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Greetings, and welcome to the second quarter Helix Energy Solutions 2023 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session at that time. If you have a question, please press the one followed by the 4 on your telephone. If any time during the conference, you need to reach an operator. As a reminder, this conference is being recorded Thursday, July 27, 2023, and I would now like to turn the conference over to Brent Arriaga, CAO of Helix Energy. Please go ahead.

Good morning, everyone, and thanks for joining us today on our conference call for our second quarter 2023 earnings release. Participating on this call today for Helix are Owen Kratz, our CEO; Scotty Sparks, our COO; Erik Staffeldt, our CFO; Ken Neikirk, our General Counsel; and myself. Hopefully, you've had an opportunity to review our earnings press release and the related slide presentation released last night. If you don't have a copy of these materials, both can be accessed through the for the investor page on our website at www.helixesg.com. The press release can be accessed under the Press Releases tab and the slide presentation can be accessed by clicking on today's webcast icon. Before we begin our prepared remarks, Ken Iker will make a statement regarding forward-looking information. Ken?

During this conference call, we anticipate making certain projections and forward-looking statements based on our expectations and assumptions as of today. Such forward-looking statements may include projections and estimates of future events, business or industry trends or business or financial results. All statements in this conference call or in the associated presentation, other than statements of historical fact, are forward-looking statements and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual future results may differ materially from our projections and forward-looking statements due to a number and variety of risks, uncertainties, assumptions and factors, including those set forth in Slide 2 and our most recently filed annual report on Form 10-K our quarterly reports on Form 10-Q and in our other filings with the SEC. You should not place undue reliance on forward-looking statements, and we do not undertake any duty to update any forward-looking statement. We disclaim any written or oral statements made by any third party regarding the subject matter of this conference call. Also, during this call, certain non-GAAP financial disclosures may be made. In accordance with SEC rules, -- the final slide of our presentation provides reconciliations of certain non-GAAP measures to comparable GAAP financial measures. These reconciliations, along with this presentation, the earnings press release, our annual report and a replay of this webcast are available under the For the Investors section of our website at www.helixesg.com. Please remember that information on this conference call speaks only as of today, July 27, 2023, and therefore, you are advised that any time sensitive information may no longer be accurate as of any replay of this call. Owen?

Good morning. This morning, we'll review our Q2 highlights and financial performance, we'll provide insight into our operations and the key drivers to our results and outlook for the balance of Q3. Lastly, we'll provide insight into continued development of the offshore energy market, our focus on the opportunities within our energy transition model and opportunities beyond '23. Moving into the presentation, Slide 6 to provide a high-level summary of our results and key highlights for the second quarter of 2023. Helix delivered strong results, assisted in part by the improved weather in the North Sea and Gulf of Mexico shelf. Despite current economic uncertainty and volatility of commodity markets, oil prices remain supportive to the current investment cycle. In addition, the continued geographic expansion of the offshore renewables market into the U.S. and Asia Pacific markets has enhanced the current rate environment for our services. Highlights for the quarter include the Q7000 commenced operations in New

