Erik Staffeldt - SVP and CFO Alisa B. Johnson - EVP, General Counsel, and Corporate Secretary Owen Kratz - President and CEO Scotty Sparks - EVP and COO Anthony Tripodo - EVP and Senior Advisor.

Gregory Lewis - Credit Suisse Chase Mulvehill - Wolfe Research Vaibhav Vaishnav - Cowen & Company Marshall Adkins - Raymond James George O'Leary - Tudor, Pickering, Holt & Company Haithum Nokta - Clarksons Platou Securities Joe Gibney - Capital One Southcoast Ian Macpherson - Simmons & Company Martin Malloy - Johnson Rice William Dezellem - Tieton Capital Management.

Ladies and gentlemen, thank you for standing by. Welcome to the Helix Energy Solutions Group Second Quarter 2017 Earnings Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions].

As a reminder, this conference is being recorded, Monday, July 24, 2017. I would now like to turn the conference over to Erik Staffeldt, CFO. Please go ahead, sir..

Good morning everyone and thanks for joining us today for our conference call for our second quarter 2017 earnings release. Participating on this call for Helix today is Owen Kratz, our CEO; Scotty Sparks, our COO, Alisa Johnson, our General Counsel; Tony Tripodo, Executive Vice President and Senior Advisor and myself.

Hopefully, you've had an opportunity to review our 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 Investor Relations 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, Alisa Johnson will make a statement regarding forward-looking information..

During this conference call, we anticipate making certain projections and forward-looking statements based on our current expectations.

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 of and variety of factors, including those set forth in our slide 2 and in our Annual Report on Form 10-K for the year ended December 31, 2016. Also, during this call, certain non-GAAP financial disclosures may be made.

In accordance with SEC rules, the final slides of our presentation materials provide a reconciliation of certain non-GAAP measures to comparable GAAP financial measures. The reconciliations, along with this presentation, the earnings press release, our Annual Report, and a replay of this broadcast, are available on our website.

Owen?.

Good morning everyone. We’ll start with slide 5, it’s the high level summary of the Q2 results. Our second quarter financial results benefitted from the improved seasonal factors that affect our operations in the North Sea as well as the start of operations on the Siem Helix 1 in Brazil.

Our financial performance showed significant improvement in Q2 compared to Q1. Revenues increased to 150 million from 105 million and EBITDA improved to 30 million from 15 million. Most of the improvement is the result of higher utilization of our North Sea well intervention assets.

Our results were negatively impacted by a non-cash 6.3 million tax charge attributable to a change in treatment of our foreign taxes. Turning to slide 6, the driver of our improved financial performance both quarter-over-quarter and year-over-year was the improved utilization of our North Sea well intervention vessel.

The Well Enhancer and Seawell was fully utilizing in Q2 compared to 57% utilization in Q1, 2007 and 49% utilization in Q2 2016. In the Gulf of Mexico the Q4000 was in dry docks at 34 days. Absent the dry docks the Q4000 was fully utilized during the quarter. The Q5000 was 91% utilized for the quarter experiencing downtime early in the quarter.

At the end of May Q5000 demobilized from the BP campaign and worked on projects for two customers for the remainder of the quarter. The vessel is scheduled to return to service for BP in early September. AS we've previously said, we commenced operations with the Siem Helix 1 in Brazil in mid April.

During the quarter the vessel performed successful operations on three wells. As expected the vessels financial results continued to improve since it began commercial operations. Robotics did benefit from an improved activity over Q1 but it’s hampered by an overall weak market. Production facilities continues to be a steady performer.

Onto slide 7, from a balance sheet perspective our cash levels at quarter end decreased to 390 million from 538 million at the end of Q1. At the end of the second quarter we entered into an amended credit facility comprising some positive 150 million revolving credit facility and a 100 million term loan.

As part of this process, we used cash on hand to reduce our term loan balance to 100 million. For the quarter we take down a total of 95 million of principal debt obligations and use 46 million of cash for capital expenditures the majority of which is attributable to Brazilian operations.

Our net debt increased to 125 million at quarter end compared to 72 million in the first quarter. At the quarter end access to our revolver was restricted but we expect this to change overtime as our performance improved and we continued to pay down debt. I’ll now turn the call over to Scotty for an in depth discussion of our operating results. .

Thanks Owen. Moving on to slide 9, revenue in the second quarter increased to 150 million from 107 million in the first quarter.

Gross profit margin increased to 12% resulting in a profit of 18 million up from negative 1 million in Q1 due to achieving high utilization across the well intervention fleet and increased seasonal activity in the Robotics fleet.

The North Sea well intervention business both vessels at 100% utilization on projects requiring our unique fully integrated diving services.

In the Gulf of Mexico well intervention business, the Q5000 had high utilization and successfully completed the first year of the BP -- of the five year BP contract and then continued on to complete work for two additional clients.

The Q4000 completed its planned five year dry dock on schedule and on budget and continued working for the remainder of the quarter. In Brazil operations commenced in April on the SH1, the vessel utilized 95% of good up time.

