Helix Energy Solutions Group Inc (HLX) 2021 Q3 法說會逐字稿

Greetings, and welcome to the Third Quarter 2021 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded Thursday, October 21, 2021. I would now like to turn the conference over to Erik Staffeldt, CFO. Please go ahead.

Good morning, everyone, and thanks for joining us today on our conference call for our third quarter 2021 earnings release. Participating on this call for Helix today are Owen Kratz, our CEO; Scotty Sparks, our COO; and Ken Neikirk, our General Counsel; 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 -- 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. 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 factors, including those set forth in Slide 2 and our most recently filed annual report on Form 10-K and in our other filings with the SEC.

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 broadcast are available under the For the Investors section of our website at www.helixesg.com. Owen?

Good morning. I hope everyone out there and their families are doing well, healthy, and staying safe. This morning, we'll review our Q3 and year-to-date performance, our operations, our view of the current market dynamics and provide our outlook for the balance of '21. We'll also discuss the underlying market environment and how we think it will influence 2022 and beyond.

Moving to the presentation, slides 5 through 7 provide a high-level summary of our results. Our performance for the quarter and year-to-date continues to be in line with expectations as our teams continue to execute at high levels of -- operationally. The Q7000 continued successful operations in West Africa.

North Sea intervention activity increased with both vessels, the Well Enhancer and the Seawell working parts of the third quarter.

Gulf of Mexico intervention continues to improve. We benefited from increased utilization and have visibility for work into Q1 of '22.

In Brazil, Siem Helix 2 worked the entire quarter. The Siem Helix 1 completed its contract with Petrobras in August. The vessel was in dry dock at the end of the quarter.

Robotics benefited from the good weather season in the North Sea with increased activity in trenching and site clearance work. And production facilities continues to be a steady performer, benefited from the production enhancement efforts completed on our Droshky field during Q2 with increased production.

Our results for the third quarter of 2021 were largely in line with our results from the second quarter of 2021. Revenues reported $181 million with a net loss of $19 million and EBITDA of $27 million. Our gross profit was $3 million or 2%.

On to Slide 8, from a balance sheet perspective, our cash balance at the end of the quarter was $238 million, with an additional $71 million in temporarily restricted cash associated with a short LC -- short-term LC for our work in West Africa.

During the third quarter, we generated $29 million of operating cash flows and spent $1 million on CapEx with resulting free cash flow of $28 million. Year-to-date, we've generated $121 million of operating cash flow and $114 million of free cash flow.

During the quarter, we entered into a new $80 million asset-based revolving credit facility and paid off our term loan. We achieved a long-standing financial goal of ours by reaching net debt 0 and ended the quarter with a negative net debt balance of $4 million.

I'll now turn the call over to Scotty for an in-depth discussion of our operational results.

Thanks, Owen, and good morning, everyone. Moving on to Slide 10. We continue to operate all of our business lines through a challenging year with the ongoing COVID-19 pandemic. Both onshore and offshore, our teams are doing a phenomenal job keeping our operations functional and safe.

Our office and facilities in Houston and in Aberdeen are opened and fully operational. And shortly, we will commence reopening our offices in Rio and Singapore. Safety measures and protocols remain in place, and the team's compliance to these allow safe access to work in these locations.

The COVID-19 pandemic still presents many logistical challenges. However, we continue to successfully transport personnel to our work sites globally. We are keeping to our protocols, testing and screening our personnel, subcontractors and clients at each offshore work location. Most of our personnel where a vaccine is available have been vaccinated, and we are now seeing less COVID-19 related incidents at our work sites.

In some parts of the world, travel restrictions are being eased and most clients are returning to their offices. And finally, after all these months, some clients will now allow an in-person meeting.

In the third quarter, we continued to operate 14 vessels globally with minimal operational disruption, continually operating at an exceptional standards with 98.5% uptime efficiency. Our dedicated and committed personnel continued the third quarter with very satisfying notable safety statistics again, emphasizing our strong supportive safety culture and leadership globally.

Over to Slide 11. During the third quarter, we produced revenues of $181 million, resulting in a gross profit margin of 2%, producing a gross profit of $3 million, producing EBITDA for the third quarter of $27 million compared to $162 million revenue, $3 million gross profit and EBITDA of $25 million in the second quarter.

In the third quarter, the well intervention fleets achieved utilization of 72% globally with 72% utilization in Brazil with the completion of the long-term Siem Helix 1 contract for Petrobras. Utilization increased to 74% in the Gulf of Mexico, with 57% utilization in the North Sea and utilization increased to 100% in West Africa.

The Robotics chartered vessel fleet achieved utilization of 99% globally, increasing to 358 vessel days during the quarter compared to 236 days in the second quarter.

In the Gulf of Mexico, we had both the Q4000 and the Q5000 working with increased utilization over the second quarter with some scheduled gaps between projects working for numerous clients.

In the North Sea, the Well Enhancer was operational prior to being warm stack for part of the quarter, and the Seawell was again reactivated to undertake projects prior to returning to warm stack mode.

In the West Africa region the Q7000 had an impressive quarter, working in Nigeria for 2 clients undertaking production enhancement works.

Operating performance in Brazil was at their usual high standard with the Siem Helix 1 safety completion works with 0 [NPT] and then demobilizing from the Petrobras contract. The Siem Helix 2 was 100% utilized, producing a strong quarter.

The Robotics chartered vessel fleet achieved high utilization in the quarter, working between ROV support, trenching and renewable works globally, completing 358 days. 176 days work was undertaken on 4 projects using spot chartered vessels, including 1 vessel conducting our first project offshore Guyana.

Slide 12 provides a more detailed review of our operations for our Well Intervention business in the Gulf of Mexico. The Q5000 increased utilization to 77% compared to 72% in Q2, performing production enhancement operations in ultra-deepwater for 3 clients with some small schedule gaps between projects.

The Q4000 increased utilization to 71% compared to 45% in Q2 completing production enhancement works with 2 clients in ultra-deepwater, followed by 2 small construction projects for 2 clients.

Additionally, we've provided aid to one of our clients with platform repair work caused by storm damage from Hurricane Ida. Both key units have integrated Helix-Schlumberger Alliance teams and equipment installed, proactively working as one complete productive and safe team. Most of our key unit intervention contracts undertaken in the Gulf of Mexico and our single-point contract mechanism allowing for easier contracting for our clients.

In the third quarter, the Helix-Schlumberger Alliance team was successful in the award of the BP Gulf of Mexico riser-based Well Intervention vessel and services package for a 3-year call of contracts plus options. Whilst the contract does not provide the guaranteed days, we are told we are the contractor of choice for any riser-based interventions for BP in the Gulf of Mexico, and we do expect annual utilization for 1 to 3 wells each year.

Pleasingly, both vessels of high utilization contracted work in Q4, with contracted and awarded works into 2022, and much better visibility potential further activity in 2022 compared to 2021. In our recent weeks, we've been awarded approximately 250 days for the Gulf of Mexico units from 9 clients for work in the fourth quarter and the first quarter of 2022.

Moving to Slide 13. Our North Sea Well Intervention business continues to be most affected by reduced work opportunities related to COVID-19. The Well Enhancer achieved 57% utilization in Q3, working for 2 clients in the quarter, including completing production enhancement scopes. The vessel was then warm-stacked in Leith, Scotland, significantly reducing vessel operating costs and crew levels.

The Seawell achieved 56% utilization working for 3 clients. The vessel completed abandonment scope for 1 customer and completed production enhancement works for the following customer, followed by a full well abandonment program for the third customer. The vessel was then warm-stacked in Leith, Scotland with significantly reduced costs and reduced crews for the remainder of the quarter.

The Q7000 had a strong performing quarter in Q3. The vessel performed extremely well working with the multinational and integrated Helix-Schlumberger Alliance teams. The vessel worked on 2 wells in the quarter for 2 clients and now has contracted work in Nigeria well into Q4 with potential further works identified at the end of 2021 and in 2022.

