What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-10-26 compared with 2022-07-27 · 144 added, 99 removed, 232 unchanged (51% of the section changed)

36 unchanged sentences

● unexpected delays in the delivery, chartering or customer acceptance, and terms of acceptance, of our assets;

● the effect of adverse weather conditions and/or other risks associated with marine operations;

● the effects of our indebtedness, our ability to comply with debt covenants and our ability to reduce capital commitments;

6 unchanged sentences

● the future impact of international activity and trade agreements on our business, operations and financial condition;

● the effect of adverse weather conditions and/or other risks associated with marine operations;

● the impact of foreign currency exchange controls, potential illiquidity of those currencies and exchange rate fluctuations;

● the effectiveness of our future hedging activities;

● the effectiveness of any future hedging activities;

● the potential impact of a negative event related to our human capital resources, including a loss of one or more key employees;

14 unchanged sentences

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

Our robotics equipment includes 40 work-class ROVs and four trenchers.

Our robotics equipment includes 40 work-class ROVs, four trenchers, one ROVDrill and one boulder grab.

We charter robotics support vessels on both long-term and spot bases to facilitate our ROV and trenching operations.

Our well intervention and robotics operations are geographically dispersed throughout the world.

Our Production Facilities segment includes the HP I , the HFRS and our ownership of oil and gas properties.

Our Production Facilities segment includes the HP I , the HFRS and our ownership of oil and gas properties including the recently acquired interest in the Thunder Hawk Field.

On July 1, 2022, we completed our acquisition of Alliance and formed a new reporting segment in the third quarter 2022 comprised of the Helix Alliance business.

Our new Shallow Water Abandonment segment includes 10 liftboats, six OSVs, three DSVs, one 1760T heavy lift derrick barge, one crew boat, 14 marketable P&A systems (with the ability to scale up to 20 systems) and six coiled tubing systems.

Economic Outlook and Industry Influences

1 unchanged sentence

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 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.

Oil and gas prices experienced increased volatility and moderate declines from recent highs in the first half of 2022.

Meanwhile, global demand continued to recover and supply was disrupted by regional conflicts.

The outlook for sustained high 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.

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.

These headwinds include those regional conflicts, high inflation and in particular governments’ and central banks’ efforts to taper economic growth, ongoing COVID-related uncertainties, various governmental and customer ESG initiatives and continued shifting of resource allocation to renewable energy.

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

Historically, drilling rigs have been the asset class used for offshore well intervention work, and rig day rates are a pricing indicator for our services.

15 unchanged sentences

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.

Although we are able to mitigate 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.

While the cost outlook is not certain, we believe that we can manage these inflationary pressures by introducing appropriate sales price adjustments and by actively pursuing internal cost reduction efforts.

3 unchanged sentences

We define backlog as firm commitments represented by signed contracts.

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.

As of September 30, 2022, our consolidated backlog totaled $758 million, of which $162 million is expected to be performed over the remainder of 2022.

Our contract with Trident Energy Do Brasil LTDA.

1 unchanged sentence

(“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 54% of our total backlog as of June 30, 2022.

for the Q5000 and our fixed fee agreement for the HP I represented approximately 58% of our total backlog as of September 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;

16 unchanged sentences

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.

To arrive at our measure of Adjusted EBITDA, we exclude the gain or loss on disposition of assets, acquisition and integration costs, the change in fair value of contingent consideration 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.

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Income tax provision (benefit)

Net interest expense

Other (income) expense, net

Loss on extinguishment of long-term debt

Other expense, net

Depreciation and amortization

Gain on equity investment

Loss on disposition of assets, net

(Gain) loss on disposition of assets, net

Acquisition and integration costs

Change in fair value of contingent consideration

General provision (release) for current expected credit losses

1 unchanged sentence

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

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

1 unchanged sentence

Free Cash Flow

Comparison of Three Months Ended June 30, 2022 and 2021

We have three reportable business segments:

Well Intervention, Robotics and Production Facilities.

Comparison of Three Months Ended September 30, 2022 and 2021

We have four reportable business segments:

Well Intervention, Robotics, Shallow Water Abandonment 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.