However, alliance partners once they have seen Schlumberger they have contracted several works on a shared risk contracting mechanism. We now plan to offer a fully integrated solution with Schlumberger services on the Q4000 offering our clients further enhanced benefits.

Slide 10 provides an overview of our well intervention business in the Gulf of Mexico. The Q5000 continued with BP completing work on three subsea interventions ahead of schedule. On June 1st the vessel completed the first year of the BP contract and immediately commenced working for two additional clients for the remainder of the quarter.

The unit realized 91% up time for the quarter. The Q5000 schedule is nearly full for the remainder of the year and will return to BP for the second 270 day terminal in September. So far in 2017 the up time of the Q5000 units has been in line with our fleet wide expectations.

The Q4000 had 63% utilization in the quarter due to completing its five year dry dock in Brownsville on schedule and on budget in May. The vessel performed well at the dry docking, completing works for two clients and has a good backlog for 2017. IRS1 is idle and IRS4 is completing its five years COC both at [indiscernible] in Houston.

We continue to strengthen and enhance our alliance with Schlumberger, firstly the 15K jointly owned alliance IRS system is now completing the testing phase of the one subsea facility in the UK. The system will be shipped mid Q3 and delivered and ready for use in the Gulf of Mexico in Q4.

We are negotiating closely with several premier clients for the rental of the IRS -- of the Intervention Riser System starting in Q4 of 2017. The system will be the first of its kind available on a rental basis to address the growing intervention needs of deepwater high pressure subsea wells.

Manufacturing continued on their own, devising the pipe and water abandonment module and we expect completion of the system and to be operationally ready in Q3 or Q4. As I mentioned earlier we now plan to offer fully integrated Schlumberger services on the Q4000 to offer further enhanced benefits enabling a one contract option to clients.

This should also lead to integrated crews and also reduction of overall cost on the vessel and schedule savings. We're also looking to expand this offer into other regions as well. Moving to slide 11, our North Sea well intervention business had a very good quarter.

Five vessels experienced 100% utilization on projects utilizing our unique integrated onboard diving services. The Well Enhancer worked for two clients in the quarter, the vessel completed the first scope on an intervention project mid April and then commenced work on an 11 well P&A project for the remainder of the quarter.

The Seawell also worked for two clients during the quarter both in P&A projects. The vessel completed the first scope in April and then went on to a longer-term commitment for a client. Both vessels have good backlog for the remainder of the year and are scheduled to be fully utilized into November of 2017.

Moving to slide 12, in Brazil the Siem Helix 1 was placed in service mid April. The vessel has successfully completed four wells since commencement with good operational uptime throughout achieving 95% utilization for the quarter.

We have addressed a number of the identified items from the vessel acceptance phase reducing the rate penalties as we work through the list leading to improved financial performance. The Siem Helix 2 topside equipment installation continued this quarter with additional refinement to the vessel from the lessons learned from SH1.

The vessel will transit to Brazil in Q3 and we are presently forecasting Siem Helix 2 to be placed into service late Q4. Moving on to slide 13 for our Robotics review. As expected market conditions remained soft at robotic side of the business.

However, we did a good job increasing utilization in Q2 and we have secured some good utilization for 3Q and into Q4. Deep Cygnus completed 28 days in the quarter commencing an ROV support project in June that will see the vessel contracted for at least the end of Q3 working in Egypt.

Grand Canyon I had 63 day utilization mostly on trenching scopes and will have high utilization in Q3 performing various contracted trenching projects into early Q4 in the North Sea. Grand Canyon II had 61 days of work on very short term ROV IRM projects in the Gulf of Mexico.

Grand Canyon III was delivered in May and went on to complete 33 day utilization. In June the vessel commenced a transit to India to undertake an ROV support project in Q3 and will then work in Egypt trenching in Q4.

We have secured some good recent utilization and increased our backlog with some multi-year longer term trenching projects from 2018 onwards. Over to slide 14, I will leave this slide detail in the vessels ROV and trenching utilization for your reference. Handing over to Tony. .

Good morning and thanks Scotty. Turning to our balance sheet, slide 16 reflects total gross funded debt of 544 million at June 30th, a reduction of 95 million from March 31.

Substantial reduction in gross debt levels primarily is the result of the pay off of 180 million of the prior term loan net of proceeds for the new $100 million term loan that we entered into at the end of the quarter two. The new term loan facility essentially extends maturities on a 100 million of our bank loan facility for two years.

Thus the debt maturity profile shown on slide 16 shows a more comfortable level of scheduled principal payments than existed a quarter ago. On slide 17 net debt at the end of June increased from 72 million a quarter ago to 125 million at the end of June.

The increase is directly related to cash outflows on CAPEX as previously mentioned which amounted to 46 million during quarter two. Cash at quarter end decreased to 390 million reflecting the aforementioned pay down of debt as well as the CAPEX. Slide 18 I will turn the call over to Erik for discussion on our 2017 outlook. .

Thanks Tony. Moving over to slide 19 which provides an updated outlook on 2017. We're maintaining our forecasted 2017 EBITDA range of 105 million to 125 million. The outlook is based on some key -- some fundamental key assumptions. Performance of Siem Helix 1, we continue to address certain items on the vessel that will improve our top line performance.

As we address these items our operating costs are running higher than normal with extra equipment and operating personnel on board. Currently we estimate we complete this process towards the end of Q3 at which point we expect to reduce our cost and the vessel to start generating acceptable returns.

Assume start up of Siem Helix 2 we are completing topside equipment installation and applying lessons learned from our experience with Siem Helix 1 acceptance process. We're targeting commercial operations late in Q4. Sustained improved market environment for the North Sea well intervention business.

We've had a good first half of the year and we expect to have a stronger second half. Improved utilization of the Q5000, fewer system issues, vessel has improved its performance in 2017 and we expect this to continue.

And we have of course operating in a in a weak Robotics market Moving over to slide 20, our backlog of 1.8 billion at close to quarter two continues to be heavily weighted to the BP Q5000 contract, the two Petrobras contracts, and the production handling contract for the Helix Producer 1.

We are benefiting from the improved market activity in the North Sea well intervention market and efficient performance of our assets. We expect both vessels to realize good utilization into the fourth quarter.

In the Gulf of Mexico the Q5000 is currently working spot market contract as BP denotes [ph] for its 95 day window in late May and schedule back on the vessel in early September. Vessel has worked that will take it into August. Q4000 is expected to have good utilization the remainder of the year.

Again the actual operational performance of Siem Helix 1 along with our ability to meet the operational specification of Petrobras would be a factor for the remainder of 2017. We have made assumptions to this respect that could vary plus or minus. These assumptions are incorporated into our guidance range.

Over to slide 21, the Robotics business segment is expected to have a better second half of the year but overall still difficult year of subsea infrastructure spending is weak and slightly to lag in industry recovery.

In the second half of the year we should benefit from increased activities that take place in the summer months in the North Sea including several wins from our trenching projects.

Over to slide 22, the CAPEX forecast for the year is forecasted at approximately 235 million but most of this capital for the completion and build out of the two Siem Helix vessels and the continuing construction of the Q7000.

This forecast is higher than our April guidance due to additional spending associated with the items we are addressing in the Siem Helix 1 and Siem Helix 2. Of the 235 million in projected CAPEX, 220 can be classified as growth CAPEX.

Onto slide 23, as previously mentioned we amended our credit facilities, we've reduced our term loan and is extending its maturity to 2020. Our remaining debt payments for the second half of the year approximate 24 million. I would skip slide 25 and leave it for your reference. At this time I will turn the call back to Owen for closing comments. .

Thanks Erik. In the second quarter we began to see the benefits of our long term contract and the foundation they provide for our financial performance. We expect this to continue over the near term and we expect the results of the second half of 2017 to be better than the first half. We also expect 2018 results to be better than 2017.

Although results are never predictable in the down market we feel that we have entered into a period of time where we expect to improve financial results. We have a plan to make it through this down turn and are prepared for the opportunities when the market recovers.

That being said I would like to address more near-term issues likely on the minds of investors. Our two contracts with Petrobras in Brazil, the SH1 went on contract April 14th and it worked uninterrupted since then on multiple wells performing on the wide variety of tests demonstrating its versatility.

Upon Petrobras interpretation of contractual specifications allowed Petrobras to contractually penalize our day rates for each issue identified in the acceptance process where we were being -- compliance whether or not to protect the offshore visibility [ph] of the vessel. This is typical of Petrobras contract.

However, the amount of penalties imposed exceeded what we expected or might have expected in the historic market conditions. We have been working through and regulating these penalties. We currently expect to have worked through most of these penalties by the end of the third quarter.

As a result our capital expenditure increased and OPEX has been elevated at the same time that revenues were penalized [ph]. In June we were profitable. Expenditures and OPEX should continue to decline as the work wraps up and we will see revenues increase. It is our expectation that returns will continue to improve.

We have taken steps to mitigate a repeat of this occurrence in the second vessel. We have done the work in the shipyard to address the issues that resulted in penalty assessment on the first vessel.

We are also in discussions to clarify the language of the technical specifications to more clearly capture the intensive meaning mitigating any penalty assessments that arise from differing interpretations.

The second vessel is expected to arrive in Brazil by the end of the third quarter and begin its contract by late Q4 following the acceptance process. Taking all of this into account going into the full year next year we expect both vessels to be on full contract as a profitable return.

For a little broader perspective on the market I would like to address the macro issues and the Helix strategy going forward. Without trying to join the chorus in predicating oil price and offshore demand, I will share the perspective that we intend to manage to learn what that means. We will be assuming a work for longer method.

I do see some green sheets of maintenance work and some production enhancement work starting again to be done on wells. Most notably we see this and depict it year-over-year in the North Sea. While the Gulf of Mexico remains fairly active, rig over supply is exerting pressure on rate.

We expect the rig over supply to continue for years regardless of oil price. Liquidity and cash flow are the two primary metrics driving these strategies. I anticipate modest offshore spending growth by our clients to occur over the next three years but at a gradual rate. Rig over supply will continue through and beyond this period.