Thanks, Owen, and good morning, you come to Slide 11. Firstly, I would like to again thank our teams offshore and onshore for another very well-executed quarter, being our best-performing quarter for many years. There continues to be positive momentum in the global offshore markets that we operate in, and all of our businesses are well positioned for the remainder of 2020 and beyond. In the second quarter of 2023, we continue to operate globally with minimal operational disruption. -- of operations in Europe, Asia, Brazil, the Gulf of Mexico and off the U.S. East Coast. We continue to operate with high standards with strong uptime efficiency. During the second quarter, we generated a gross profit of $55 million a gross profit margin of 18%, up from a gross loss of $1 million in the second quarter of 2022. For the first 6 months of 2023, we generated a gross profit of $71 million and a gross profit margin of quite an improvement from a gross loss of $20 million for the first 6 months of 2022. We are expecting an even further improved second half of 2020 compared to the first half of the year, now that most of our larger planned regulatory maintenance periods are complete as the market continues to tighten, the demand for our services continues to grow. Slide 12 provides a more review of our well intervention business in the Gulf of Mexico. The Q5000 had excellent utilization of 99% and the vessel performed very well conducted production enhancements and abandonment work on 5 wells in ultra-deepwater working under a multiyear campaign for Shell. The Q4000 had utilization of 7% in the second quarter completing a 2-well abandonment campaign for 1 client in ultra-deepwater and subsequently commenced the scheduled regulatory dry dock for the remainder of the quarter with completion scheduled for the end of July. Unfortunately, that dry dock has taken longer than originally scheduled since we undertook additional recertification work. Positively, we expect both vessels to have high utilization for the remainder of 2023. We've contracted awarded work well into Q4, and we already have awarded work in 2024. -- with good visibility of potential further activity and increased rates compared to the first half of 2023. Both key vessels continue to operate under the integrated Helix FLB Subsea Service Alliance package. Moving to Slide 13. Our North Sea, well Intervention business continues to respond well to the increased demand in the region, having a very strong second quarter, achieving 100% utilization for both vessels in the U.K. The enhancement performed very well on production enhancement works on 6 wells for 4 customers and then completed decommissioning operations on one well for another customer. The Seawell also had a very good quarter, working for free customers performing decommissioning works on numerous wells and production enhancement work for free wells. Demand for our services continues to improve, and our business is seeing much improved conditions in terms of rates, contracting terms and utilization. The Seawell is fully contracted for the remainder of the year and has recently contracted an expected 210-day decommissioning project in the Mediterranean, keeping the vessel contract well into Q2 2024. The wire hand also has contracted work for the remainder of 2023 and has been awarded work in 2024 at further increased rates. On completion of its dry docking in Malaysia, the Q7000 completed paid transit in New

Thanks, Scotty. Moving to Slide 21, it outlines our debt instruments and maturity profile as of June 30. We had total funded debt of $267 million at quarter end. Our manning maturities in 2023 include $4 million installment of Marat debt in August and our 2023 converts, which matured in September and have a remaining principal $30 million. We have long communicated our intention to cash settle those notes using cash on hand. Moving on to Slide 22, provides an update on key balance sheet metrics, including cash, long-term debt, liquidity and net debt levels. With cash of $183 million, our net debt position at quarter end was $78 million. During the second quarter, we increased the size of our ABL facility from $100 million to $120 million. At quarter end, we had $112 million of gross capacity under ABL and no borrowings outstanding. After considering LCs, our net remaining availability under the ABL was $103 million with resulting liquidity of $285 million. I'll now turn the call over to Erik for a discussion on our outlook for 2023 and beyond.

Thanks, Brent. As we've discussed, we've had a solid start to 2023. And the offshore market, traditional oil and gas and renewables continues to show its strength. We are increasing our guidance for '23 as follows: revenue, $1.175 to $1.25 billion, EBITDA $240 million to $270 million, a $25 million increase from midpoint. Free cash flow, $130 million to $170 million a $20 million increase from midpoint, and our CapEx in the $65 million to $80 million range. These ranges include some key assumptions and estimates any significant variation from these key assumptions and estimates could cause our results to fall outside the ranges provided. Our quarterly results are likely to continue to be impacted by seasonal weather in the North Sea and Gulf of Mexico shelf, primarily in the fourth quarter and first quarter. In addition, the timing of our vessel maintenance periods and project mobilizations will cause variances between quarters. For instance, the impact of the Q4000 dry dock extension which has resulted in fewer days available at the launch in Q3. We nevertheless expect the second half of 2023 to be stronger than the first half with the third quarter likely being our stronger quarter. Providing key assumptions by segments and regions starting on Slide 25. First, our well invention segment. The Gulf of Mexico is expected to continue to be a strong market in '23 with improving rates and expected strong utilization on the Q4000 and Q5000, Q4000 is currently expected to complete its stocking and be on hire by the end of July. In the U.K. North Sea, both vessels have contracted work through Q4 and with the Seawell having work into Q2 of 2024. Activity levels for our well intervention vessels in this market continues to be robust. During the second half of this year, the Seawell is scheduled to undertake a 2-to-3-week transit for a project in Mediterranean. The Q7000 is currently operating in New

