What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-24 compared with 2024-07-25 · 104 added, 86 removed, 266 unchanged (42% of the section changed)

29 unchanged sentences

● the general impact of oil and natural 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 potential effects of regional tensions that have escalated or may escalate, including into conflicts or wars, and their impact on the global economy, the 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, and any amounts payable in connection therewith, or the determination not to pursue or effect such initiatives;

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

Demand for decommissioning, which has been an area of growth for us in recent years, is affected by commodity prices as well as governmental regulations and political forces globally.

Demand for decommissioning is affected by commodity prices as well as governmental regulations and political forces globally.

Oil prices continue to be volatile but have generally remained robust since 2020.

Global demand for oil continues to experience growth, and we expect the current market conditions will maintain continued customer spending for the industry.

Despite the current commodity price environment, factors that could threaten the current commodity price environment persist, including regional conflicts, unrest in the Middle East, decisions from members of the Organization of Petroleum Exporting Countries (“OPEC”) and other non-OPEC producer nations (collectively with OPEC members, “OPEC+”), various governmental and customer sustainability initiatives and continued shifting of resource allocation to renewable energy.

Global demand for oil continues to experience growth albeit at slower rates, and we expect the current market conditions will maintain continued customer spending for the industry.

However, factors that could threaten the current commodity price environment persist, including regional conflicts, unrest in the Middle East, decisions from members of the Organization of Petroleum Exporting Countries (“OPEC”) and other non-OPEC producer nations (collectively with OPEC members, “OPEC+”), the global economy and the demand for oil and gas in China in particular, various governmental and customer sustainability 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.

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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.

We support the energy transition to renewable energy 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 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 offshore renewable energy developments.

Once end-of-life oil and gas wells have depleted their production, we decommission wells and infrastructure in our Well Intervention and Shallow Water Abandonment segments.

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The demand for P&A services should grow over the mid- to long-term as the subsea tree base expands, as government regulations continue to place stronger emphasis on decommissioning aged wells worldwide (including subsea trees as well as mature dry tree wells in the shallow waters of the Gulf of Mexico), as customers look to reduce their decommissioning obligations and as customers shift resources to renewable energy.

In 2024, we expect to experience another strong year of performance driven by increasing demand for our decommissioning services internationally and continued growth in the offshore renewables trenching market.

We expect the demand for shallow water decommissioning services in the Gulf of Mexico to remain soft in the near term but should grow over the mid- to long-term.

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

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

Our backlog is represented by signed contracts.

As of June 30, 2024, our consolidated backlog totaled approximately $873 million, of which $443 million is expected to be performed over the remainder of 2024.

Our various contracts with Shell, ExxonMobil and Subsea 7 globally, our contracts with Trident Energy and Petrobras in Brazil, and our agreement for the HP I in the Gulf of Mexico represented approximately 73% of our total backlog as of June 30, 2024.

As of September 30, 2024, our consolidated backlog totaled approximately $1.6 billion, of which $261 million is expected to be performed over the remainder of 2024.

Our various contracts with Shell and ExxonMobil globally, our contracts with Trident Energy and Petrobras in Brazil, and our contracts with Talos in the Gulf of Mexico represented approximately 86% of our total backlog as of September 30, 2024.

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

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If there are cancellation fees, the amount of those fees can be substantially less than amounts reflected in backlog.

For the remainder of 2024 going into 2025, we expect to continue our strong performance driven by increasing demand for our decommissioning services internationally and continued growth in the offshore renewables trenching market.

We expect the demand for shallow water decommissioning services in the Gulf of Mexico to remain soft in the near term but should grow over the mid- to long-term.

RESULTS OF OPERATIONS

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Income tax provision

5 unchanged sentences

Change in fair value of contingent consideration

General provision (release) for current expected credit losses

General provision for current expected credit losses

Losses related to convertible senior notes

1 unchanged sentence

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

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

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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

Comparison of Three Months Ended June 30, 2024 and 2023

Comparison of Three Months Ended September 30, 2024 and 2023

We have four reportable business segments:

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Three Months Ended

September 30,

Net revenues —

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(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 June 30, 2024 and 2023 included 91 and 113 spot vessel days, respectively, at near full utilization.