Moving to Slide 14. In Brazil, both vessels achieved strong performance with 0 commercial downtime in the third quarter. The Siem Helix 1 had 45% utilization in Q3 with no commercial downtime for the safe completion of the Petrobras contract and demobilization in mid-August. The vessel completed abandonment work on 1 well and production enhancement works on 2 additional wells. The vessel has completed its planned 5-year regulatory maintenance docking period our focus is now on pursuing other works for the vessel in Brazil and other markets internationally. We have identified and are in discussions regarding numerous opportunities that we hope will have the vessel contracted in the coming months.

The Siem Helix 2 had 100% utilization and completed abandonment work on 3 wells and production enhancement work on 2 wells during the quarter. We are currently discussing a possible extension with Petrobras regarding the Siem Helix 2, but the outcome of those discussions remains to be seen, and we are identifying other opportunities globally.

Moving to Slide 15 for our Robotics review. Robotics had another good quarter, continuing another good year in 2021, operating 6 vessels during the quarter, primarily working between trenching, ROV, decommissioning, non-oil and gas and renewables-related projects.

In the APAC region, the Grand Canyon II had 100% utilization in Q3. The vessel is contracted in Thailand, undertaking an expected 210-day well and decommissioning projects, removing 125 wells SH1 brought. It is expected to continue into Q1 of 2022.

In the North Sea, the Grand Canyon III was utilized 98%, undertaking 2 oil and gas trenching projects, a renewable trenching project for another client and a telecom trenching project for a new client. The vessel has contracted oil and gas and renewable trenching scopes utilizing the vessel for most of the remainder of 2021 and a good portion of 2022.

The chartered vessels, the that's out through [North Sea] continued site clearance and survey works with 53 days on a wind farm project that is now expected to wrap into late Q4. The project chartered [Siem] commenced work on a UXO's clearance and detonation project for 46 days, and is also expected to continue into the latter part of Q4.

In the Gulf of Mexico, ROV activity remains strong, and we continue to mark [UXO boulder] as pay-as-we-go vessel going forward this year.

The project chartered Siem Dorado was contracted for a cable installation project on our first offshore work Guyana for 77 days in the quarter.

The Robotics group transitioned further into the green and renewable sector continues, adding new clients and more services. We've recently been contracted to undertake further site clearance and survey projects and are seeing tender activity increase for all the services we provide globally. We've also recently been awarded further renewable trenching works in 2022 and 2023 that may require a second trenching vessel in 2022.

Over to Slide 16. I'll leave this slide detailing the vessel with ROV and trenching utilization for your reference. Before I close, I would like to mention some other key points. We have commenced programs to reduce our carbon footprints and greenhouse gas emissions across all of our business regions and recently appointed a senior manager to take on the plan and work closely with our operations and sustainability teams. It is also very pleasing to see far better visibility across our business lines, especially within the Gulf of Mexico, Brazil and our newer international markets. Tender activity has increased and the number of available working days appears to be recovering. We've added to our sales force in many areas recently. And within the robotics group, we continue to increase activity in the green and renewables markets, and we expect an increased trenching activity and further awards for the newer services we have been offering.

Before I turn the call over to Erik, I would again like to thank our Helix global team, our offshore personnel, our onshore personnel and our partners for continuing to innovate and evolve and doing a fantastic job under these challenging circumstances, maintaining operational excellence with minimal NPT while keeping very high standards in safety performance.

Thanks, Scotty. Moving to Slide 18, it outlines our debt instruments and their maturity profile at September 30. Our total funded debt is $314 million at the end of Q3. Our next scheduled principal payments are in 2022.

Moving on to Slide 19. This slide provides an update on key balance sheet metrics, including our long-term debt and net debt levels at year-end and September 30. With $309 million of cash and restricted cash as of September 30, we are in a negative debt position of $4 million at quarter end. Our cash position at the end of Q3 was $238 million with an additional $71 million of restricted cash that supports a temporary project LC.

During the quarter, we paid off our term loan and entered a new $80 million ABL revolving credit facility, with availability driven primarily by our U.S. and U.K.-based receivables. At quarter end, we had no amounts outstanding and $70 million of availability under the ABL.

For a discussion on our outlook we move to slides 20 through 23. We continue to operate in a challenging market. Our customers continue to be very cautious in committing to spending in '21. The currently relatively stable macro backdrop has increased customer interactions and increased activity in regions like the Gulf of Mexico, but it has been slow to develop in areas like the North Sea one intervention market.