Thanks, Erik. Last quarter, we indicated that we thought we were trending towards the upper end of our initial guidance, and things have continued to improve. In fact, we're exceeding our forecast despite a few anomalies. In Q2, we more than doubled our Q1 EBITDA and our forecast for the rest of the 23 remains strong. We've raised the lower end of our EBITDA guidance by $30 million and raised the upper end by $20 million, as Erik mentioned. This is a testament not only to a robust offshore service market, but the diversification we've built into our business and operational execution by our people. 2023 has started well and as strong as our current performance is, there are identifiable opportunities for even further improvement going forward, especially for 2024. First, 5 of our well intervention vessels, the Q4 7,500 well enhanced and Seawell all have planned maintenance or dockings this year. As you've already heard, the most significant unexpected issue in Q2 occurred with the regulatory required dry dock of the Q4000, which resulted in an unanticipated recertification work and significant additional maintenance CapEx expense. Also earlier this year, we experienced a number of delays on the Q7000 as a result of weather and shipyard performance negatively impacting the Q7000 potential returns. None of these events should recur in 2024. We should have approximately 200 incremental vessel days to sell in 2024 in our -- well Intervention segment. just based on fewer scheduled maintenance days. Using our 2023 rates and costs, the potential benefit in 2024 could be up to $25 million to $30 million from these extra days. In addition, the offshore service market continues to improve with supply constraints for assets and services leading to higher rates and greater visibility. The rates are continuing to improve in many regions. -- that are particular -- they're partially offset by higher labor costs. There are contractual rate increases already on the Q7000 S2 and S1 for 2024, with further contract extensions with rate improvements under discussions on these vessels. We continue to work through legacy rates on work contracted at a weaker point in the market prior to 2023, creating further future upside for the current higher rate environment. Of the 3 trenchers and 2 intervention systems recently acquired, one of each are currently working on long-term commitments. So far, the forecasted returns are better than originally expected. -- meaning the other 2 systems could bring additional upside. Shallow water abandonment has just begun to see the potential for the demand increases. Rates have only started to improve in this space and are expected to escalate going forward, somewhat offset by higher labor costs. But the outlook for decommissioning demand appears to be strong for years to come. We're well positioned in the transitional segments in the oil and gas markets. Our businesses are poised for long sustained demand as the energy market transitions. While many contractors have struggled to maintain suitable returns in the offshore wind markets, the Helix approach of providing specialty services is generating satisfactory returns with an outlook for not only sustainability, but growth as well. The 3 buckets of our business model, maximizing existing reserves, decommissioning and renewable support remains our foundation and each one shows promise for sustainable growth. We always explore opportunities that prioritize shareholder return with our current focus being on growth within our existing capabilities. We believe we're being patient and selective with these opportunities and our markets continue to be dynamic. We expect to generate double-digit free cash flow yield going forward. We will be paying attention to our capital structure and debt as well as capital allocation to building cash, share repurchase and growth in a balanced manner to yield what we believe will represent the greatest return to the shareholders. And with that, I'll turn it back to you.

Operator, at this time, we'll take any questions.

[Operator Instructions]. Our first question is coming from the line of Greg Lewis.

I wanted to start off talking about well intervention clearly, it seems like the pendulum has definitely started to swing towards you guys in terms of your ability to kind of push pricing. What kind of curious have customers realizing that visibility is pretty good in the next 6-plus months. But if customers started to look to kind of contract these vessels even farther out, i.e., in the rig market, we're seeing customers starting to look for equipment starting in '25. How -- how are you -- what are those customer conversations like around your kind of core assets?

It's Scotty here. I'll take that. Yes, we are seeing future outlook. Down in Brazil, we're seeing clients looking out the vessels to 2025. We're in discussions with Petrobras and others to extend the 2 SH vessels down there Shell has taken that the Q7000 into 2025, they have options that could take it all the way up to 2026. In the North Sea, we've got a better outlook than we've had in many, many years, probably going the way back from 2014. We have more booked years right out days right now going into 2024 than we've had in an awful lot of time. So we're definitely seeing that the clients take a forward look on this -- we've got long-term agreements that have been set up in the Gulf of Mexico recently with the like to Oxy Shell and Hess. So these clients are looking out towards the future and providing us with a better backdrop than we've had in a while.

I'll just add a little bit to that. I think if you go back to 2022, there was starting to be a demand for clients looking out multiple years. There was a reluctance on our part because we were still in the downturn. And therefore, we were providing what we consider now legacy rates which are well below current market rates. So we were reluctant to get pricing out. A dynamic in the market right now, though, is that I think the clients have come around to realizing that for multiyear contracts, there has to be escalators. So we're being more successful in building escalators into our contracts. That gives us a little more confidence in going ahead and starting discussions about booking additional multiyear out into the future. So that's -- I think the clients are sort of pivoting towards being concerned more about availability than achieving the lowest rate possible.