1 unchanged sentence

Three Months Ended

September 30,

Net revenues —

Well Intervention

Shallow Water Abandonment

Production Facilities

2 unchanged sentences

Well Intervention

Shallow Water Abandonment

Production Facilities

2 unchanged sentences

Well Intervention

Shallow Water Abandonment

Production Facilities

Total company

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

Number of vessels, Robotics assets or Shallow Water Abandonment systems (1) / Utilization (2)

Well Intervention vessels

1 unchanged sentence

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.

(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 June 30, 2022 and 2021 included 116 and 61 spot vessel days, respectively, at near full utilization.

(3) Consists of ROVs and trenchers.

Shallow Water Abandonment vessels (4)

Shallow Water Abandonment systems (5)

(1) Represents the number of vessels, Robotics assets or marketable Shallow Water Abandonment systems 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, vessels managed on behalf of third parties and vessels or assets disposed of and/or taken out of service.

(2) Represents the average utilization rate, which is calculated by dividing the total number of days the vessels, Robotics assets or marketable Shallow Water Abandonment systems 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 September 30, 2022 and 2021 included 100 and 176 spot vessel days, respectively, at near full utilization.

(3) Consists of ROVs, trenchers, an ROVDrill and a boulder grab.

(4) Consists of liftboats, OSVs, DSVs, a heavy lift derrick barge and a crew boat.

(5) Consists of marketable P&A and coiled tubing systems.

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

1 unchanged sentence

Three Months Ended

September 30,

Well Intervention

Shallow Water Abandonment

Net Revenues.

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.

Our consolidated net revenues for the three-month period ended September 30, 2022 increased by 51% as compared to the same period in 2021, primarily reflecting the addition of Shallow Water Abandonment segment in the third quarter 2022 and higher revenues from our Well Intervention and Robotics segments.

Our Well Intervention revenues increased by 10% for the three-month period ended September 30, 2022 as compared to the same period in 2021, primarily reflecting higher utilization and rates in the Gulf of Mexico and the North Sea, offset in part by lower utilization on the Q7000 in West Africa, lower rates in Brazil and the impact of weaker foreign currency exchange rates.

Utilization in the Gulf of Mexico improved year over year with fewer idle days during the quarter.

The North Sea fleet maintained strong utilization during the third quarter 2022 as compared to the prior year, which saw an early seasonal slowdown during the third quarter 2021.

The Q7000 recommenced operations mid-quarter following its scheduled maintenance whereas it was fully utilized during the third quarter 2021.

In Brazil, the Siem Helix 2 operated at near full utilization with lower rates under the existing contract with Petrobras during the third quarter 2022 whereas it was on higher legacy contract rates during the third quarter 2021.

Our Robotics revenues increased by 32% for the three-month period ended September 30, 2022 as compared to the same period in 2021, primarily reflecting higher vessel, ROV and trenching activities.

Chartered vessel days increased to 376 days during the third quarter 2022 as compared to 358 days during the third quarter 2021.

Vessel utilization remained relatively flat at 98% in the third quarter 2022 as compared to 99% during the third quarter 2021.

Vessel days during the third quarter 2022 included 100 spot vessel days as compared to 176 spot vessel days during the third quarter 2021, primarily performing seabed clearance work in the North Sea.

ROV and trencher utilization increased to 66% in the third quarter 2022 from 43% during the third quarter 2021, and trenching days increased to 176 days during the third quarter 2022 as compared to 90 days during the third quarter 2021.

Our Shallow Water Abandonment revenues for the three-month period ended September 30, 2022 reflected revenues generated by Helix Alliance since the acquisition on July 1, 2022 (Note 3) with 80% utilization across 21 vessels and 1,077 days of utilization across marketable P&A and coiled tubing systems during the quarter.

Our Production Facilities revenues for the three-month period ended September 30, 2022 decreased slightly as compared to the same period in 2021, primarily reflecting lower oil and gas production volumes from the Droshky wells, offset in part by oil and gas volume from our recently acquired interest in the Thunder Hawk Field (Note 2).

The HP I completed its scheduled five-year regulatory dry dock during the third quarter 2022.

Gross Profit (Loss).

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.

Our consolidated gross profit was $39.2 million for the three-month period ended September 30, 2022 as compared to $3.0 million for the same period in 2021, primarily reflecting the addition of Shallow Water Abandonment segment in the third quarter 2022 and increased profitability in our other segments.

Our Well Intervention gross profit was $1.8 million for the three-month period ended September 30, 2022 as compared to a gross loss of $9.6 million the same period in 2021, primarily reflecting higher segment revenues.

Our Robotics gross profit increased by $6.6 million for the three-month period ended September 30, 2022 as compared to the same period in 2021, primarily reflecting higher revenues due to increased ROV and trenching activities and a higher number of vessel days, offset in part by higher costs on increased activity.

Our Shallow Water Abandonment gross profit for the three-month period ended September 30, 2022 reflected results from Helix Alliance since the acquisition on July 1, 2022 (Note 3).

Our Production Facilities gross profit increased by $1.4 million for the three-month period ended September 30, 2022 as compared to the same period in 2021, primarily reflecting lower depletion expense associated with the Droshky wells.

Acquisition and Integration Costs.

Our acquisition and integration costs were $0.8 million for the three-month period ended September 30, 2022, reflecting Alliance acquisition related costs incurred during the third quarter 2022 (Note 3).

Change in Fair Value of Contingent Consideration.

The $2.7 million change in fair value of contingent consideration for the three-month period ended September 30, 2022 reflected an increase in the estimated earn-out consideration payable to the seller in the Alliance transaction in 2024 as Helix Alliance’s actual third quarter 2022 results were more favorable than previous forecasts based on available information at the acquisition date (Notes 3 and 16).

Selling, General and Administrative Expenses.

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).

Our selling, general and administrative expenses were $23.6 million for the three-month period ended September 30, 2022 as compared to $13.3 million for the same period in 2021, primarily reflecting higher employee incentive compensation costs and general and administrative costs in our Shallow Water Abandonment segment following the closing of our Alliance acquisition on July 1, 2022.

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 $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.

Our net interest expense totaled $4.6 million for the three-month period ended September 30, 2022 as compared to $5.9 million for the same period in 2021, primarily reflecting the repayment of certain indebtedness (Note 6).

Other Expense, Net.

Net other expense was $20.3 million for the three-month period ended September 30, 2022 as compared to $4.0 million for the same period in 2021 and is comprised almost entirely of unrealized foreign currency losses of $19.7 million related to the approximately 8% weakening of the British pound during the third quarter 2022 on U.S.

dollar denominated intercompany debt in our U.K.

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.

Income tax provision was $6.5 million for the three-month period ended September 30, 2022 as compared to an income tax benefit of $1.1 million for the same period in 2021.

The effective tax rates for the three-month periods ended September 30, 2022 and 2021 were (53.0)% and 5.3%, 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 7).

Comparison of Six Months Ended June 30, 2022 and 2021

We have three reportable business segments:

Well Intervention, Robotics and Production Facilities.

Comparison of Nine Months Ended September 30, 2022 and 2021

We have four reportable business segments:

Well Intervention, Robotics, Shallow Water Abandonment 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

Nine Months Ended

September 30,

Net revenues —

Well Intervention

Shallow Water Abandonment

Production Facilities

2 unchanged sentences

Well Intervention

Shallow Water Abandonment

Production Facilities

2 unchanged sentences

Well Intervention

Shallow Water Abandonment

Production Facilities

Total company

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

Number of vessels, Robotics assets or Shallow Water Abandonment systems (1) / Utilization (2)

Well Intervention vessels

1 unchanged sentence

Chartered Robotics vessels

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.

Shallow Water Abandonment vessels (4)

Shallow Water Abandonment systems (5)

Utilization rates of chartered Robotics vessels during the nine-month periods ended September 30, 2022 and 2021 included 352 and 240 spot vessel days, respectively, at near full utilization.

(3) Consists of ROVs, trenchers, an ROVDrill and a boulder grab.

