What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-07-27 compared with 2023-04-26 · 156 added, 73 removed, 225 unchanged (50% of the section changed)

9 unchanged sentences

● statements regarding our ability to enter into and/or perform commercial contracts, including the scope, timing and outcome of those contracts;

● statements regarding the spot market, the continuation of our current backlog, visibility and future utilization, our spending and cost management efforts and our ability to manage changes, and the COVID-19 pandemic and oil price volatility and their respective effects and results on the foregoing as well as our protocols and plans;

● statements regarding the spot market, the continuation of our current backlog, visibility and future utilization, our spending and cost management efforts and our ability to manage changes, oil price volatility and its effects and results on the foregoing as well as our protocols and plans;

● statements regarding energy transition and energy security;

17 unchanged sentences

● the general impact of oil and gas price volatility and the cyclical nature of the oil and gas market;

● the results and effects of the COVID-19 pandemic and actions by governments, customers, suppliers and partners with respect thereto;

● the potential effects of regional tensions that have escalated or may escalate, including into conflicts or wars, and their impact on the global economy, oil and gas market, our operations, international trade, or our ability to do business with certain parties or in certain regions, and any governmental sanctions resulting therefrom;

6 unchanged sentences

● the performance of contracts by suppliers, customers and partners;

● the results of our continuing efforts to control costs and improve performance;

● unexpected future operations expenditures, including the amount and nature thereof;

2 unchanged sentences

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

● the results of our continuing efforts to control costs and improve performance;

● the success of our risk management activities, including with respect to our cybersecurity initiatives;

2 unchanged sentences

● the effectiveness of our ESG initiatives and disclosures;

● the impact of current and future laws and governmental regulations and how they will be interpreted or enforced, including related to fossil fuel production and litigation and similar claims in which we may be involved;

● the impact of current and future laws and governmental regulations and how they will be interpreted or enforced, including related to fossil fuel production, decommissioning, and litigation and similar claims in which we may be involved;

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

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

● the effectiveness of any future hedging activities;

13 unchanged sentences

We are an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention, robotics and full-field decommissioning 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, supporting renewable energy developments and decommissioning end-of-life oil and gas fields.

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

Our well intervention fleet includes seven purpose-built well intervention vessels and 12 intervention systems.

1 unchanged sentence

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

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

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

Our new Shallow Water Abandonment segment includes nine liftboats, six OSVs, three DSVs, one heavy lift derrick barge, one crew boat, 15 marketable P&A systems (with the ability to scale up to 20 systems) and six coiled tubing systems.

3 unchanged sentences

Oil prices reached ten-year highs during the middle of 2022 and have since experienced moderate declines and volatility.

Global demand for oil continues to recover as supply has been disrupted by regional conflicts.

We expect oil prices will remain robust for the near term, which should lead to higher customer spending for the industry.

However, despite the current strong commodity price environment, there remain headwinds to commodity price stability, including those regional conflicts, high inflation and in particular governments’ and central banks’ efforts to control inflation, which may taper economic growth, COVID-related uncertainties, various governmental and customer ESG initiatives and continued shifting of resource allocation to renewable energy, and most recently wavering market confidence in light of turmoil within the banking industry.

Global demand for oil continues to recover as supply has been impacted by regional conflicts and decisions by members of the Organization of Petroleum Exporting Countries (“OPEC) and other non-OPEC producer nations (collectively with OPEC members, “OPEC+”) related to production.

We expect the current market conditions will maintain continued customer spending for the industry.

Despite the current commodity price environment, there remain headwinds to commodity price stability, including those regional conflicts, further OPEC+ decisions, high inflation and in particular governments’ and central banks’ efforts to control inflation, which may taper economic growth, various governmental and customer ESG initiatives and continued shifting of resource allocation to renewable energy, and the impact of market confidence in light of turmoil within the banking industry.

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

We maximize production of remaining oil and gas reserves for our customers primarily in our Well Intervention segment.

We are subject to the effects of changing prices.

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

however, inflation rates have risen significantly since 2021.

Although we may be 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 through the rates we charge and by actively pursuing internal cost management efforts.

However, competitive market pressures may affect our ability to recoup these price increases through our rates, which may result in reductions in our operating margins and cash flows.