Yes. No, absolutely. And then I want to I guess in hindsight, congratulations on Alliance. I mean, just as we think about what is happening in that abandonment business, it's been impressive. I guess, I think what a lot of people are wondering -- was this kind of just some pent-up demand? Or as we think about it, and I'm not asking for multiyear guidance, but as you see certain things in this market over the next couple of years, is there any reason why we can't at least hold what we've been able to do more recently in that space. I mean it's just been like I said, I mean, give us a little color on what's happening there? And I guess I have to assume that the acquisition of Alliance really has exceeded your guys' expectations at least to this point.

Yes. I believe we're -- we've reached a historic inflection point in the marketplace. I mean, for years of decommissioning of the shallow water structures, was the hockey stick that just never occurred. And there's always -- and the industry business model was to sell them on to smaller producers and then just shove the decommissioning work out into the future. The end result of that, though, is that a lot of -- you've seen 2 major bankruptcies in the last few years. The end result is that the cash from the production has been stripped out of the company's and bankruptcies declared forcing these properties back onto the market. What's different now, though, is that most of these properties have a net negative asset value -- and therefore, there are no -- I think the industry is learning their lesson about selling them on to smaller producers because the abandonment is going to come back and it's come back in a vengeance here. We saw this potential for happening, which is why we bought Helix Alliance. And we're just -- as I said in my color comments, we're just now starting to see -- I mean, there's been a ramp-up in the decommissioning demand -- but with the recent Cox bankruptcy, I think you're just going to see it sunomaly of decommissioning demand on the shallower waters. And this time, there's not going to be the optionality of selling demand. So the work is actually going to get done now and you're starting to see that reflected in our results with Alliance.

I think also you have Alliance, we are the only company that can do full shallow water, full field or danime decommissioning and the recent award that we've just had of the 39 wells, 15 pipelines and 7 structures to remove shows that we have all the capabilities to package big decommissioning packages together.

Yes. And that's been pretty exciting to watch. Anyway, hey, thanks for taking my question and have great day.

Our next question is coming from the line of James Schumm.

So, you have some long-term contracts on some well intervention vessels in at least the Gulf of Mexico and Brazil how much, if at all, the rates typically move up in this scenario? I'm just trying to get a sense of what 2024 might look like for these longer-term contracts.

So, we do have some legacy left over in 2024, especially down in Brazil with the we're discussing with those clients for extensions past 2024. And I think it's fair to say that we will be increasing the rates on those contracts. Some of the legacy contracts we've just been placed in the new longer-term contracts we've just been in place in the Gulf of Mexico at a far better rates than the legacy rates you've had in the past. So, we've recently contracted up 2 longer-term 3-year outlook contracts with majors in the Gulf and the far better rates than the legacy teams we've had in the past. And I think Owen pointed out what the increases in the space can be for next year just on utilization days as well.

Just to expand on that, on the Q7000, we do have a multiyear contract through 2025 on that vessel. It does have escalators already built into the contract. So we do have built-in visibility on improvement there. Same with the SH1 going forward. And then as we mentioned in our presentation, we're also in discussions about extending both of those vessels along with the SH2 with Petrobras for multiyear beyond what we already have currently contracted and all of that would also have escalators built into it. The 2 vessels in the North Sea are very high in demand right now, and we are booking partial utilization contracts on a multiyear basis. And for instance, we already have 300 days of work already contracted in the North Sea with some pretty meaningful rate increases over 2023. So, we already have at this time last year, we gave you about 4 or 5 things that we knew we were going to have maybe a little early for us to quantify all of this. We have to work through it, but there are a number of positive things that are already contracted. We have visibility on that have built in improvement 24 over 23.

Okay. And then just sort of wanted to ask what's driving the strength in robotics? I mean, is there anything in particular, were there any onetime unusual items here, closeouts, high-margin mix, and if you could just comment on where rates are versus last year?

Okay. So, I'll take that. So, robotics, obviously, has a very good performance this year in big improvements. A lot of this has been driven by the renewable sector and our build-out into the trenching market. We've had a couple of onetime items this year were a couple of lumps, some transient jobs when in our favor performed very well. But obviously, you've seen the expansion into Taiwan, where we bought some new trenches and we've put them to work in Tin and the Taiwan market to expand. And so we're seeing an expansion in renewables work not just transient but other services on a global basis. We've gone from tranching that was primarily a U.K.-based business. It's now in Taiwan. There's talk of careers that we've been trending on the U.S. East Coast. So, I see that continuing and expanding and our rates are up, say, 10% to 15% year-over-year.