We’re nearing the end of our obligated capital build program. Capital spending did increase this year over our expectation. We work through the Brazil issues but we see an end to that and all major capital spending will be complete by year end with primarily just the Q7000 final payment remaining at the end of 2018.

The work to complete the Q7000 will actually conclude by early Q1 of 2018. As previously stated as we approach the time where our capital risk lessons we will become more aggressive on debt reductions. I believe you have seen the beginning of this in this quarter’s results.

We have a fairly aggressive debt reduction payment plan and we’ll seek to meet the schedule of debt reduction. The focus over the next few years will be to one, complete our capital obligation and resist undertaking any new capital spending. Two, preserve liquidity to operate in the down market. Three, consider opportunity to reduce net debt.

And four, improve margins through first OPEX cost reduction and B) creative contracting. Reserving a strong balance sheet and attaining and maintaining free cash flow will be our focus and position for Helix for sustainability and preparedness for opportunities as the market eventually recovers. With that I’ll hand it back to Erik for Q&A..

Operator at this time we’re ready to take questions. .

[Operator Instructions]. Our first question comes from the line of Gregory Lewis with Credit Suisse. Please proceed with your question..

Yes, thank you and good morning. Owen, I was hoping you could dive a little bit more into the Siem Helix 1 just on -- you made a few comments about the progress and the pricing or the lack of -- or the move of less penalties.

I guess where do we stand in the process now as we're here in July and you sort of indicated that maybe in Q3 by the end of the quarter you are largely behind us, do we think we're kind of about halfway there? And then you also made a comment about you expected delays, you expected penalties out of the gate, maybe not as severe as they are currently.

Has the Siem Helix 1 kind of caught up to maybe where you expected it was going to be at this point in the break in period?.

Right now on the Siem Helix 1 I think when we go on contract in April I mentioned that we should have most if not all the contingencies taken care of in 120 days. We're on track to meet that schedule.

Right now I’d say we’re over half way, we’re little over halfway through the clearing contingencies and like I said we expect to have all of them taken care of by the end of the third quarter.

On the Siem Helix 2 what we've been doing is all of the little workups that Petrobras has required us to do to Siem Helix 1 we have passed over to the project team of Siem Helix 2 and they've been doing those works concurrent with completing the vessel.

The vessel will show up in Brazil with everything done on the Siem Helix 2 that has been done on the 1 that has been accepted by Petrobras. So we don’t expect, certainly don't expect Petrobras to be able to penalize us for the same thing when we've already applied the acceptable remedy.

In addition to that though a lot of what happened on the Siem Helix 1 was a result of just language interpretation and technical interpretation as applied by the Petrobras legal department.

What we are in the process of doing right now with Petrobras is restating the actual word of the technical specifications so that there is much less chance of any misinterpretation or application of wrong intent. Between those two we don’t expect anywhere near the same issues with the Siem Helix 2. .

Okay, great. And then just on what the 15K IRS stack that is going to be delivered later this year. I guess it sounds like customer conversations are ongoing, you kind of alluded hey, there could be some work later this year.

In the event that the Q4000 and Q5000 are fully booked out in the fourth quarter, is that something where Helix would consider running out the 15K stack or is that something where we would just expect a 15K stack to go work on the Q4000?.

Yeah, like we said we're in discussions with many premier clients at the moment. There is optionality to put the 15K on both the Q4000 and the Q5000. However the target market is expected to be a rental system. .

Okay, great..

Bottom line it is rental system separating apart from any of our vessels it should assist in improving utilization and revenues on our vessels. But we are more than willing to make it available to others whoever wants to rent it. .

Okay, great. And then just one more from me, just given the strength in utilization in the North Sea, clearly on a percent utilization something to be very proud of.

Is there opportunities or is there a potential that we could see Helix do some, maybe some short-term chartering of vessels to maybe take advantage of what's really been a strong market or is that something at this point given as I guess more halfway through summer that maybe we have to wait for next year for that to happen?.

The North Sea market we have pretty well covered. There are some days that due to scheduling conflicts we weren’t able to cover and that work went to our competitor. Just to remind you we still have -- we don’t have a formal chartering place with Gulf but we still have access to the Skandi Constructor.

Although the Skandi Constructor is now located in Asia Pacific so that makes it sort of difficult. So right now I would say no, we don’t have anything anticipated in our plans for picking up additional vessels but certainly we are open to taking advantage of opportunities. .

Okay guys. Hey, thank you very much and have a great rest the summer..

Thanks..

Our next question comes from the line of Chase Mulvehill with Wolfe Research. Please proceed with your question..

Hey, good morning. .

Good morning. .

I guess the first question, cost came in a little bit higher than we were expecting in 2Q. I guess some of that was kind of related to Siem Helix 1.

So, maybe could you talk to, maybe quantify that a little at least relative to Siem Helix 1 or any other kind of one off cost in 2Q and in the past to kind of reducing that and pulling those costs back out?.