(4) Cosists of liftboats, OSVs, DSVs, a heavy lift derrick barge and a crew boat.

(5) Consists of marketable P&A and coiled tubing systems.

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

Nine Months Ended

September 30,

Well Intervention

Shallow Water Abandonment

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.

Our consolidated net revenues for the nine-month period ended September 30, 2022 increased by 16% as compared to the same period in 2021, reflecting the addition of Shallow Water Abandonment segment in the third quarter 2022 and higher revenues from our Robotics and Production Facilities segments, offset in part by lower revenues from our Well Intervention segment.

Our Well Intervention revenues decreased by 10% for the nine-month period ended September 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 a four-month period from April to July 2022, offset in part by higher rates and utilization in the Gulf of Mexico and higher utilization in the North Sea during the nine-month period ended September 30, 2022.

Our Robotics revenues increased by 49% for the nine-month period ended September 30, 2022 as compared to the same period in 2021, primarily reflecting higher vessel, ROV and trenching activities.

Chartered vessel days increased to 1,069 days during the nine-month period ended September 30, 2022 as compared to 759 days during the same period in 2021.

Vessel utilization remained relatively flat at 94% during the nine-month period ended September 30, 2022 as compared to 95% during the same period in 2021.

Vessel days during the nine-month period ended September 30, 2022 included 352 spot vessel days as compared to 240 spot vessel days during the same period in 2021, primarily performing seabed clearance work in the North Sea.

ROV and trencher utilization increased to 52% during the nine-month period ended September 30, 2022 from 35% during the same period in 2021, and trenching days increased to 323 days during the nine-month period ended September 30, 2022 as compared to 246 days during the same period in 2021.

Our Production Facilities revenues increased by 11% for the nine-month period ended September 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.

Our consolidated gross profit was $19.3 million for the nine-month period ended September 30, 2022 as compared to $20.8 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 and the addition of Shallow Water Abandonment segment in the third quarter 2022.

Our Well Intervention segment had a gross loss of $45.9 million for the nine-month period ended September 30, 2022 as compared to a gross loss of $3.4 million for the same period in 2021, primarily reflecting lower segment revenues.

Our Robotics gross profit increased by $20.4 million for the nine-month period ended September 30, 2022 as compared to the same period in 2021, primarily reflecting higher revenues due to increased ROV and trenching activities and a higher number of vessel days.

Our Shallow Water Abandonment gross profit for the nine-month period ended September 30, 2022 reflected results from Helix Alliance since the acquisition on July 1, 2022 (Note 3).

Our Production Facilities gross profit for the nine-month period ended September 30, 2022 increased by $2.4 million as compared to the same period in 2021, primarily reflecting higher revenues.

Acquisition and Integration Costs.

Our acquisition and integration costs were $2.3 million for the nine-month period ended September 30, 2022, reflecting Alliance acquisition related costs incurred during 2022 (Note 3).

Change in Fair Value of Contingent Consideration.

The $2.7 million change in fair value of contingent consideration for the nine-month period ended September 30, 2022 reflected an increase in the estimated earn-out consideration payable to the seller in the Alliance transaction in 2024 as Helix Alliance’s actual third quarter 2022 results were more favorable than previous forecasts based on available information at the acquisition date (Notes 3 and 16).

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).

Our selling, general and administrative expenses were $54.0 million for the nine-month period ended September 30, 2022 as compared to $42.0 million for the same period in 2021, primarily reflecting higher employee incentive compensation costs and general and administrative costs in our Shallow Water Abandonment segment following the closing of our Alliance acquisition on July 1, 2022.

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).

Equity in earnings of investment was $8.3 million for the nine-month period ended September 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.

Our net interest expense totaled $14.6 million for the nine-month period ended September 30, 2022 as compared to $17.9 million for the same period in 2021, primarily reflecting the repayment of certain indebtedness (Note 6).

Other Expense, Net.

Net other expense was $37.6 million for the nine-month period ended September 30, 2022 as compared to $1.4 million for the same period in 2021 and is comprised almost entirely of unrealized foreign currency losses of $38.4 million related to the approximately 17% weakening of the British pound during 2022 on U.S.

dollar denominated intercompany debt in our U.K.

