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Greetings and welcome to the Third Quarter Helix Energy Solutions 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Tuesday, October 24, 2023. I would now like to turn the conference over to Mr. Brent Arriaga, Chief Accounting Officer. Please go ahead.

Good morning, everyone and thanks for joining us today on our conference call for our third quarter 2023 earnings release. Participating on this call for Helix today are Owen Kratz, our CEO; Scotty Sparks, our COO; Erik Staffeldt, our CFO; Ken Neikirk, our General Counsel; and myself. Hopefully, you have had an opportunity to review our earnings press release and the related slide presentation released last night. If you do not 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 Neikirk 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 current 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 facts 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 maybe 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 broadcast are available under the For The Investor section of our website at www.helixesg.com. Please remember that information on this conference call speaks only as of today, October 24, 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 Q3 highlights and financial performance. We will provide insight into our operations and the key drivers to our results and outlook for the balance of 2023. Lastly, we’ll provide insight into the continued development of offshore energy market, our focus on the opportunities within our energy transition model and opportunities beyond 2023. Moving to the presentation, Slides 6 through 9 provide a high-level summary of our results and key highlights for the third quarter of 2023. The underlying macro drivers of the offshore energy service market continue to be constructive and supportive of a sustainable long-term investment cycle. Offshore services, both in the U.S. and internationally continue to be very active with traditional oil and gas competing with renewables for assets, creating high levels of demand for services. In addition, our continued geographic expansion of our offshore renewable services into the U.S. and Asia-Pacific markets has diversified our operations and broadened our reach in addition to maintaining high utilization and enhancing the current rate environment for our other services. The fundamentals for decommissioning remained positive with favorable regulatory push and high commodity prices. With the positive market backdrop on top of strong seasonal activity, our third quarter results improved upon the solid performance delivered in Q2. Our third quarter reflects – results reflects our best quarter since 2014 and are illustrative of our earnings power of our focus and geographically diversified business model. Highlights for the quarter include the Q7000 worked the third quarter on decommissioning operations in New

Thanks, Owen and good morning. Moving on to Slide 11. The team’s offshore and onshore outperformed again, producing another very well executed quarter, been our best performing quarter since 2014. In the third quarter of 2023, we continue to operate globally with minimal operational disruption with operations in Europe, Asia, New

Thanks, Scotty. Moving to Slide 21. It outlines our debt instruments and maturity profile as of September 30. We had total funded debt of $233 million at quarter end. During Q3, we repaid the remaining $30 million of our 2023 converts entirely in cash as well as the semiannual installments of our MARAD debt. We have no more scheduled maturities of our long-term debt during the remainder of the year. But as mentioned, managing our balance sheet continues to be a top strategic priority. Moving on, Slide 22 provides an update on key balance sheet metrics, including cash, long-term debt, liquidity and net debt levels. With cash of $168 million, our net debt position at quarter end was $59 million. At quarter end, we had full $120 million of gross capacity under our ABL facility and no borrowings outstanding. After LCs, our net remaining availability into the ABL was $110 million with resulting liquidity of $279 million. Given the cash repayments of our 2023 converts and installment of the MARAD debt during the quarter, we repurchased 174,000 shares of Helix common stock for approximately $1.9 million. I will now turn the call over to Erik for a discussion on our outlook for 2023 and beyond.

Thanks, Brent. Our team performed well, delivering strong results in the third quarter. It is our most active and best quarter of the year and the market continues to be constructive for the remainder of ‘23 and into 2024. Our results through three quarters have delivered the year-over-year improvements we expected. Entering the winter months, we expect seasonal impacts to our operations in the North Sea, Gulf of Mexico and APAC regions. Given these expected impacts, we are tightening our guidance as follows: revenue in the $1.2 billion to $1.3 billion range; EBITDA $263 million to $278 million, a $15 million increase from the midpoint; free cash flow of $100 million to $140 million; CapEx of $75 million to $85 million. These ranges include some key assumptions and estimates. Any significant variation from these assumptions and estimates could cause our results to fall outside of the ranges provided. Our fourth quarter results will be impacted by the seasonal weather in the Northern Hemisphere. Robotics segment will be impacted in the North Sea and APAC regions with a decrease in trenching activities. Our shallow water abandonment will be impacted in the Gulf of Mexico with a decrease in heavy lift and diving activities. We nevertheless expect the fourth quarter to generate solid seasonally adjusted results. Providing key assumptions by segment and region, starting on Slide 25. First, our Well Intervention segment. The Gulf of Mexico is expected continue to be a strong market for the balance of ‘23 with the expected strong utilization on both the Q4000 and Q5000 and benefiting from market rates. In the UK North Sea, both vessels have contracted work through Q4 and into 2024. Activity levels for our Well Invention vessels in this market continues to be robust. During the fourth quarter, the Seawell is scheduled to undertake a 2 to 3-week transit for a project in the Western Mediterranean. The Q7000 is currently completing work in New

Thanks, Erik. Well, things are good, and we expect even better returns going forward. We continue to outperform our expectations, resulting in an additional increase to our 2023 guidance to an EBITDA range of $263 million to $278 million. We’re in the budgeting process for 2024. So we don’t have specific guidance to share at this time with what we see so far, it could be upwards of 10% growth for 2024 over 2023 from our current assets. This includes legacy below market rates previously contracted that start to roll off by the end of 2024, which would indicate even further growth opportunities in 2025 over 2024. We’ve already pointed out that 2024 will have approximately 200 fewer scheduled maintenance days than 2023. Assuming market rates and that we’re able to manage costs and execute on our maintenance programs. This could turn into approximately $25 million to $30 million in EBITDA. We have four major assets currently impacted by legacy rates. The SH1 is on a 2-year contract to the end of 2024 with a small escalator in rates for 2024 over ‘23, offsetting higher costs. By 2025, we expect the vessel to be able to achieve market rates, which could be a 50% to 60% increase to the current rates. The SH2 is on a 2-year extension of a 4-year contract that has a flat rate until the end of 2024. At that time, we expect the vessel to be available at market rates, which could be approximately 40% higher. The Q5000 has a partial year commitment contract that ends at the end of 2024. There is a year-over-year escalator for 2024 over ‘23, but we will not see market rates until ‘25. The Q7000 is contracted to work in the APAC into mid-2024 before transitioning to Brazil for 12 to 18 months. The rate and cost differences between APAC work and the Brazil work should generate $20,000 to $30,000 a day increase in EBITDA contribution starting in 2025 before reaching market rates in 2026. When I refer to market rates, I’m referencing current market rates as we don’t know what the market rates will be in ‘25 or ‘26 other than to say that current market rates are not yet back up to 2014 levels. Rig rates continue to increase and supply is expected to remain tight. At this time, we don’t have sufficient assets to meet the expected demand. We don’t anticipate adding any new Helix purchased or new build vessels, but instead, could look to partner with select vessel owners to provide Helix systems and expertise to cover demand as an alternative to adding excess capacity to the market. We will be assessing our spread deployment strategy with consideration given to maintaining our presence and relationships in all the regions where we were. To this end, we added two additional intervention systems and two trenches at the end of 2022. In the renewables market, we forecasted growth rates for the work in the market that would allow us to grow our – which would allow us to grow our trenching and site clearance business within those two areas without a need to expand into other segments of the offshore wind market where adequate returns could be a challenge. Last year’s acquisition of Alliance and the extension of our decommissioning business once again into the Gulf of Mexico shelf has been a good success. This business has seen EBITDA contribution more than triple since our acquisition and then 2023 is on track to generate roughly double the initial guidance given at the time of the acquisition as demand has increased faster than we expected. A recent study indicates over 14,000 wells to be abandoned in the Gulf of Mexico and thousands of structures and pipelines with 90% of wells being in shelf waters. The recent Fieldwood and Cox bankruptcies have kick-started an intense desire to see this work done from both successor owners who will assume the liability as well as regulatory bodies pushing for a solution. A full field abandonment process begins with assessment and making the old structure safe to work on. Then the focus turns to the P&A of the world. Following this, the pipelines are abandoned and the platforms removed with the last phase named debris clearance of the ocean floor. After a flurry of well P&A work in 2023, we can expect the potential slowdown in well work and a ramp-up in pipeline and platform removal. This may be the trend until the more recent Cox bankruptcy work begins. At which time, all phases of the work should be active. Helix is the preeminent shelf contractor that owns all the main asset classes needed to perform all aspects of full field abandonment work. We expect the work to continue for years to come based on the work that exists. We believe the business lines, Helix has developed for the end-of-life oil and gas and the development of offshore wind has positioned the company well with a strong balance sheet for the generation of double-digit free cash flow yield going forward. I believe this gives you a good perspective on why I am saying things are good, but we expect them to get even better. Erik?

Thanks Owen. Operator, at this time we will take any questions.

[Operator Instructions] Our first question comes from James Schumm with TD Cowen. Please proceed.

Hey. Good morning guys. Can you just help me understand the free cash flow guide for this year? I mean you have EBITDA going up nicely versus the prior guide. And I think you got free cash flow down $30 million or so at the midpoint. It looks like CapEx is up $6 million or $7 million. So, you called out working capital in the press release. But is that it, or like why would you not be able to reverse the working capital build in the fourth quarter, that’s kind of typical for OFS? So, just help me understand what’s going on with the free cash flow, please.

Yes. You are right, Jim. I think the primary driver for the adjustment to the free cash flow is the working capital increases. You are right about, obviously, the increased EBITDA that comes with also an increase to our revenue by over $50 million just quarter-over-quarter. So overall, this is primarily a timing issue. I think from what we are forecasting in the fourth quarter, I think we see some flow-back in the fourth quarter. As we are projecting strong free cash flow between $60 million to $100 million in the fourth quarter alone, I think there is a good chance some of that will happen in the early first quarter as well. Once again, the seasonal impact activity levels remain strong into October, November before we see the seasonal dip in December. And so it is primarily working capital. And once again, it’s primarily just a timing issue. There is the impact of the slight increase to CapEx that was outlined, but those are the two main drivers.

Thanks Erik. And just to confirm, like there is no – you have no collection issues or anything like that. It’s just timing. And so we should – this should reverse by the fourth – sorry, by the first quarter, if not in the fourth quarter, is that fair?

I think that’s fair. I think overall, Jim, once again, activity levels for us as a whole this year over last year, revenues were up by over $400 million. And so I think the impact of the working capital on our cash flow generation has been obviously quite strong. I also think that we have had a little bit of shift in our schedules that has impacted the working capital as well. At this time, we don’t expect or see significant collection issues.

Okay. And then the last one for me, can you just give an update on the 2026 converts? What’s the strategy, or what’s the most likely outcome there?

I think from that standpoint, Jim, we had been advised and expect that the converts that we have are – is an instrument that we could hold to maturity. Once again, managing our balance sheet has always been our top priority. And then from that standpoint, we continue to weigh our options on how to manage this. Several years back, our focus was primarily on cash generation. Now as the market has improved, we are looking at our options from the debt standpoint, Obviously, we haven’t been shy about talking about wanting to a more traditional debt instrument rather than convert. So, really all options are on the table and focus really top priority is managing our balance sheet.

Okay. Thanks a lot Erik. Appreciate it.

Our next question comes from Luke Lemoine with Piper Sandler. Please proceed.

Hey. Good morning. Owen, I just wanted to kind of clarify a couple of your comments on the initial ‘24 outlook. When you said up at least 10%, were you referring to EBITDA for ‘24?

Yes.

Okay. And is that inclusive or exclusive of the $25 million to $30 million of dry docks that you had in ‘23?

That would be primarily based on the $25 million to $30 million of enhanced EBITDA from lower maintenance CapEx.

Okay. Got it. So, just at that amount, would those absent plus rate group on top of that, right?

Right. That does not include any anything other than continued operations from our current assets. It doesn’t include any acquisitions of production or other impacts that may also increase it. So, that’s why we said greater than 10%.

Okay. Alright. Perfect. Thanks Owen.

[Operator Instructions] Our next question comes from Greg Lewis with BTIG. Please proceed.

Yes. Hi. Thank you and good morning everybody and thanks for taking my questions. I was hoping that you could talk a little bit more about the shallow water abandonment market. I guess one question was the handful of assets you purchased, I guess it was like $6 million. Were those acquired from existing, I guess competitors, or were those – was that new equipment that was ordered and you took delivery of?

That was – no, we are not looking to add capacity to the market. That was an acquisition from an existing competitor. It was very attractive because it also came with quite a number of offshore workers and people are the biggest bottleneck to your ability to cover greater market share in this market. So, adding the people would be actually more important than adding the equipment.

65 regional employees that, that division had we managed to hire 62 of those people direct. So, it’s a really good win for us.

And then just – and just as we try to piece together the fragmentation of the shallow water market and realizing it’s also geographic specific. Do you see as this market unfolds, and obviously, you guys are in a pretty great position from a balance sheet and liquidity and cash, could there be opportunities to do more such similar? I mean you did mention potential for – or that the guidance was exclusive of any acquisitions. Is this an area where the company could continue to look to grow over the next 1 year to 2 years?

Yes. I think we will keep a close eye on the market and talk to all of our major clients. One of the advantages that we have is that we already have the systems and our policies in place that qualify us to work for the majors, which are the recipients of the liability as it were from the Fieldwood and Cox bankruptcy. So, depending on their demand and if it gets to the point where we are exceeding our capacity to supply, then there are opportunities that we could look at.

Okay. Super helpful. And then just one more for me. Realizing that – when we talk realizing that sometimes well intervention assets have to compete against offshore drilling rigs, a big theme across the drilling space has been white space and idle time as rigs look to get back to work. It’s interesting because when we listen to you, it doesn’t seem like we are really facing – it doesn’t seem like the well intervention assets are facing much white space. Is that – I guess my question is, are we starting to see drilling rigs kind of look to take some of the short-term well intervention work, or is the white space that we are seeing in offshore drilling really transient and rigs aren’t looking to compete against your well intervention assets?

So, I will take that. I think that there are certain rigs that are entering the – on the decommissioning market. There has been a couple of contracts awarded in the deepwater Gulf of Mexico, a couple awarded in Australia, but we are expecting high utilization for all of our assets in ‘23 and as we go into ‘24. And you also have to look at it geographically, we don’t really compete with rigs in the North Sea. For instance, our vessels are very specific to the type of work that happens in the North Sea being neither enhanced and older wells in the North Sea. So, there is a few contracts that have been awarded, but I wouldn’t say it’s greatly impacting us, and we are expecting a good utilization through it.

Super helpful. Thanks for your time everyone.

Thank you.

Our next question comes from Don Crist with Johnson Rice. Please proceed.

Good morning gentlemen. I wanted to ask one quick question about the convertible debt. I mean obviously, there are – all options are on the table. But would you expect any of the current note-holders to convert given where it’s trading today? It seems at least to us that – it doesn’t really seem like anybody is going to convert at this stage given where they are trading today.

Yes. Good morning Don. I think the advice that we have gotten from the experts in this area is to generally not expect any of the holders to convert because the notes trade at a premium to our stock price, and so that’s the advice that we have been given. And I think that you can see it from the trading value of the converts that they are trading at a slight premium to our stock price. And therefore, we would not expect there to be a conversion.

Okay. And I wanted to ask one question on the Alliance payout. It seems like it impacted your EPS, but not your EBITDA this quarter. Can you remind us when that actually goes out the door – when that cash is out or to the ex management team?

So yes, the measurement period, Don, goes through the fourth quarter of ‘23, so it includes the upcoming quarter as well. At which point, we will true it up as of the third quarter to net up to fair market estimate, value estimate of $74 million. The payment is expected to happen in the start of the second quarter of 2024.

Well, I think we are all in agreement that Alliance has significantly outperformed, so we don’t mind paying a little bit more to them. So, I appreciate the time today. Thanks.

Yes. And to your point there, once again, it is $74 million through the third quarter. We expect, obviously, we will adjust it upwards as they continue to outperform here in the fourth quarter.

Thank you.

Gentlemen, there are no further questions at this time.

Okay. Thanks for joining us today. We very much appreciate your interest and participation and look forward to having you on our fourth quarter call 2023 in February. Thank you.