Utilization rates of chartered Robotics vessels during the three-month periods ended September 30, 2024 and 2023 each included 92 spot vessel days at near full utilization.

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

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Three Months Ended

September 30,

Well Intervention

1 unchanged sentence

Net Revenues.

Our consolidated net revenues for the three-month period ended June 30, 2024 increased by 18% as compared to the same period in 2023, reflecting higher revenues in our Well Intervention, Robotics and Production Facilities business segments, offset in part by lower revenues in our Shallow Water Abandonment segment.

Our Well Intervention revenues increased by 46% for the three-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting higher utilization and rates in the Gulf of Mexico, higher rates on the Seawell and higher revenues on the Q7000 .

Both the Q4000 and the Q5000 generated higher day rates in the Gulf of Mexico during the second quarter 2024.

The Q4000 had higher utilization during the second quarter 2024 as the vessel spent most of the second quarter 2023 on its regulatory dry dock.

The Seawell benefitted from being contracted in the western Mediterranean at higher rates during most of the second quarter 2024.The Q7000 had a full quarter of utilization during the second quarter 2024 whereas the vessel recognized revenues over approximately 27 days during the second quarter 2023 following its paid transit and mobilization to the Asia Pacific region, a period during which revenues were deferred and not recognized.

Our Robotics revenues increased by 16% for the three-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting higher chartered vessel days and trenching and ROV activities during the second quarter 2024.

Chartered vessel days increased to 528 days during the second quarter 2024 as compared to 435 days during the second quarter 2023.

ROV and trencher utilization increased to 76% in the second quarter 2024 from 58% during the second quarter 2023 and included 232 days of integrated vessel trenching in the second quarter 2024 as compared to 194 days in the second quarter 2023.

Our Shallow Water Abandonment revenues decreased by 33% for the three-month period ended June 30, 2024 as compared to the same period in 2023.

The decrease in revenues was due to lower activity levels and an overall softer Gulf of Mexico shelf market in 2024, resulting in lower vessel and system utilization during the second quarter 2024 as compared to the second quarter 2023.

Overall vessel utilization was 58% during the second quarter 2024 as compared to 78% during the second quarter 2023.

P&A systems and CT systems achieved 632 days of utilization, or 27% on 26 systems, during the second quarter 2024 as compared to 1,554 days of utilization, or 81% on 21 systems, during the second quarter 2023.

Our Production Facilities revenues increased by 10% for the three-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting higher oil and gas production during the second quarter 2024 whereas both the Droshky and Thunder Hawk wells were shut in for planned maintenance during portions of the second quarter 2023.

Our consolidated net revenues for the three-month period ended September 30, 2024 decreased by 13% as compared to the same period in 2023, reflecting lower revenues in our Well Intervention, Shallow Water Abandonment and Production Facilities business segments, offset in part by higher revenues in our Robotics segment.

Our Well Intervention revenues decreased by 19% for the three-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting a higher number of transit and mobilization days, during which period revenues and costs were deferred and not recognized.

The Q4000 incurred approximately 67 days of paid mobilization and transit to West Africa and the Q7000 incurred approximately 38 days of paid mobilization and transit between contracts offshore Australia during the third quarter 2024, whereas both vessels had no transit and mobilization days during the third quarter 2023.

Our Robotics revenues increased by 12% for the three-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting higher vessel, trenching and ROV activities during the third quarter 2024.

Chartered vessel activity increased to 532 days during the third quarter 2024 as compared to 506 days during the third quarter 2023.

Integrated vessel trenching decreased to 249 days during the third quarter 2024 as compared to 276 days during the third quarter 2023, and the third quarter 2024 included 92 days utilization on the i-Plough trencher on a third-party vessel and 92 days utilization on the IROV boulder grab whereas the i-Plough and IROV were idle during the third quarter 2023.

Overall ROV and trencher utilization increased to 77% in the third quarter 2024 from 67% during the third quarter 2023.

Our Shallow Water Abandonment revenues decreased by 18% for the three-month period ended September 30, 2024 as compared to the same period in 2023.

The decrease in revenues was due to lower activity levels and an overall softer Gulf of Mexico shelf market in 2024 coupled with the impact of two hurricanes affecting our operations in September 2024, resulting in lower vessel and system utilization during the third quarter 2024 as compared to the third quarter 2023, offset in part by higher pass-through revenues on the P&A systems.

Overall vessel utilization was 76% during the third quarter 2024 as compared to 89% during the third quarter 2023.

P&A systems and CT systems utilization declined to 607 days of utilization, or 25%, during the third quarter 2024 as compared to 1,531 days of utilization, or 74%, during the third quarter 2023.

Our Production Facilities revenues decreased by 15% for the three-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting lower oil and gas production and prices during the third quarter 2024.

Oil and gas production declined during the third quarter 2024 due to an ongoing unplanned shut-in of the Thunder Hawk wells.

Gross Profit (Loss).

Our consolidated gross profit increased by $20.1 million for the three-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting increased profits from our Well Intervention, Robotics and Production Facilities business segments, offset in part by a reduction in profit from our Shallow Water Abandonment segment.

Our Well Intervention segment gross profit increased by $26.6 million for the three-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting higher segment revenues and increased activity levels.

Our Robotics gross profit increased by $11.4 million for the three-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting higher revenues and higher profit margin projects during the second quarter 2024.

Our Shallow Water Abandonment gross profit decreased by $19.3 million for the three-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting lower segment revenues.

Our Production Facilities gross profit increased by $1.2 million for the three-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting higher segment revenues.

Our consolidated gross profit decreased by $14.9 million for the three-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting a reduction in profit from our Shallow Water Abandonment business segment, offset in part by an increase in profit from our Robotics segment.

Our Well Intervention segment gross profit remained relatively flat despite lower revenues for the three-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting lower revenues, offset by lower costs due in part to the deferral of transit and mobilization costs during the third quarter 2024.

Our Robotics gross profit increased by $4.0 million for the three-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting higher revenues during the third quarter 2024.

Our Shallow Water Abandonment gross profit decreased by $18.4 million for the three-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting lower revenues, in addition to higher costs due to an increase in lower margin pass-through activities during the third quarter 2024.

Our Production Facilities gross profit decreased by $0.9 million for the three-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting lower revenues, offset in part by lower production costs.

Change in Fair Value of Contingent Consideration.

The change in fair value of contingent consideration in the second quarter 2023 reflected an improvement in Helix Alliance’s results during the quarter.

The change in fair value of contingent consideration in the third quarter 2023 reflects an improvement in Helix Alliance’s results during the quarter.

We entered into an agreement and set the final earn-out during the fourth quarter 2023, which was paid on April 3, 2024.

Selling, General and Administrative Expenses.

Our selling, general and administrative expenses were $22.3 million for the three-month period ended June 30, 2024 as compared to $24.0 million for the same period in 2023, primarily reflecting lower employee compensation costs.

Our selling, general and administrative expenses were $21.1 million for the three-month period ended September 30, 2024 as compared to $27.8 million for the same period in 2023, primarily reflecting lower employee compensation costs.

Net Interest Expense.

Our net interest expense totaled $5.9 million for the three-month period ended June 30, 2024 as compared to $4.2 million for the same period in 2023, primarily reflecting interest expense on our 2029 Notes, offset in part by higher interest income on our invested cash reserves (Note 5).

Our net interest expense totaled $5.7 million for the three-month period ended September 30, 2024 as compared to $4.2 million for the same period in 2023, primarily reflecting higher debt levels and rates on our 2029 Notes in 2024 as compared to our 2026 Notes in 2023, offset in part by higher interest income on our invested cash reserves (Note 5).

Other Expense, Net.

Net other expense was $0.4 million for the three-month period ended June 30, 2024 as compared to net other expense of $5.7 million for the same period in 2023.

Net other expense during the second quarter 2023 primarily reflected an $11.7 million foreign currency loss related to the devaluation of the Nigerian naira on our naira cash holdings, offset in part by foreign currency gains due to the strengthening of the British pound primarily on U.S.

Net other expense was minimal for the three-month period ended September 30, 2024 as compared to $8.3 million for the same period in 2023.

Net other expense during the third quarter 2024 primarily reflects a $2.4 million increase in the value of incentive credits granted to the seller of P&A equipment acquired in 2023 (Note 3), offset by foreign currency gains due to the strengthening of the British pound.

Net other expense during the third quarter 2023 primarily reflects foreign currency losses related to U.S.

dollar denominated intercompany debt in our U.K.

Income Tax Provision.

Income tax provision was $14.7 million for the three-month period ended June 30, 2024 as compared to $3.3 million for the same period in 2023.

The effective tax rates for the three-month periods ended June 30, 2024 and 2023 were 31.3% and 31.8%, respectively.

The increase in income tax expense was primarily attributable to higher net income.

Comparison of Six Months Ended June 30, 2024 and 2023

Income tax provision was $9.5 million for the three-month period ended September 30, 2024 as compared to $8.3 million for the same period in 2023.

The effective tax rates for the three-month periods ended September 30, 2024 and 2023 were 24.4% and 34.9%, respectively.

The increase in income tax expense was primarily attributable to higher net income (Note 6).

Comparison of Nine Months Ended September 30, 2024 and 2023

We have four reportable business segments:

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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 —

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Utilization rates of chartered Robotics vessels during the six-month periods ended June 30, 2024 and 2023 included 182 and 126 spot vessel days, respectively, at near full utilization.

Utilization rates of chartered Robotics vessels during the nine-month periods ended September 30, 2024 and 2023 included 274 and 218 spot vessel days, respectively, at near full utilization.

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

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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, 2024 increased by 18% as compared to the same period in 2023, reflecting higher revenues in our Well Intervention, Robotics and Production Facilities business segments, offset in part by lower revenues in our Shallow Water Abandonment segment.

Our Well Intervention revenues increased by 49% for the six-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting higher revenues on the Q7000 and higher rates and utilization on the Seawell , the Q4000 and the Q5000 , offset in part by lower utilization on the Well Enhancer .

The Q7000 had full utilization during the six-month period ended June 30, 2024 whereas the vessel spent most of the six-month period ended June 30, 2023 on regulatory and project-related dockings and paid transit and mobilization to Asia Pacific.

The Seawell benefitted from being contracted in the western Mediterranean at higher rates during most of the six-month period ended June 30, 2024 as compared to having had lower utilization and rates during the same period in 2023.

Utilization increased on the Q4000 and the Q5000 during the six-month period ended June 30, 2024 as both vessels underwent their regulatory dry docks during the six-month period ended June 30, 2023.

Gulf of Mexico day rates also improved during the year over year periods.

Our consolidated net revenues for the nine-month period ended September 30, 2024 increased by 5% as compared to the same period in 2023, reflecting higher revenues in our Well Intervention, Robotics and Production Facilities business segments, offset in part by lower revenues in our Shallow Water Abandonment segment.

Our Well Intervention revenues increased by 19% for the nine-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting higher revenues across our well intervention fleet except for the Well Enhancer .

Utilization increased on the Q4000 and the Q5000 during the nine-month period ended September 30, 2024 as both vessels underwent their regulatory dry docks in 2023.

The Q7000 had higher utilization during the nine-month period ended September 30, 2024 as compared to 2023.

The Seawell ‘s contract in the western Mediterranean, which completed in June 2024, has provided higher rates and utilization during the nine-month period ended September 30, 2024 as compared to the nine-month period ended September 30, 2023.

The Well Enhancer in the North Sea had lower utilization as compared to the prior year period as the vessel underwent a scheduled dry dock during the first quarter 2024.

Our Robotics revenues increased by 10% for the six-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting higher chartered vessel days and trenching and ROV activities.

Chartered vessel days increased to 861 days during the six-month period ended June 30, 2024 as compared to 730 days during the six-month period ended June 30, 2023, although chartered vessel days in the first quarter 2024 included approximately 64 days of standby utilization at reduced rates.

ROV and trencher utilization increased to 67% in the six-month period ended June 30, 2024 from 57% during the six-month period ended June 30, 2023 and included 317 days of integrated vessel trenching in 2024 as compared to 260 days in 2023.

Our Shallow Water Abandonment revenues decreased by 38% for the six-month period ended June 30, 2024 as compared to the same period in 2023.

The decrease in revenues is due to lower activity levels and an overall softer Gulf of Mexico shelf market in 2024, resulting in lower vessel and system utilization during the six-month period ended June 30, 2024 as compared to the six-month period ended June 30, 2023.

Overall vessel utilization was 49% during the six-month period ended June 30, 2024 as compared to 68% during the same period in 2023.

P&A systems and CT systems achieved 1,258 days of utilization, or 27% on 26 systems, during the six-month period ended June 30, 2024 as compared to 2,831 days of utilization, or 74% on 21 systems, during the six-month period ended June 30, 2023.

Our Production Facilities revenues increased by 13% for the six-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting higher oil and gas production as both the Droshky and Thunder Hawk wells were shut in for planned maintenance during portions of the six-month period ended June 30, 2023.

Our Robotics revenues increased by 11% for the nine-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting higher chartered vessel days and trenching and ROV activities.

Chartered vessel activity increased to 1,393 days during the nine-month period ended September 30, 2024 as compared to 1,236 days during the nine-month period ended September 30, 2023, although chartered vessel days in the first quarter 2024 included approximately 64 days of standby utilization at reduced rates.

Overall ROV and trencher utilization increased to 70% in the nine-month period ended September 30, 2024 from 60% during the nine-month period ended September 30, 2023 and included 566 days of integrated vessel trenching in 2024 as compared to 536 days in 2023.

Our Shallow Water Abandonment revenues decreased by 30% for the nine-month period ended September 30, 2024 as compared to the same period in 2023.

The decrease in revenues was due to lower activity levels and an overall softer Gulf of Mexico shelf market in 2024, resulting in lower vessel and system utilization during the nine-month period ended September 30, 2024 as compared to the nine-month period ended September 30, 2023.

Overall vessel utilization was 59% during the nine-month period ended September 30, 2024 as compared to 75% during the same period in 2023.

P&A systems and CT systems achieved 1,865 days of utilization, or 26%, during the nine-month period ended September 30, 2024 as compared to 4,362 days of utilization, or 74%, during the nine-month period ended September 30, 2023.

Our Production Facilities revenues increased by 3% for the nine-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting higher oil and gas production and lower number of shut-in days.

Gross Profit (Loss).

Our consolidated gross profit increased by $24.5 million for the six-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting increased profits from our Well Intervention and Robotics business segments, offset in part by losses from our Shallow Water Abandonment and Production Facilities segments.

Our Well Intervention segment gross profit increased by $54.1 million for the six-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting higher segment revenues and increased activity levels.

Our Robotics gross profit increased by $12.5 million for the six-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting higher revenues and higher profit margin projects during the six-month period ended June 30, 2024.

Our Shallow Water Abandonment segment had a gross loss of $8.1 million for the six-month period ended June 30, 2024 as compared to a gross profit of $28.5 million for the same period in 2023, primarily reflecting lower segment revenues.

Our Production Facilities gross profit decreased by $5.9 million for the six-month period ended June 30, 2024 as compared to the same period in 2023, primarily reflecting well workover costs of approximately $8.6 million related to the Thunder Hawk wells during the first quarter 2024, offset in part by higher segment revenues.

Our consolidated gross profit increased by $9.6 million for the nine-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting increased profits from our Well Intervention and Robotics business segments, offset in part by losses from our Shallow Water Abandonment and Production Facilities segments.

Our Well Intervention segment gross profit increased by $54.6 million for the nine-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting higher segment revenues and increased activity levels.

Our Robotics gross profit increased by $16.5 million for the nine-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting higher revenues and higher profit margin projects during the nine-month period ended September 30, 2024.

Our Shallow Water Abandonment gross profit decreased by $55.0 million for the nine-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting lower segment revenues.

Our Production Facilities gross profit decreased by $6.7 million for the nine-month period ended September 30, 2024 as compared to the same period in 2023, primarily reflecting well workover costs of approximately $8.6 million related to the Thunder Hawk wells during the first quarter 2024, offset in part by higher segment revenues.

Change in Fair Value of Contingent Consideration.

The change in fair value of contingent consideration in the six-month period ended June 30, 2023 reflected an improvement in Helix Alliance’s results during the first half 2023.

The change in fair value of contingent consideration in the nine-month period ended September 30, 2023 reflects an improvement in Helix Alliance’s results during the first half 2023.

We entered into an agreement and set the final earn-out during the fourth quarter 2023, which was paid on April 3, 2024.

Selling, General and Administrative Expenses.

Our selling, general and administrative expenses were $64.1 million for the nine-month period ended September 30, 2024 as compared to $71.5 million for the same period in 2023, primarily reflecting lower employee compensation costs.

Net Interest Expense.

Our net interest expense totaled $11.4 million for the six-month period ended June 30, 2024 as compared to $8.4 million for the same period in 2023, primarily reflecting interest expense on our 2029 Notes, offset in part by higher interest income on our invested cash reserves (Note 5).

Our net interest expense totaled $17.1 million for the nine-month period ended September 30, 2024 as compared to $12.6 million for the same period in 2023, primarily reflecting higher debt levels and rates on our 2029 Notes in 2024 as compared to our 2026 Notes in 2023, offset in part by higher interest income on our invested cash reserves (Note 5).

Losses Related to Convertible Senior Notes.

The $20.9 million loss for the six-month period ended June 30, 2024 was associated with the retirement of our 2026 Notes (Note 5).

The $20.9 million loss for the nine-month period ended September 30, 2024 was associated with the retirement of our 2026 Notes (Note 5).

Other Expense, Net.

Net other expense was $2.6 million for the nine-month period ended September 30, 2024 as compared to $10.6 million for the same period in 2023.

Net other expense during the nine-month period ended September 30, 2024 primarily reflects a $2.4 million increase in the value of incentive credits granted to the seller of P&A equipment acquired in 2023 (Note 3).

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

dollar denominated intercompany debt in our U.K.

Income Tax Provision.

Income tax provision was $13.0 million for the six-month period ended June 30, 2024 as compared to $1.3 million for the same period in 2023.

The effective tax rates for the six-month periods ended June 30, 2024 and 2023 were 68.5% and 40.1%, respectively.

Income tax provision was $22.5 million for the nine-month period ended September 30, 2024 as compared to $9.6 million for the same period in 2023.

The effective tax rates for the nine-month periods ended September 30, 2024 and 2023 were 38.8% and 35.5%, respectively.

The increase in effective tax rates was primarily attributable to the non-deductibility of certain losses associated with the 2026 Notes Redemptions, which was characterized as a discrete event and reported in the first quarter 2024 (Note 6).

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

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Long-Term Debt

Long-term debt in the table above includes our MARAD Debt, the 2026 Notes and the 2029 Notes and excludes current maturities of $9.0 million at June 30, 2024 and $48.3 million at December 31, 2023, and is net of unamortized debt discount and debt issuance costs.

Long-term debt in the table above includes our MARAD Debt, the 2026 Notes and the 2029 Notes and excludes current maturities of $9.2 million at September 30, 2024 and $48.3 million at December 31, 2023, and is net of unamortized debt discount and debt issuance costs.

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

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

Our liquidity at June 30, 2024 included $275.1 million of cash and cash equivalents and $95.1 million of available borrowing capacity under the Amended ABL Facility (Note 5).

Our liquidity at September 30, 2024 included $324.1 million of cash and cash equivalents and $74.7 million of available borrowing capacity under the Amended ABL Facility (Note 5).

Our liquidity at December 31, 2023 included $332.2 million of cash and cash equivalents and $99.3 million of available borrowing capacity under the Amended ABL Facility.

In March 2024, we settled the remaining $40.2 million aggregate principal amount of the 2026 Notes for $60.5 million in cash (excluding costs), offset in part by $4.4 million from the settlement of the remaining 2026 Capped Calls.

On April 3, 2024, we paid $85.0 million of earn-out consideration in cash to the seller in the Alliance transaction.

In the current market environment, following the settlement of the Alliance earn-out we expect strong ongoing operating performance and cash flows and continued availability on the Amended ABL Facility.

The reduction in availability on the Amended ABL Facility was attributable to higher letter of credit usage due to the Nigeria project on the Q4000 .

In the current market environment, we expect strong ongoing operating performance and cash flows.

We believe that our cash on hand, internally generated cash flows and availability under the Amended ABL Facility will be sufficient to fund our operations and expected capital spending, service our debt and other obligations, and execute our share repurchase program over at least the next 12 months.

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

We expect lower levels of availability on the Amended ABL Facility while the Q4000 performs work in Nigeria due to fewer eligible receivables and higher letter of credit usage.

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

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

Six Months Ended

Nine Months Ended

September 30,

Cash provided by (used in):

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Operating Activities

The increase in our operating cash flows for the six-month period ended June 30, 2024 as compared to the same period in 2023 primarily reflects higher operating income, and lower regulatory recertification costs for our vessels and systems, offset in part by higher working capital outflows.

Operating cash outflows during the six-month period ended June 30, 2024 included $58.3 million of the $85.0 million earn-out payment on April 3, 2024, representing the amount in the excess of the $26.7 million fair value of earn-out consideration at the Alliance acquisition date.

Regulatory recertification spend on our vessels and systems amounted to $20.3 million and $41.3 million, respectively, during the comparable year over year periods.

The increase in our operating cash flows for the nine-month period ended September 30, 2024 as compared to the same period in 2023 primarily reflects higher operating income, lower regulatory recertification costs for our vessels and systems and lower working capital outflows.

Operating cash outflows during the nine-month period ended September 30, 2024 included $58.3 million of the $85.0 million earn-out payment on April 3, 2024, representing the amount in the excess of the $26.7 million initial fair value of earn-out consideration at the Alliance acquisition date.

Regulatory recertification spend on our vessels and systems were $29.2 million and $59.2 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, 2024 and 2023 reflect comparable capital expenditure levels during the year over year periods.

Cash flows used in investing activities for the nine-month periods ended September 30, 2024 decreased as compared to the same period in 2023 primarily due to lower capital expenditures.

Financing Activities

Net cash outflows from financing activities for the six-month period ended June 30, 2024 primarily reflect cash outflows of $60.7 million related to the 2026 Notes, $26.7 million of the $85.0 million earn-out payment, $10.2 million in repurchases of our common stock under the 2023 Repurchase Program and the principal repayment of $4.3 million related to the MARAD Debt, offset in part by $4.4 million from the proportionate settlement of the 2026 Capped Calls.

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

Net cash outflows from financing activities for the nine-month period ended September 30, 2024 primarily reflect the final retirement of our 2026 Notes and the earn-out payment.

Cash outflows in 2024 included $60.7 million related to the 2026 Notes, $26.7 million of the $85.0 million earn-out payment, $10.2 million in repurchases of our common stock under the 2023 Repurchase Program and the principal repayment of $8.7 million related to the MARAD Debt, offset in part by $4.4 million of cash inflows from the proportionate settlement of the 2026 Capped Calls.

Net cash outflows from financing activities for the nine-month period ended September 30, 2023 primarily reflect $12.0 million in repurchases 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 5).

Material Cash Requirements

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Long-term debt and other contractual commitments

The following table summarizes (in thousands) 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, 2024 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.

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, 2024.

The following table summarizes (in thousands) the principal amount of our long-term debt and related debt service costs as well as other contractual commitments, which include commitments for property and equipment and operating lease obligations, as of September 30, 2024 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.

Interest related to debt

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

At June 30, 2024, our commitment related to long-term vessel charters totaled approximately $876.4 million, of which $437.2 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, 2024.

At September 30, 2024, our commitment related to long-term vessel charters totaled approximately $844.4 million, of which $424.1 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, 2024.

Other material cash requirements

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

Those obligations, which are presented on a discounted basis on the condensed consolidated balance sheets, approximate $80.9 million (undiscounted) for Thunder Hawk Field oil and gas properties and $37.1 million (undiscounted) for Droshky oil and gas properties as of June 30, 2024, 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 $80.9 million (undiscounted) for Thunder Hawk Field oil and gas properties and $37.1 million (undiscounted) for Droshky oil and gas properties as of September 30, 2024, 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