Well I will take the Siem Helix 1. We have had a number of third parties on board doing work in response to the clearing of the contingencies [ph] that's had knock on effect because it does require additional personnel from our crew to support them, extra catering, etc. So OPEX was elevated.

We also rented some equipment near-term in order to set aside some dependencies and as we replaced those with longer term solutions then the rental cost will come down. So I do see a lot of opportunity for us to lower cost on the Siem Helix 1.

With the rest of the company one of the things that excites me is with our alliance and what we are doing, Scotty might mention that. .

Yeah, I mean the cost for all the other vessels were in line and actually a little low. The guys have been doing a good job of keeping our budgets under control. As we've said we're looking to further enhance our alliance position with Schlumberger.

Our plan is to have their services near permanent on board the Q4000 which will allow us to integrate crews. It would mean their services are currently on board so that we follow less mobilization and demobilization time between clients which will lead to further savings.

There is no point having five service providers on one vessel each having one electrician, each having one mechanic and we can really look to integrate crews and reduce the cost down there as well as schedule savings which means a day per day of the whole vessel revenue to the client is a saving. And we look to do that further in the North Sea.

I think certainly when Q7000 comes out we will be integrating that fully from the start and we're going to look at some of the, I'm going to see well out of one hand surviving a more integrated solution also..

I might just add a little more color. This is one of the things that we believe positions Helix well in the marketplace because we are the only intervention provider that is fully integrated with potential of adding third party services vessels, Robotics and the intervention systems.

There is no other company in the marketplace that can do that so that’s definitely gives us a competitive advantage going forward..

Okay, alright yeah, that’s helpful.

I mean when we think about the Q7000 so it sounds like that you've got an opportunity here to leverage the Schlumberger alliance and so is that leveraging it in the North Sea or is that bringing the Q7000 to the Gulf of Mexico?.

Right now we're targeting globally. The overall plan for Q7000 originally was for the North Sea. There is still a large well stock in the North Sea that doesn’t have much access to heavier co-achieving and some of the other abandonment technologies we will be able to deploy from the Q7000.

So it's target market is North Sea and West of Shetland but right now we're looking at opportunities globally from Africa, Brazil, and even the Gulf of Mexico. .

Unique feature of the Q7000 is the fact that it has been built similar to the design concept of the Q4000 which should shape soon which gives it a high transit fees. Historically [Indiscernible] because of the slow transit fees that the Q7000 was identified early on in our build process as a multi regional asset that we can move it around..

Okay and I think you mentioned in the prepared remarks that the Q7000 would be completed in the first quarter.

Should we still expect a 4Q -- late 4Q delivery for next year or is there the opportunity to bring this in ahead of time?.

I think we’ll just have to wait and see how the next year unfolds. Right now the completion schedule on the vessel would make it available to work at the end of the first quarter but right now I think it’s way too early to make that call..

Okay, last one and I'll turn it back over.

When we think about MOV cost for the Siem Helix 2 in the back half of the year, how much MOV cost are left to be realized?.

I still think we probably have the vessel scheduled to transit. I think that Scotty mentioned sometime in the third quarter with vessel acceptance starting shortly thereafter. So I think there's probably about three to four months of MOV cost still to be incurred..

Okay and all of this is deferred and recognized over the life of the contract right?.

That's correct..

Okay, alright. Thanks Erik, thanks Owen..

Our next question comes from the line of Vaibhav Vaishnav with Cowen & Co. Please proceed with your question..

Hey, good morning and thanks for taking my question.

Can you quantify for us how much was the improvement in date Siem Helix 1 at the end of let’s say June versus when it started in mid April?.

You know that we haven't provided that detail. Obviously the vessel did improve performance significantly as we addressed the open item, some items that were out there. As we did mention the vessel was cash positive from that perspective but I don’t think we can provide a specific..

No, we haven’t really focused on it because the improving revenues was somewhat offset by the higher OPEX cost as a result of going through the process. So I think it’s probably better to start focusing on what the year in run rate might be. .

Okay and I guess what you are implying if I'm not mistaken is by the end of third quarter all the modifications would be done hence the day date should return to full day date sometime in fourth quarter, is that fair?.

Well, it’s a full day rate less what we would have expected going into the contract. The way that Petrobras works is that they will always penalize your day rates.

So your stated day rate is never an actual received day rate but we did make assumptions and are tendering to Petrobras to allow for that and absent those penalties yes, we should be back to a normalized revenue rate..

I mean if I say it is somewhere around 200 to 225 is that a good run rate for the life of the contract?.

I think that would be on a very, very low end. .

Got it, okay. That's helpful.

On Siem Helix 2 do you now know where the vessels would be working or is it still to be determined by Petrobras?.

That's still to be determined by Petrobras. I don’t know they were very fluid in their planning, to be kind. So we're looking at it. We have a number of wells identified by them but which ones they are going do first and everything is in constant state of flex with them. .

Okay, but they….

The vessels that are programmed into the Petrobras scheduling and they have a number of wells identified whether they go well one, two, three, four is dependent on their schedule at that time. But it is scheduled to go into their system and has work lined up. .