The recent high inflation rates seen in various major economies have resulted in central banks’ tightening of monetary policies.

These concerns have contributed to stock market volatility as well as higher interest rates, which could provide a strained macroeconomic outlook and in turn affect energy markets.

We maximize production of existing oil and gas reserves for our customers primarily in our Well Intervention segment.

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.

1 unchanged sentence

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.

Over the near-term, with the current high commodity price environment we expect oil and gas companies to invest in new long-cycle exploration projects in addition to maintaining and/or increasing production from their remaining reserves.

Over the near-term, we are seeing oil and gas companies investing in new long-cycle exploration projects in addition to maintaining and/or increasing production from their existing reserves.

As historically production enhancement through well intervention is less expensive per incremental barrel of oil than exploration, we expect oil and gas companies to continue to focus on optimizing production of their existing subsea wells.

4 unchanged sentences

We support the energy transition to renewables through our services in offshore wind farm developments, primarily including subsea cable trenching and burial as well as seabed clearance and preparation 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.

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 generation and/or reduce the cost of renewable energy, expansion of offshore renewable energy projects to deeper water and other regions, and government subsidies for renewable energy projects.

We expect growth in our renewables services as the energy market transitions to continued renewable energy developments.

1 unchanged sentence

As the subsea tree base expands and ages and customers shift resources to renewable energy, the demand for P&A services should persist.

Our operations service the life cycle of an oil and gas field and provide P&A services at the end of the life of a field as required by governmental regulations, and we believe that we have a competitive advantage in performing these services efficiently.

We are subject to the effects of changing prices.

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

however, inflation rates have risen significantly since 2021 due in part to supply chain disruptions and the effects of the COVID-19 pandemic.

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 management efforts.

However, competitive market pressures may affect our ability to recoup these price increases through the rates we charge, which may result in reductions in our operating margins and cash flows in the future.

The recent high inflation rates seen in various major economies have caused concerns for central banks’ tightening of monetary policies.

These concerns have contributed to stock market volatility as well as higher interest rates, which, combined with ongoing regional conflicts and unrest and potential COVID-related disruptions throughout the globe, could provide a strained macroeconomic outlook and in turn affect energy markets.

Our operations service the life cycle of an oil and gas field and provide P&A and decommissioning services at the end of the life of a field as required by governmental regulations, and we believe that we have a competitive advantage in performing these services efficiently.

The COVID-19 pandemic resulted in unprecedented 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.

While the peak of the COVID-19 pandemic has largely subsided, we could experience a resurgence of the COVID-19 or new pandemic that could significantly impact economic activity, our customers’ willingness to commit to future spending, access to and use of capital, supply chains, inflation and human capital resources.

Although the World Health Organization ended the global public health emergency status for COVID-19 in May 2023, we could experience either a resurgence of COVID-19 or a new pandemic that could significantly impact economic activity, our customers’ willingness to commit to future spending, access to and use of capital, supply chains, inflation and human capital resources.

We define backlog as firm commitments represented by signed contracts.

As of March 31, 2023, our consolidated backlog totaled approximately $920 million, of which $554 million is expected to be performed over the remainder of 2023.

Our various contracts with Shell globally, our contracts with Trident and Petrobras in Brazil, our contracts with Repsol globally and our agreement for the HP I in the Gulf of Mexico represented approximately 64% of our total backlog as of March 31, 2023.

As of June 30, 2023, our consolidated backlog totaled approximately $910 million, of which $455 million is expected to be performed over the remainder of 2023.

Our various contracts with Shell globally, our contracts with Trident and Petrobras in Brazil, our contracts with Repsol globally, and our agreement for the HP I in the Gulf of Mexico represented approximately 57% of our total backlog as of June 30, 2023.

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

22 unchanged sentences

Three Months Ended

Income tax provision (benefit)

Six Months Ended

Net income (loss)

Income tax provision

Net interest expense

Other (income) expense, net

Other expense, net

Depreciation and amortization

Gain on equity investment

Gain on disposition of assets, net

1 unchanged sentence

Change in fair value of contingent consideration

General provision (release) for current expected credit losses

General provision for current expected credit losses

Adjusted EBITDA

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

4 unchanged sentences

Cash and cash equivalents and restricted cash

Comparison of Three Months Ended March 31, 2023 and 2022

Comparison of Three Months Ended June 30, 2023 and 2022

We have four reportable business segments:

26 unchanged sentences

(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 March 31, 2023 and 2022 included 13 spot vessel days at 81% utilization and 136 spot vessel days at near full utilization, respectively.

Utilization rates of chartered Robotics vessels during the three-month periods ended June 30, 2023 and 2022 included 113 and 116 spot vessel days, respectively, at near full utilization.

(3) Consists of ROVs, trenchers and the IROV 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.

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

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

2 unchanged sentences

Well Intervention

Shallow Water Abandonment

Net Revenues.

Our consolidated net revenues for the three-month period ended March 31, 2023 increased by 67% as compared to the same period in 2022, reflecting higher revenues across our business segments.

Our Well Intervention revenues increased by 34% for the three-month period ended March 31, 2023 as compared to the same period in 2022, primarily reflecting higher utilization in the North Sea and higher rates in the Gulf of Mexico and Brazil, offset in part by lower revenue on the Q7000 .

Revenues in the North Sea improved with strong winter season activity, generating 81% utilization during the first quarter 2023 as compared to the first quarter 2022, which generated 13% utilization.

Revenues in the Gulf of Mexico benefitted from an improved day rate environment year over year, and revenues in Brazil increased primarily due to higher rates as both the Siem Helix 1 and the Siem Helix 2 commenced long-term contracts with improved rates at the end of 2022.

During the first quarter 2023, the Q7000 had 53 days of dry dock during which it generated no revenue and 37 days of paid transit and mobilization to Asia Pacific for which all revenues have been deferred.

Our Robotics revenues increased by 32% for the three-month period ended March 31, 2023 as compared to the same period in 2022, primarily reflecting higher ROV and trenching activities, offset in part by fewer vessel days year over year.

ROV and trencher utilization increased to 56% in the first quarter 2023 from 35% during the first quarter 2022 and included 66 days of integrated vessel trenching in both periods as well as 90 days of stand-alone trencher activities during the first quarter 2023.

While chartered vessel utilization remained relatively flat at 91% during the first quarter 2023 as compared to 90% during the first quarter 2022, chartered vessel days decreased to 295 days as compared to 323 days primarily due to fewer spot vessel days during the first quarter 2023 performing seabed clearance work in the North Sea.

Our Shallow Water Abandonment revenues for the three-month period ended March 31, 2023 reflected revenues generated by Helix Alliance as a result of the Alliance acquisition on July 1, 2022 (Note 3) with 58% utilization across 20 vessels and 1,277 days of utilization across marketable P&A and coiled tubing systems during the quarter.

Our Production Facilities revenues for the three-month period ended March 31, 2023 increased by 14% as compared to the same period in 2022, primarily reflecting higher oil and gas production with the contribution from our interest in the Thunder Hawk Field acquired during the third quarter 2022 and improved rates on our HP I production contract.

Our consolidated net revenues for the three-month period ended June 30, 2023 increased by 90% as compared to the same period in 2022, reflecting higher revenues across our business segments.

Our Well Intervention revenues increased by 45% for the three-month period ended June 30, 2023 as compared to the same period in 2022, primarily reflecting higher revenues in the North Sea and Brazil as well as on the Q7000 , offset in part by lower utilization on the Q4000 as the vessel commenced its scheduled regulatory dry dock during the second quarter 2023.

Revenues in the North Sea improved with stronger utilization and rates as compared to the second quarter 2022.

Revenues in Brazil increased primarily due to higher rates as both the Siem Helix 1 and the Siem Helix 2 commenced long-term contracts with improved rates at the end of 2022.

During the second quarter 2023, the Q7000 recognized revenues over approximately 27 days following its paid transit and mobilization to Asia Pacific as compared to minimal utilization before conducting its scheduled regulatory maintenance during the remainder of the quarter in 2022.

Our Robotics revenues increased by 41% for the three-month period ended June 30, 2023 as compared to the same period in 2022, primarily reflecting higher utilization and rates on vessels, ROVs and trenchers.

Chartered vessel days and utilization increased to 435 days and 96%, respectively, during the second quarter 2023 as compared to 370 days and 94%, respectively, during the second quarter 2022.

ROV and trencher utilization increased to 58% in the second quarter 2023 from 53% during the second quarter 2022 and included 194 days of integrated vessel trenching in the second quarter 2023 as compared to 81 days in the second quarter 2022.

Also included in the second quarter 2023 were 58 days of stand-alone trencher activities on the i-Plough trencher and 83 days of utilization on the IROV boulder grab, both of which were acquired subsequent to the second quarter 2022.

Our Shallow Water Abandonment revenues for the three-month period ended June 30, 2023 reflected revenues generated by Helix Alliance as a result of the Alliance acquisition on July 1, 2022 (Note 3) with 78% utilization across 20 vessels and 1,554 days of utilization across 21 P&A and coiled tubing systems during the quarter.

Our Production Facilities revenues for the three-month period ended June 30, 2023 increased by 31% as compared to the same period in 2022, primarily reflecting higher oil and gas production with the contribution from our interest in the Thunder Hawk Field acquired during the third quarter 2022, offset in part by lower commodity prices realized on our Droshky wells during the second quarter 2023 as compared to the second quarter 2022.

Gross Profit (Loss).

Our consolidated gross profit was $15.2 million for the three-month period ended March 31, 2023 as compared to consolidated gross loss of $18.6 million for the same period in 2022, primarily reflecting increased profitability in our Well Intervention and Robotics segments as well as the addition of Shallow Water Abandonment segment.

Our Well Intervention gross loss for the three-month period ended March 31, 2023 was $4.4 million as compared to a gross loss of $28.4 million for the same period in 2022, primarily reflecting higher segment revenues.

Our Robotics gross profit increased by $3.5 million for the three-month period ended March 31, 2023 as compared to the same period in 2022, primarily reflecting higher revenues due to increased ROV and trenching activities.

Our Shallow Water Abandonment gross profit for the three-month period ended March 31, 2023 reflected results from Helix Alliance.

Our Production Facilities gross profit decreased by $0.8 million for the three-month period ended March 31, 2023 as compared to the same period in 2022, primarily reflecting higher oil and gas operating costs following the Thunder Hawk Field acquisition as compared to the same period in 2022.

Our consolidated gross profit was $55.3 million for the three-month period ended June 30, 2023 as compared to consolidated gross loss of $1.4 million for the same period in 2022, primarily reflecting increased segment profitability as well as the addition of Shallow Water Abandonment segment.

Our Well Intervention gross profit for the three-month period ended June 30, 2023 was $7.0 million as compared to a gross loss of $19.3 million for the same period in 2022, primarily reflecting higher segment revenues.

Our Robotics gross profit increased by $7.9 million for the three-month period ended June 30, 2023 as compared to the same period in 2022, primarily reflecting higher revenues due to increased activities.

Our Shallow Water Abandonment gross profit for the three-month period ended June 30, 2023 reflected results from Helix Alliance.

Our Production Facilities gross profit increased by $2.0 million for the three-month period ended June 30, 2023 as compared to the same period in 2022, primarily reflecting higher revenues.

Acquisition and Integration Costs.

Our acquisition and integration costs were $0.2 million for the three-month period ended March 31, 2023, reflecting Alliance acquisition related costs incurred during the first quarter 2023.

Our acquisition and integration costs decreased by $1.3 million for the three-month period ended June 30, 2023 as compared to the same period in 2022, reflecting lower spend towards the late stage of the Alliance integration process.

Change in Fair Value of Contingent Consideration.

The $4.0 million change in fair value of contingent consideration for the three-month period ended March 31, 2023 reflected an increase in the estimated earn-out consideration payable to the seller in the Alliance transaction in 2024 primarily due to an improved outlook for Helix Alliance’s 2023 results (Notes 3 and 17).

The $10.8 million change in fair value of contingent consideration for the three-month period ended June 30, 2023 reflected an increase in the estimated Alliance acquisition earn-out consideration primarily due to an improved outlook for Helix Alliance’s 2023 results (Notes 3 and 17).

Selling, General and Administrative Expenses.

Our selling, general and administrative expenses were $19.6 million for the three-month period ended March 31, 2023 as compared to $14.4 million for the same period in 2022, primarily reflecting higher employee compensation costs.

Our selling, general and administrative expenses were $24.0 million for the three-month period ended June 30, 2023 as compared to $16.0 million for the same period in 2022, primarily reflecting higher employee compensation costs.

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 gains recognized as a result of the sale of the “Independence Hub” platform.

Net Interest Expense.

Our net interest expense totaled $4.2 million for the three-month period ended March 31, 2023 as compared to $5.2 million for the same period in 2022, primarily reflecting the increase in interest income and the repayment of certain indebtedness (Note 6).

Other Income (Expense), Net.

Net other income was $3.4 million for the three-month period ended March 31, 2023 as compared to net other expense of $3.9 million for the same period in 2022 primarily due to foreign currency transaction gains (losses) reflecting the strengthening (weakening) of the British pound.

Income Tax Provision (Benefit).

Income tax benefit was $2.0 million for the three-month period ended March 31, 2023 as compared to an income tax provision of $2.1 million for the same period in 2022.

The effective tax rates for the three-month periods ended March 31, 2023 and 2022 were 28.1% and (5.4)%, respectively.

Our net interest expense totaled $4.2 million for the three-month period ended June 30, 2023 as compared to $4.8 million for the same period in 2022, primarily reflecting the increase in interest income and the repayment of certain indebtedness (Note 6).

Other Expense, Net.

Net other expense was $5.7 million for the three-month period ended June 30, 2023, primarily reflecting an $11.7 million foreign currency loss related to the devaluation of the Nigerian naira on our naira cash holdings during the second quarter 2023, offset in part by foreign currency gains due to the strengthening of the British pound.

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

Income Tax Provision.

Income tax provision was $3.3 million for the three-month period ended June 30, 2023 as compared to $1.4 million for the same period in 2022.

The effective tax rates for the three-month periods ended June 30, 2023 and 2022 were 31.8% and (5.1)%, respectively.

These variances were primarily attributable to non-deductible expenses, non-creditable foreign income taxes and losses for which no financial statement benefits have been recognized (Note 7).

Comparison of Six Months Ended June 30, 2023 and 2022

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

Net revenues —

Well Intervention

Shallow Water Abandonment

Production Facilities

Intercompany eliminations

Gross profit (loss) —

Well Intervention

Shallow Water Abandonment

Production Facilities

Corporate, eliminations and other

Gross margin —

Well Intervention

Shallow Water Abandonment

Production Facilities

Total company

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

Well Intervention vessels

Robotics assets (3)

Chartered Robotics vessels

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.

Utilization rates of chartered Robotics vessels during the six-month periods ended June 30, 2023 and 2022 included 126 and 252 spot vessel days, respectively, at near full utilization.

(3) Consists of ROVs, trenchers and the IROV boulder grab.

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

(5) Consists of marketable P&A systems 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

Well Intervention

Shallow Water Abandonment

Net Revenues.

Our consolidated net revenues for the six-month period ended June 30, 2023 increased by 79% as compared to the same period in 2022, reflecting higher revenues across our business segments.

Our Well Intervention revenues increased by 40% for the six-month period ended June 30, 2023 as compared to the same period in 2022, primarily reflecting higher revenues in the North Sea and Brazil, offset in part by lower revenues in the Gulf of Mexico and on the Q7000 .

Revenues in the North Sea improved with stronger utilization and rates as compared to the six-month period ended June 30, 2022.

Revenues in Brazil increased primarily due to higher rates as both the Siem Helix 1 and the Siem Helix 2 commenced long-term contracts with improved rates at the end of 2022.

Revenues in the Gulf of Mexico decreased primarily due to lower utilization on the Q4000 and the Q5000 as both vessels have their scheduled regulatory dry dock in 2023.

This revenue decrease was partially offset by improved day rates on the Q4000 .

Lower revenues on the Q7000 were primarily attributable to revenue deferrals on 92 days of paid transit and mobilization to Asia Pacific, which was partially recognized over approximately 27 operational days during the six-month period ended June 30, 2023.

This revenue decrease was partially offset by higher utilization as the Q7000 had 53 days of dry dock during the first quarter 2023 whereas the vessel had minimal utilization before conducting its scheduled regulatory maintenance during the second quarter 2022.

Our Robotics revenues increased by 37% for the six-month period ended June 30, 2023 as compared to the same period in 2022, primarily reflecting higher utilization and rates on vessels, ROVs and trenchers.

Chartered vessel days and utilization increased to 730 days and 94%, respectively, during the six-month period ended June 30, 2023 as compared to 693 days and 92%, respectively, during the six-month period ended June 30, 2022.

ROV and trencher utilization increased to 57% in the six-month period ended June 30, 2023 from 44% during the six-month period ended June 30, 2022 and included 260 days of integrated vessel trenching in 2023 as compared to 147 days in 2022.

Also included in the six-month period ended June 30, 2023 were 148 days of stand-alone trencher activities on the i-Plough trencher and 83 days of utilization on the IROV boulder grab, both of which were acquired subsequent to the second quarter 2022.

Our Shallow Water Abandonment revenues for the six-month period ended June 30, 2023 reflected revenues generated by Helix Alliance as a result of the Alliance acquisition on July 1, 2022 (Note 3) with 68% utilization across 20 vessels and 2,831 days of utilization across 21 P&A systems and coiled tubing systems during the six-month period ended June 30, 2023.

Our Production Facilities revenues for the six-month period ended June 30, 2023 increased by 22% as compared to the same period in 2022, primarily reflecting higher oil and gas production with the contribution from our interest in the Thunder Hawk Field acquired during the third quarter 2022.

Gross Profit (Loss).

Our consolidated gross profit was $70.5 million for the six-month period ended June 30, 2023 as compared to consolidated gross loss of $20.0 million for the same period in 2022, primarily reflecting increased segment profitability as well as the addition of Shallow Water Abandonment segment.

Our Well Intervention gross profit for the six-month period ended June 30, 2023 was $2.6 million as compared to a gross loss of $47.8 million for the same period in 2022, primarily reflecting higher segment revenues.

Our Robotics gross profit increased by $11.4 million for the six-month period ended June 30, 2023 as compared to the same period in 2022, primarily reflecting higher revenues due to increased activities.

Our Shallow Water Abandonment gross profit for the six-month period ended June 30, 2023 reflected results from Helix Alliance.

Our Production Facilities gross profit increased by $1.1 million for the six-month period ended June 30, 2023 as compared to the same period in 2022, primarily reflecting higher revenues.

Acquisition and Integration Costs.

Our acquisition and integration costs decreased by $1.0 million for the six-month period ended June 30, 2023 as compared to the same period in 2022, reflecting lower spend towards the late stage of the Alliance integration process.

Change in Fair Value of Contingent Consideration.

The $14.8 million change in fair value of contingent consideration for the six-month period ended June 30, 2023 reflected an increase in the estimated Alliance acquisition earn-out consideration primarily due to an improved outlook for Helix Alliance’s 2023 results (Notes 3 and 17).

Selling, General and Administrative Expenses.

Our selling, general and administrative expenses were $43.6 million for the six-month period ended June 30, 2023 as compared to $30.4 million for the same period in 2022, primarily reflecting higher employee compensation costs.

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 gains recognized as a result of the sale of the “Independence Hub” platform.

Net Interest Expense.

Our net interest expense totaled $8.4 million for the six-month period ended June 30, 2023 as compared to $10.0 million for the same period in 2022, primarily reflecting the increase in interest income and the repayment of certain indebtedness (Note 6).

Other Expense, Net.

Net other expense was $2.3 million for the six-month period ended June 30, 2023, primarily reflecting a $13.2 million foreign currency loss related to the devaluation of the Nigerian naira on our naira cash holdings during the six-month period ended June 30, 2023, offset in part by foreign currency gains due to the strengthening of the British pound.

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

Income Tax Provision.

Income tax provision was $1.3 million for the six-month period ended June 30, 2023 as compared to $3.6 million for the same period in 2022.

The effective tax rates for the six-month periods ended June 30, 2023 and 2022 were 40.1% and (5.2)%, 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).

8 unchanged sentences

Long-Term Debt

Long-term debt in the table above is net of unamortized debt issuance costs and excludes current maturities of $38.5 million at March 31, 2023 and $38.2 million at December 31, 2022.

Long-term debt in the table above is net of unamortized debt issuance costs and excludes current maturities of $38.5 million at June 30, 2023 and $38.2 million at December 31, 2022.

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 March 31, 2023 included $166.7 million of cash and cash equivalents and $80.0 million of available borrowing capacity under the Amended ABL Facility (Note 6) and excluded $2.5 million of restricted cash.

Our liquidity at June 30, 2023 included $182.7 million of cash and cash equivalents and $102.5 million of available borrowing capacity under the Amended ABL Facility (Note 6).

Our liquidity at December 31, 2022 included $186.6 million of cash and cash equivalents and $98.1 million of available borrowing capacity under the Amended ABL Facility and excluded $2.5 million of restricted cash.

As of March 31, 2023, we had approximately $27.8 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.

As of June 30, 2023, we had approximately $16.2 million in Nigerian naira, which has been subject to currency exchange controls established by the Central Bank of Nigeria.

Those exchange controls have to date limited our ability to convert our Nigerian naira into U.S.

During 2022, we saw an improvement in the markets we serve as evidenced by increases in our revenues and gross profit.

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Any repurchased shares are expected to be cancelled.

During the three-month period ended March 31, 2023, we repurchased a total of 660,000 shares of our common stock for approximately $5.0 million pursuant to the 2023 Repurchase Program.

During the six-month period ended June 30, 2023, we repurchased a total of 1,410,000 shares of our common stock for approximately $10.1 million pursuant to the 2023 Repurchase Program.

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 outflows for the three-month period ended March 31, 2023 as compared to the same period in 2022 primarily reflects higher earnings, offset in part by higher regulatory recertification costs for our vessels and systems and higher working capital outflows.

The increase in our operating cash flows for the six-month period ended June 30, 2023 as compared to the same period in 2022 primarily reflects higher earnings, offset in part by higher regulatory recertification costs for our vessels and systems and higher working capital outflows.

Regulatory recertification spend on our vessels and systems amounted to $41.3 million and $15.7 million, respectively, during the comparable year over year periods.

Investing Activities

Cash flows used in investing activities for the three-month periods ended March 31, 2023 and 2022 reflect higher capital expenditures as a result of increased activity levels.

Cash flows used in investing activities for the six-month periods ended June 30, 2023 and 2022 reflect higher capital expenditures as a result of increased activity levels.

Financing Activities

Net cash outflows from financing activities for the three-month period ended March 31, 2023 primarily reflect the $5.0 million repurchase of our common stock under the 2023 Repurchase Program and the principal repayment of $4.1 million related to the MARAD Debt.

Net cash outflows from financing activities for the three-month period ended March 31, 2022 primarily reflect the principal repayment of $3.9 million related to the MARAD Debt (Note 6).

Net cash outflows from financing activities for the six-month period ended June 30, 2023 primarily reflect the $10.1 million repurchase of our common stock under the 2023 Repurchase Program and the principal repayment of $4.1 million related to the MARAD Debt.

Net cash outflows from financing activities for the six-month period ended June 30, 2022 primarily reflect the principal repayment of $3.9 million related to the MARAD Debt and $35 million related to the 2022 Notes (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 March 31, 2023 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, 2023.

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, 2023 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 March 31, 2023, our commitment related to long-term vessel charters totaled approximately $361.2 million, of which $147.7 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, 2023.

(2) 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).

Amount reflects the estimated fair value of the earn-out as of March 31, 2023 although the final earn-out payable is not capped.

At June 30, 2023, our commitment related to long-term vessel charters totaled approximately $340.7 million, of which $142.3 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, 2023.

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

Amount reflects the estimated fair value of the earn-out as of June 30, 2023 although the final earn-out payable is not capped.

Other material cash requirements

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We have decommissioning obligations associated with our oil and gas properties (Note 13).

Those obligations, which are presented on a discounted basis on the condensed consolidated balance sheets, approximate $45.0 million (undiscounted) for Thunder Hawk Field oil and gas properties and $33.5 million (undiscounted) for Droshky oil and gas properties as of March 31, 2023, none of which is expected to be paid during the next 12 months.

Those obligations, which are presented on a discounted basis on the condensed consolidated balance sheets, approximate $45.0 million (undiscounted) for Thunder Hawk Field oil and gas properties and $33.5 million (undiscounted) for Droshky oil and gas properties as of June 30, 2023, none of which is expected to be paid during the next 12 months.

We are entitled to receive $30.0 million (undiscounted) from Marathon Oil as certain decommissioning obligations associated with Droshky oil and gas properties 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