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.

Income tax provision was $10.1 million for the nine-month period ended September 30, 2022 as compared to an income tax benefit of $2.9 million for the same period in 2021.

The effective tax rates for the nine-month periods ended September 30, 2022 and 2021 were (12.5)% and 7.5%, respectively.

2 unchanged sentences

The following table presents certain information useful in the analysis of our financial condition and liquidity (in thousands):

September 30,

Net working capital

5 unchanged sentences

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.

Long-term debt in the table above is net of unamortized debt issuance costs and excludes current maturities of $38.2 million at September 30, 2022 and $42.9 million at December 31, 2021.

See Note 6 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 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 September 30, 2022 included $162.3 million of cash and cash equivalents and $81.8 million of available borrowing capacity under the Amended ABL Facility (Note 6) 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.

As of September 30, 2022, we had approximately $21.7 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.

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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.

Additionally on July 1, 2022, we completed our acquisition of Alliance for $119.0 million cash at closing plus post-closing earn-out consideration payable to the seller in the Alliance transaction in 2024 in the event the Helix Alliance business achieves certain financial metrics in 2022 and 2023 (Note 3).

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

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.

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

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

We currently do not anticipate borrowing under the Amended 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):

Six Months Ended

Nine Months Ended

September 30,

Cash provided by (used in):

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Operating Activities

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.

The decrease in our operating cash flows for the nine-month period ended September 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.

Regulatory recertification spend on our vessels and systems amounted to $30.3 million and $7.1 million, respectively, during the comparable year over year periods.

Operating cash flows for the nine-month periods ended September 30, 2022 and 2021 included the receipt of $1.1 million and $18.9 million, respectively, in income tax refunds related to the U.S.

Coronavirus Aid, Relief, and Economic Security Act.

Investing Activities

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.

Cash flows used in investing activities for the nine-month periods ended September 30, 2022 and 2021 reflect $112.6 million in net cash paid to acquire Alliance (Note 3), offset in part by $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 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.

Net cash outflows from financing activities for the nine-month period ended September 30, 2022 primarily reflect the repayment of $7.9 million related to the MARAD Debt and $35 million related to the 2022 Notes (Note 6).

Net cash outflows from financing activities for the nine-month period ended September 30, 2021 primarily reflect the repayment of $90.9 million related to our indebtedness, including the final maturity of $53.6 million of the Nordea Q5000 Loan and $28.0 million in full repayment of the Term Loan (Note 6).

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 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 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 June 30, 2022.

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 September 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.

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

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.

At September 30, 2022, our commitment related to long-term vessel charters totaled approximately $402.3 million, of which $167.8 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 September 30, 2022.

Other material cash requirements

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We have decommissioning obligations associated with our oil and gas properties (Note 12).

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.

Those obligations, which are presented on a discounted basis on the accompanying condensed consolidated balance sheets, approximate $76.0 million (undiscounted) as of September 30, 2022, of which $31.0 million are expected to be paid during the next 12 months.

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

Regulatory recertification and dry dock.

Our vessels and intervention systems are subject to certain regulatory recertification requirements that must be satisfied in order for the vessels and intervention systems to operate.

Our Well Intervention vessels and systems are subject to certain regulatory recertification requirements that must be satisfied in order for the vessels and systems to operate.

Recertification may require dry dock and other compliance costs on a periodic basis, usually every 30 months.

These costs can vary and generally range between $3.0 million to $15.0 million per vessel and $0.5 million to $5.0 million per intervention system.

The timing of these costs can vary.

We expect the sources of funds to satisfy our material cash requirements to primarily come from our ongoing operations and existing cash on hand, but may also come from availability under the ABL Facility and access to capital markets.

Although the amount and timing of these costs may vary, they generally range between $3.0 million to $15.0 million per vessel and $0.5 million to $5.0 million per system.

Earn-out consideration .

As part of the Alliance acquisition, we are required to make the earn-out payment to the seller in the Alliance transaction in 2024 in the event the Helix Alliance business achieves certain financial metrics in 2022 and 2023 (Note 3).

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

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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