Okay, so they want to line up, that's good.

And if I think about the guide so you increased the revenue guide specifically for well intervention to 400 million versus 375 million, but still no change to EBITDA guide, is that all because of the move cost or is it something else that we need to think about?.

No, there's quite a bit of cost that we do incur on a daily basis that is on a pass through. So from our perspective it is a very small markup on those. We really don't forecast those when we provide our guidance. So there's always increased revenue and increased cost associated with those pass through items. .

Okay, and last question for me if I just think about from an EBITDA perspective or more so in EBIT perspective, it sounds like the guidance implies about 20 million EBIT in second half versus 10 million EBIT loss in first half.

So, understandably first quarter was not a great quarter but just in terms of the progression from here on, is that fair to say you still expect well intervention revenues and profitability to grow in 3Q and 4Q? And then maybe can Robotics be actually EBIT positive in 3Q?.

Specifically from the well intervention standpoint obviously there's a lot of variables that are affecting our Gulf of Mexico. Obviously we still have blend of spot rate and legacy contracts. So the timing of those will affect, you could say the results of the well intervention.

So it's hard to say that you would expect sequential growth quarter-over-quarter but we do expect very solid results from the well intervention side for both quarters. Obviously in the fourth quarter we do expect a decline with the North Sea assets as they enter their winter months..

And on the Robotics side, quarter-by-quarter it is a little hard to call because of how we marketed and how leveraged it is expected with the work. But year-over-year we are looking for Robotics to pickup primarily through a cost reduction as our charters and hedges roll off. .

Okay, alright. That's all for me. Thank you so much. .

Our next question comes from the line of Marshall Adkins with Raymond James. Please proceed with your question..

Good morning guys.

Owen on the Q5000 the contract with BP, remind me didn't they have an option, did they exercise the option to get to the 270 days or was that already under contract?.

They have an option to decide whether they take it 365 or 270 each year. They have to give us a six month notice period on that and then exercise the 270 day option for 2018..

Okay, so that is -- is that any kind of testament to how well it's operating for them, can we read anything into that?.

No, I think it is just the amount of work they have lined up in 2018. I will remind you that in Q1 Q5000 received the rig of the month in the Gulf of Mexico for BP. And virtually every well, in fact every well we worked on this year has been ahead of schedule and budget for BP so I know that very accurate unit right now.

Our down payment on the Q5000 is now in line with what we expect on Q4000 and in line with the rest of the fleet so we're happy we are over the initial problems that we had with the IRS system moving forward..

Perfect.

I know we've already hit the Q7000 a couple times but I'm just curious would you consider the outlook a little more optimistic than a quarter or two ago or a little less or still way too early to call Owen?.

I think the matter of Q7000 is more balance sheet related than it is market related. For us to go ahead and bring it out early would accelerate payments. To be able to accelerate payments puts unnecessary pressure on the balance sheet or we would have to have a bankable contract. There is no bankable contract that we are -- up for 2018.

So it's sort of just trying to be conservative with our cash flow management that leads us to be a little more pessimistic about bringing the Q7 up in 2018 than when we might otherwise been..

Okay, last one for me. The North Sea has been certainly better than we thought it would be.

Give us some insight on what's driving, I mean everyone talks about how horrible offshore market is but, this seems to say wait a minute there is still a whole lot of stuff going on, there's still a lot of demand particularly in these mature areas like the North Sea.

Can you can you give me any color on what you think is driving that strong demand in North Sea?.

Yes I think first of all we are seeing an increased amount of P&A activity and for us that’s the first piece of the actual well P&A and the number of the clients are moving now to larger P&A sites and we just said we've just completed an 11 well P&A program on one of the vessels. P&A activity is increasing.

Since the price of oil has come back we're also seeing the small operators go after intervention scopes and more so repair and maintenance scopes on the wells to get production back on line. So, I think the price of oil is have them spend money compared to where we were sort of a year ago and that's how much time has gone on it all. .

Also Marshall just from a more of a macro perspective the North Sea is probably the most mature of the subsea provinces. As wells age they require more and more intervention. Quite honestly I think the North Sea was just over -- the cash was cut off for about as long it could be cut off or some of the maintenance programs just had started happening.

And so I think with the stabilization of the oil prices you’re seeing a normalization of the maintenance programs..

Makes sense. Thanks guys..

Thank you..

Our next question comes from the line of George O'Leary with TPH and Company. Please proceed with your question..

Good morning guys, just had one more question. It sounds like you guys are pretty excited about the joint offering with Schlumberger, it seems like a big opportunity.

I guess could you provide a little more color or remind us where most of the opportunities you feel like sit with them, is that more on the production enhancement side, more on the Brownfield work and coke seeing incremental hydrocarbons that are kind of legacy producing areas, just a little bit more color on kind of where the customer discussions and where your marketing focus is for that offering?.

Right now it's pretty much all Gulf of Mexico and it has led to utilization on the Q4000 allowing us to offer a shared risk mechanism for the contracts.

There is certainly an interest with the clients in the Gulf of Mexico that would certainly would be the smaller operators to make the offering easier for them so that they don't have so many contracts to deal with and just would rather work with us and one service provider. So right now it’s Gulf of Mexico.

Definitely because of the interest we've seen so far in the Gulf of Mexico and the amount of operators looking towards a fuller service contract we will be looking to offer that into the North Sea region and other places.

I believe also that will lead down to us being able to take on different contracting mechanisms with these clients again making it easier for the client and leading to better scheduled savings and therefore overall project savings to the clients and then the integration of the teams allows us to bring the vessel cost down as well. .

Just to add to that, I think just to follow on your mention of Brownfield, our assets combined with Schlumberger especially in light of what they do through their IPM would make an awful lot of sense.

I don't know if that’s on the radar for the Schlumberger IPM program but I think that's something where we along with one subsea can do a lot to further the application of our assets with Schlumberger on enhancing Brownfield on behalf of the producers. I don't -- I wouldn't call that a mature concept at this point.

I would say we've just barely touched the tip of the iceberg as to what's possible there..

Great, very helpful color. Thank you guys. .

Our next question comes from the line of Haithum Nokta with Clarksons Platou Securities. Please proceed with your question..

Hi, good morning.

Just picking up on George's question there, is the shared risk contract, is that the primary kind of marketing efforts for the Q4000 right now and can you also just explain is that, is part of that deferred compensation or is that a completely separate topic that you're either engaging in today or would consider doing in the future?.

Right now it's certainly not deferred compensation. It's more a contracting risk whereas ship divestment goes down, some of the service costs come up, and should the service -- with the services piece of the overall project go down then we would use the overall vessel costs. So it takes away risk from the client to allow the work to go forward..

Understood and is the deferred compensation scheme with Schlumberger something you would consider in the future or can you just comment on that?.

I think we're open to considering all forms of creative contracting -- with the deferring revenues right now will be at the top of our list.

But just to carry on from what Scotty says another form of performance sharing risk would be to sort of say to the client you know we are faster so, let's get away from the day rate and to the extent that we can beat the expected days on a rig then we get enough to the extent that we [indiscernible] we get our -- we lower the day rate.

So, it is little bit of putting our money where our mouth is without rifting the profitability..

Got you, thanks.

And on the Q5000 you said that's off from BP now and restarting in September, what should we expect until then, are there work opportunities for that, if that's on the spot market?.

Yes, well since we finished up on the first time on the first year of the BP contracts on June 1st, that evening the vessel went straight to work on two projects with two clients. We finished off those works about 38 days passed and went straight on to work with another client.

The current client we have now will take up a good portion of the remainder of the time available and then we expect to start mobilizing early September with BP. So it's going to have their full utilization for the year..

Okay, thank you..

Our next question comes from the line of Joe Gibney with Capital One, please proceed with your question..

Thanks, good morning, just a few quick ones from me. Scotty, I was wondering if you could comment a little bit on North Sea as utilization has tightened up a little bit more. I think you guys would characterize some measure of modest pricing left coming with that kind of low single-digit percentages.

Is that still the case or are you able to push price a little bit more, is it still predominantly a utilization game?.

I think we have over this year been pushing prices up, slight increases as you say and that will continue if we see similar utilization going into next year which we've got a quite a good outlook into next year. We'll continue to push prices where and when possible..

Okay, anything new on the Q4000 contract discussions with Shell or just it is too optimistic that you would be able to get something in place by the end of this year?.

Can't really comment on that. We are in discussion with many clients for utilization for Q4000. We have a good track record with Shell and I think that will bode well with us going forward..

Okay. .

We have worked on many, many wells for Shell and worked with them for many years and they are a good client of ours. I think that's the best place to leave it. .

Okay, it is fair.

Erik just a question for you, what is the all in CAPEX now on Siem 1 and Siem 2 as you continue to work through the punch list, made adjustments on some as you are going, just help us what product that refresh number is now on your full top sides spend here?.

I don't have the number by vessel but I think we’re right around 300 million all in for both vessels..

Okay, alright it’s helpful.

And last one from me, just Owen can you comment just I’m curious that the change in board structure there with separation of the Chairman and CEO role is just a mechanical shift or can you comment on that, just curious saw that at the end of your release today?.

I think it’s twofold. First of all I think it's just good governance, it’s something that’s been recommended by IRS [ph] and it's just an industry trend. I’m not a real trendy guy though. The I look at it is that I think we've touched on it in the conversations here. There's an incredible amount of opportunity that results in every down market.

We have mentioned a few of those potential tier and it would -- I think it would serve the company and shareholders the best if I was able to allocate more of time to trying to address those.

And as a result of getting a little help of maintaining clear communications with the Board by bifurcation of the position I think is the best thing for the company overall..

Okay, makes sense. I appreciate guys, I will turn it back..

Our next question comes from the line of Ian Macpherson with Simmons. Please proceed with your question..

Hey, thank you. I was wondering if you could update us still a little bit on the spot pricing dynamics in the Gulf of Mexico. You mentioned that you had some modest positive traction in the North Sea but we've seen clearly continued downward pressure in the western hemisphere on rig rates which I know is an influence on your pricing dynamics.

And we're seeing -- your drilling competitors certainly have been around cash breakeven cost, is that a barometer for the profitability of your spot contracts today for the Q4000 and the Q5000?.

I mean firstly the Q5000 is tied into a long term five year agreement with BP at good legacy rates. And we still have some legacy rights on Q4000 that will see drop off going into 2018. We have had considerable pressure on our rates from distressed rig operators taking down the rates.

However, our efficiencies have allowed us to stay above the bar that they set in. The way we did our work allows for a lot more efficient work and then we have things like we've discussed the alliance that can allow us to bolster some of those rates up.

And then we have the new technologies coming in like the 15K which we’ll say if you know if you price 15K work on for Q4000 that will allow us to keep rates in the better place.

But we have seen you know rig drop off coming into the market and bringing the rates down but we back to the getting to them so far and achieve good utilization of the Q4000 this year..

I think some of the rig operators like we had mentioned are just irrational and immobile. But I think this is where two things come into play. One as Scotty mentioned our efficiency but two is our track record. We have a great credibility with the clients on strong performance on these jobs. So it derisk for the producers.

And third, is what I mentioned earlier, we are the only company that has a fully integrated approach and I can't overstate how important that is both for efficiency and performance credibility..

That's helpful, thank you about that. I was just thinking with regard to the Q5000, the drilling contractors are bidding as well as there are to avoid stacking, you don't have that same dilemma for a 90 day window on the Q5000 so I would assume that you would resist work that’s below profitability, is that a fair assumption? [Multiple Speaker] I'm.

Sorry go ahead.

I'm going to be filled out the first hole of the 90 day break very well so this is quite high utilization in Q5000..

And then lastly Scotty, can you remind us how many of your -- for the Q4000, how many of your days this year have been insulated by that legacy backlog when we think about the calculation of pricing, average pricing decline from 2017 into 2018?.

I’d say nearly all of the legacy work has been undertaken so far. We have one program coming up later in the year that there will still be a legacy rates. .

However, the majority of Q4000 in the second half of this year will be on current market rates then?.

I would say the majority of it will be on current market rates and I would say probably one third of the entire year would be at legacy rates, is that a good assumption Erik..

Yeah, I think that's right. I think we entered the year with a higher percentage but I think one of the jobs that we moved over to the Q5000 was one of the legacy rates on that. So I think about a third is probably about a good assumption for the year. .

Okay, good. Thank you for that. I’ll turn it over..

Our next question comes from the line of Martin Malloy with Johnson Rice & Co. Please proceed with your question. .

Good morning, just have two quick questions here.

Anything on the dry docking side that we should be aware of second half of this year and 2018?.

Nothing that we have planned and we've just completed the merger to dry dock on Q4000 that went very well, came in on schedule and under budget. There's no major dry docking planned in 2018..

Okay and then as we look forward to thinking about 2018 CAPEX and on the growth CAPEX side it was the only item to think about, is it the Q7000 final payment of about 140 million?.

Yeah, that's correct. .

Just going back to the previous question we will have a year well done on Q5000 next year that's an underwater inspection it's not a major dry docking as such. .

Okay, thank you..

Our next question comes from the line of Bill Dezellem with Tieton Capital. Please proceed with your question. .

Great, thank you. I'd like to come back to the Siem Helix 1 if we could please.

As a reference that we really ought to be looking at the year-end our day rate run rate and so I'm going to ask the question in that way, would you please compare the year-end run rate that you anticipate versus to Q2 average that we just experienced?.

The Run rate on the let’s see..

Yeah, I think when you look at -- we said that we had expected and I think Q2 came in that we were marginally cash positive on the Siem Helix 1. We expect that towards the end of the year we would be in a position where we would start seeing the returns that we would expect or that we consider acceptable for that that vessel. .

We won’t quantify that later on right now. To be able to quantify that requires a completion of this negotiation process on the redrafting of technical terms that will help them impact on the end of the year. So it’s a little early for us to give that run rate but we will as soon as we finalize something from the Petrobras..

Thank you and then relative to the North Sea specifically, would you discuss pricing and any opportunities that you see in increased pricing there with the utilization as it is?.

Pricing year-over-year compared to last year has increase and we'll continue to push rates where we can. We have already locked up work into 2018 which is in much better position than where we were a year ago going into 2017. And we have signed up our first multi-year contract with one of the clients in the North Sea.

So if we continue to see those moves then push pricing where possible. Again I'd like to point out that a lot of our work is because the vessels are very different from other vessels in the market over there.

And nearly all of our work this year is utilized in the integrated diving services that we have on the vessels and that allows us to push the rates up further as well. .

Great, thank you all..

Mr. Staffeldt, there are no further questions at this time. I will now turn the call back to you..

Thanks for joining us today. We very much appreciate your interest and participation and look forward to having you on our third quarter 2017 call in October. Thank you. .

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines..