations approximate $31.0 million (undiscounted) as of March 31, 2022 and are all expected to be paid during the next 12 months.

Those obligations approximate $31.0 million (undiscounted) as of June 30, 2022 and are all expected to be paid during the next 12 months.

We are entitled to receive certain amounts from Marathon Oil Corporation as these decommissioning obligations are fulfilled.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis