What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-10-25 compared with 2023-07-27 · 109 added, 99 removed, 282 unchanged (42% of the section changed)

8 unchanged sentences

● statements regarding our backlog and commercial contracts and rates thereunder;

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

● statements regarding our ability to enter into, renew 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, oil price volatility and its effects and results on the foregoing as well as our protocols and plans;

16 unchanged sentences

These factors include:

● the impact of domestic and global economic conditions and the future impact of such conditions on the offshore energy industry and the demand for our services;

● the impact of domestic and global economic and market conditions and the future impact of such conditions on the offshore energy industry and the demand for our services;

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

● 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;

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

● the results of acquired properties;

● the results of corporate initiatives such as alliances, partnerships, joint ventures, mergers, acquisitions, divestitures and restructurings, and any earn-outs payable in connection therewith, or the determination not to pursue or effect such initiatives;

● the results of acquired properties and/or equipment;

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

31 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 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.

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, decommissioning end-of-life oil and gas fields and supporting renewable energy developments.

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

Our robotics equipment includes 39 work-class ROVs, seven trenchers and the IROV boulder grab.

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

Our Shallow Water Abandonment segment includes nine liftboats, six OSVs, three DSVs, one heavy lift derrick barge, one crew boat, 20 P&A systems and six coiled tubing systems.

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.

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 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 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.

Oil prices have been volatile but remained robust during 2023.

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

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.

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 such as raising interest rates, which may taper economic growth, and 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 with the potential to temper customer spending for oil and gas projects.

23 unchanged sentences

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.

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 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.

As of September 30, 2023, our consolidated backlog totaled approximately $790 million, of which $242 million is expected to be performed over the remainder of 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

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

10 unchanged sentences

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

2 unchanged sentences

The reconciliation of our long-term debt to Net Debt is as follows (in thousands):

September 30,

Long-term debt including current maturities

Cash and cash equivalents and restricted cash

Comparison of Three Months Ended June 30, 2023 and 2022

Comparison of Three Months Ended September 30, 2023 and 2022

We have four reportable business segments:

3 unchanged sentences

Three Months Ended

September 30,

Net revenues —

19 unchanged sentences

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 June 30, 2023 and 2022 included 113 and 116 spot vessel days, respectively, at near full utilization.

(1) Represents the number of vessels, Robotics assets or 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 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, 2023 and 2022 included 92 and 100 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.

(5) Consists of P&A systems 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

1 unchanged sentence

Net Revenues.

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.

Our consolidated net revenues for the three-month period ended September 30, 2023 increased by 45% as compared to the same period in 2022, reflecting higher revenues across our business segments.

Our Well Intervention revenues increased by 57% for the three-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting higher revenues on the Q7000 and higher rates in the North Sea and Brazil.

During the third quarter 2023, the Q7000 operated throughout the quarter, achieving 88% utilization at higher rates as compared to being 59% utilized during the third quarter 2022 following scheduled regulatory maintenance.

Revenues in the North Sea improved with higher day rates and a stronger British pound as compared to the third 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.

Our Robotics revenues increased by 35% for the three-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting higher chartered vessel and ROV activities and rates.

Although chartered vessel utilization declined slightly, vessel days increased to 506 days during the third quarter 2023 as compared to 376 days during the third quarter 2022.

ROV and trencher utilization increased to 67% in the third quarter 2023 from 66% during the third quarter 2022 and included 276 days of integrated vessel trenching in the third quarter 2023 as compared to 176 days in the third quarter 2022.

Our Shallow Water Abandonment revenues increased by 29% for the three-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting higher vessel and system utilization and rates in the third quarter 2023.

Overall vessel utilization was 89% during the third quarter 2023 as compared to 80% during the third quarter 2022.

P&A systems and coiled tubing systems achieved 1,531 days of utilization, or 74%, during the third quarter 2023 as compared to 1,077 days of utilization, or 59%, during the third quarter 2022.

Our Production Facilities revenues increased by 33% for the three-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting higher oil and gas production, offset in part by lower oil and gas prices during the third quarter 2023 as compared to the third quarter 2022.

Gross Profit (Loss).

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 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.

Our consolidated gross profit increased by $41.3 million for the three-month period ended September 30, 2023 as compared to 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 increased by $17.9 million for the three-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting higher segment revenues.

Our Robotics gross profit increased by $9.2 million for the three-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting higher revenues due to increased activities.

Our Shallow Water Abandonment gross profit increased by $11.9 million for the three-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting better operating results from Helix Alliance.

Our Production Facilities gross profit increased by $2.5 million for the three-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting higher revenues.

Change in Fair Value of Contingent Consideration.

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).

The change in fair value of contingent consideration reflected increases in the estimated Alliance acquisition earn-out consideration primarily due to an improvement in Helix Alliance’s results (Notes 3 and 17).

Selling, General and Administrative Expenses.

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.

Our selling, general and administrative expenses were $27.8 million for the three-month period ended September 30, 2023 as compared to $23.6 million for the same period in 2022, primarily reflecting higher employee compensation costs.

Net Interest Expense.

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).

Our net interest expense totaled $4.2 million for the three-month period ended September 30, 2023 as compared to $4.6 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.

Net other expense was $8.3 million for the three-month period ended September 30, 2023 as compared to $20.3 million for the same period in 2022, primarily reflecting a reduction in foreign currency losses related to the depreciation of the British pound primarily on U.S.

dollar denominated intercompany debt in our U.K.

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.

Income tax provision was $8.3 million for the three-month period ended September 30, 2023 as compared to $6.5 million for the same period in 2022.

The effective tax rates for the three-month periods ended September 30, 2023 and 2022 were 34.9% and (53.0)%, 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

Comparison of Nine Months Ended September 30, 2023 and 2022

We have four reportable business segments:

2 unchanged sentences

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 —

19 unchanged sentences

Shallow Water Abandonment systems (5)

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.

Utilization rates of chartered Robotics vessels during the nine-month periods ended September 30, 2023 and 2022 included 218 and 352 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.

(5) Consists of 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

Nine Months Ended

September 30,

Well Intervention

1 unchanged sentence

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.

Our consolidated net revenues for the nine-month period ended September 30, 2023 increased by 63% as compared to the same period in 2022, reflecting higher revenues across our business segments.

Our Well Intervention revenues increased by 46% for the nine-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting higher revenues in the North Sea and Brazil and on the Q7000 , offset in part by lower revenues in the Gulf of Mexico.

Revenues in the North Sea improved with stronger utilization and rates as compared to the nine-month period ended September 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.

Higher revenues on the Q7000 were primarily attributable to the vessel achieving higher utilization and rates during the third quarter 2023 as compared to the same period in 2022.

Revenues in the Gulf of Mexico decreased primarily due to lower utilization on the Q4000 and the Q5000 as both vessels had 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.

Our Robotics revenues increased by 36% for the nine-month period ended September 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 1,236 days and 95%, respectively, during the nine-month period ended September 30, 2023 as compared to 1,069 days and 94%, respectively, during the nine-month period ended September 30, 2022.

ROV and trencher utilization increased to 60% in the nine-month period ended September 30, 2023 from 52% during the nine-month period ended September 30, 2022 and included 536 days of integrated vessel trenching in 2023 as compared to 323 days in 2022.

Also included in the nine-month period ended September 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 in the second half of 2022.

Our Shallow Water Abandonment revenues for the nine-month period ended September 30, 2023 reflected nine months of revenue generated by Helix Alliance with 75% utilization across 20 vessels and 4,362 days of utilization across 26 P&A systems and coiled tubing systems.

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

Our Production Facilities revenues for the nine-month period ended September 30, 2023 increased by 26% 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 oil and gas prices during the nine-month period ended September 30, 2023 as compared to the same period in 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.

Our consolidated gross profit increased by $131.8 million for the nine-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting increased segment profitability as well as the addition of Shallow Water Abandonment segment since July 1, 2022.

Our Well Intervention gross profit for the nine-month period ended September 30, 2023 was $22.3 million as compared to a gross loss of $45.9 million for the same period in 2022, primarily reflecting higher segment revenues.

Our Robotics gross profit increased by $20.6 million for the nine-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting higher revenues due to increased activities.

Our Shallow Water Abandonment gross profit increased by $40.3 million for the nine-month period ended September 30, 2023 as compared to the same period in 2022, primarily reflecting nine months of operating results from Helix Alliance in 2023 as compared to three months of operating results in 2022.

Our Production Facilities gross profit increased by $3.7 million for the nine-month period ended September 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.

Our acquisition and integration costs decreased by $1.8 million for the nine-month period ended September 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.

Our selling, general and administrative expenses were $71.5 million for the nine-month period ended September 30, 2023 as compared to $54.0 million for the same period in 2022, primarily reflecting higher employee compensation costs and the addition of Helix Alliance.

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.

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

Our net interest expense totaled $12.6 million for the nine-month period ended September 30, 2023 as compared to $14.6 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.

Net other expense was $10.6 million for the nine-month period ended September 30, 2023, primarily reflecting foreign currency losses related to the devaluation of the Nigerian naira on our naira cash holdings, offset in part by foreign currency gains related to U.S.

dollar denominated intercompany debt in our U.K.

Net other expense was $37.6 million for the nine-month period ended September 30, 2022, primarily reflecting foreign currency losses related to U.S.

dollar denominated intercompany debt in our U.K.

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.

Income tax provision was $9.6 million for the nine-month period ended September 30, 2023 as compared to $10.1 million for the same period in 2022.

The effective tax rates for the nine-month periods ended September 30, 2023 and 2022 were 35.5% and (12.5)%, 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).

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

4 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 June 30, 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 $8.7 million at September 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 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 September 30, 2023 included $168.4 million of cash and cash equivalents and $110.2 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 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.

As of September 30, 2023, we had approximately $15.9 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.

Beginning 2022 and continuing through 2023, we have seen an improvement in the markets we serve, following the slowdown triggered by the COVID-19 pandemic, as evidenced by increases in our revenues and gross profit.

We expect continued improvements in our operating performance, increases in our cash position and high availability on the Amended ABL Facility.

11 unchanged sentences

Any repurchased shares are expected to be cancelled.

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.

During the nine-month period ended September 30, 2023, we repurchased a total of 1,584,045 shares of our common stock for approximately $12.0 million pursuant to the 2023 Repurchase Program.

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):

3 unchanged sentences

Operating Activities

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.

The increase in our operating cash flows for the nine-month period ended September 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 $59.2 million and $25.6 million, respectively, during the comparable year over year periods.

Investing Activities

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.

Cash flows used in investing activities for the nine-month periods ended September 30, 2023 and 2022 reflect higher capital expenditures as a result of increased activity levels as well as $6.0 million cash payment for the purchase of P&A equipment (Note 2).

Cash flows used in investing activities for the nine-month periods ended September 30, 2022 also included $112.6 million in net cash paid to acquire Alliance (Note 3).

Financing Activities

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).

Net cash outflows from financing activities for the nine-month period ended September 30, 2023 primarily reflect the $12.0 million repurchase of our common stock under the 2023 Repurchase Program, the principal repayment of $8.3 million related to the MARAD Debt and $30.4 million related to the 2023 Notes (Note 6).

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

Material Cash Requirements

1 unchanged sentence

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, 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 June 30, 2023.

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

Although upon conversion these notes are able to be settled in either cash or shares, we intend to settle their principal amounts in cash (Note 6).

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, operating lease obligations and contingent earn-out consideration, as of September 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).

We acquired Helix Alliance in July 2022 for total consideration that included cash plus an earn-out to the extent Helix Alliance’s financial results exceed certain thresholds in 2022 and 2023 (Note 3).

We reported $74.1 million of contingent earn-out consideration in “Accrued liabilities” in the accompanying condensed consolidated balance sheet as of September 30, 2023 (Note 4), which was the estimated fair value of the expected future earn-out payment.

The earn-out is based on Helix Alliance’s financial performance through the end of 2023 and is expected to be paid in cash in the first half of 2024, and the final amount could change based on the ultimate financial performance of Helix Alliance.

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

On September 29, 2023, we announced that the 2026 Notes are convertible at the option of the holders from October 1, 2023 through December 31, 2023 as a result of the closing price of our common stock exceeding 130% of the conversion price for at least 20 days of the last 30 consecutive trading days in the quarter ended September 30, 2023.

Should the closing share price conditions continue to be met in a future quarter for the 2026 Notes, the 2026 Notes will be convertible at their holders’ option during the immediately following quarter.

We have the right to satisfy our conversion obligation by delivering cash, shares of our common stock or any combination thereof (Note 6).

Interest related to debt

4 unchanged sentences

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

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.

At September 30, 2023, our commitment related to long-term vessel charters totaled approximately $341.6 million, of which $139.1 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, 2023.

Other material cash requirements

2 unchanged sentences

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 June 30, 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 September 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.

11 unchanged sentences

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