Okay. Great. And then if I could just squeeze one more in. The Epic Hedrin, like how do we think about that? Is that similar to a well intervention vessel in terms of day rates and OpEx or similar to a rig or any there would be great.

No. The hydrant is a shelf heavy lift asset. So it bears no resemblance to rigs or the other vessels. I think the margins that it can achieve, you have to sort of understand the heavy lift market. The Abuli market is a seasonal market. It can only safely operate during the more benign summer months. So, there's seasonality. There's probably discounts or exposure to be taken if you wanted to work in the wintertime. But typically, it's going to be lower utilization and also then you have to realize that as this abandonment work comes to fruition, and we're talking about well over 1,000 structures that need to be removed. And there's only 8 remaining heavy lift assets in the Gulf of Mexico. So they're all going to be very busy. But the time is coming. In decommissioning the field, you focus first on making the platform safe, flushing it and then doing all of your well P&A and your pipeline. The very last thing is the platform removal. So, while you're seeing a lot of activity on wells and platform make safe work right now, the heavy lifting portion is still yet to come we've just seen the first real increase in utilization for the Hedron as it went to work this year. And I think you'll see the rates and the utilization for that asset improve going forward.

But Owen, I just want to make sure I got that correctly. I'm just asking about the economics. Is that similar to well intervention? Or is that below or above? And I know there's some seasonality, which is going to change that. But in general?

So, it is below well intervention rates. It's more in line with the high-end construction vessel. One of our high entrenched investors is similar to the rates that we would obtain for that vessel.

Okay, thanks. Appreciate it.

[Operator Instructions]. Our next question is coming from the line of David Smith. Please go ahead.

Hey, good morning. Congratulations on a solid quarter.

Thank you.

I won't take them to circle back to that big decommissioning contract you announced. And if I heard your comments correctly, revenue from that contract expected to be $30 million to $40 million in each of $23 million to $24 million. So at the midpoint, about $70 million over 12 months, which that's almost 30% of your drilling fourth quarter revenue in that segment.

Sorry. You have to remember it's spread out over 12 months. There will be certain parts that we can't do for the winter months like the heavy lift. So that might be towards the end of the first quarter of next year. So, it is spread out but 30 million to 40 million each year is a good guidance on it.

Perfect. So, I'm used to thinking about the plug and abandonment market being relatively short term in nature. I would love any color that you can share about the project. If this is an operator taking a more holistic approach than they previously did. And I'm curious if you're seeing operators getting nervous at all about availability to execute their P&A plan. So maybe they're contracting for a larger program is first is playing the spot market.

Yes. The focus right now is on the well on all these structures, but you've got to understand that there's in excess of 5,000 wells out there to do. There's far more work than our entire industry right now could get done in the next 5 to 7 years. So, what that means is that the producers since the awareness of wanting to get this work done now is just occurring all at the same time. There's a real concern by the producers on availability. So I think the fact that we own anywhere from 25% to 50%, depending on which asset class you're talking about of all the assets available, and we're the only ones that actually have all of the asset classes were required to do the work I think, is garnering a lot of attention from the producers that are a little concerned about getting in the queue and having availability to get their work done. So, it's all very positive for us.

I think this producer that gave us that we're talking about realized that we could provide all of the assets, and they only have to come to one shop to get everything done, so they didn't have to manage in a typical environment different contractors and making sure those schedules come together in all, they just have to come to us, and we project manage the whole thing for them with all the different assets that we have.

Yes. I appreciate all that color. And if I could in a quick follow-up question on that alliance. I'm curious if you see other opportunities out there to maybe add to your solid water abandonment fleet?

There are opportunities to buy more equipment. The bottleneck in the industry is going to be people. I think our approach to that is that we would like to remain I think on the shelf, you have a degradation in the quality of the contractors over the past decades of slow work on the shelf. One thing that Helix brings to it is the quality of our processes, SOPs and standards. So we're going to be a little reluctant to just go out and buy more equipment and then just look for bodies. We're going to be a little more cautious in adding quality people, and we'll add that as we find the people.

Great. Appreciate your time today. Thank you.

We have no further questions. Owen Kratz Thanks for joining us today. We very much appreciate your interest and participation and look forward to having you on our third quarter 2023 call in October. Thank you.