Positive developments globally and within our sector are providing a positive foundation for recovering the markets, but primarily beyond 2021. We have made slight updates to our Q2 guidance. Our guidance is a good faith to attempt to provide investors information that is appropriately caveated as best we can against the backdrop of the current environment.

Our guidance for '21 is as follows: revenues $600 million to $645 million; EBITDA, $85 million to $100 million and free cash flow, $80 million to $120 million.

Our EBITDA outlook is based on the following. We expect visibility and utilization will continue to be on a quarter-to-quarter basis. We have increased the bottom end of our EBITDA range based on work that has been contracted into Q4. We have also increased our cash flow forecast.

Our free cash flow outlook is supported by the strong year-to-date cash generation and highlights both the challenges and the range of possibilities during the fourth quarter. Range provided and acknowledges the expected range of Q4 EBITDA and the range of our annual capital spending of $15 million to $25 million. We received an approximate $12 million tariff and tax refund in Q3. Working capital levels are assumed to support the 2022 activity.

Provide a bit more color to our key assumptions by segment and region on Slide 22. First, with our Well Intervention segment. In the Gulf of Mexico Well Intervention business, both vessels have contracted work in Q4 extending into Q1 2022 with expected high utilization.

In the North Sea Well Intervention business, both vessels are stacked with limited opportunities in Q4.

In Brazil, the Siem Helix 2 is on contract into December. The Siem 1 completed its drydock in mid-October and is available in the spot market.

In West Africa, we expect to work at Q7 into late Q4 with possibilities thereafter.

Moving to our Robotics segment on Slide 23. Robotics should continue to be a steady, early in the quarter. Projects in the North Sea will likely begin to taper off with the coming winter months.

The Grand Canyon II and APAC is on contract in Thailand into Q4 and possibly longer. Vessel is expected to have strong utilization from the balance of '21 in that region.

The Grand Canyon III is contracted to be performing trenching in the North Sea with expected strong utilization in Q4. The follow-on wind farm survey and site clearance in North Sea is now continuing into Q4.

Moving to production facilities, HP1 is on contract with no expected change. Production facilities should benefit from the Droshky production and our agreement with HWCG.

Continuing on Slide 24. Moving to Slide 24. Our CapEx forecast range is $15 million to $25 million. The majority of our CapEx forecast is maintenance and project-related. It also includes the production enhancement opportunity at Droshky completed in April. The downward revision for CapEx is based on timing shifting into 2022.

Reviewing our balance sheet, our funded debt decreased to $314 million with our retirement of our term loan. Cash position at the end of Q3 was $238 million. This does not include the $71 million of temporary restricted cash that supports our project LC. We have received $7 million tax refund in Q1 and $12 million in Q3, a product of the tax changes from the CARE Act.

As previously stated, we achieved net debt 0 during Q3 and ended the quarter with a negative net debt of $4 million.

I'll skip Slide 26, I'll leave it for your reference.

At this time, I'll turn the call back to Owen for closing comments. Owen?

Thanks, Erik. Like many businesses globally, parts of the Helix strategy were necessarily deferred due to COVID and the resulting downturn, but essentially, it's not changed. We'll endeavor to deliver free cash flow. Once we're confident about the market outlook and our ability to meet all obligations, we plan to start to return value to shareholders through dividends or share repurchase. We've been focused on positioning our balance sheet to assure being able to weather the storm of what we believed would be a prolonged downturn. This belief was based on the oversupply in the OFS market that might hinder our recovery cycle once COVID impact subsided. However, things are never simple.

In addition, we've seen COVID linger longer than many believed. We're seeing a significant pivot to renewables impacting traditional recovery type capital allocations. And we're seeing a meaningful divestment of producing fields to newer producers with a requisite digestive period.

Having said all that, the pendulum often swings too far and some are beginning to notice. Our balance sheet is strong, and we're starting to see signs of recovery. It may not be a hockey stick, but over the next few years, we believe the recovery will be robust. We're seeing this across all of our markets with each region having some variations.

The North Sea is usually the first to fall off and the first to recover. This time seems a bit different. Many properties have changed hands. COVID shutdowns seem to have had an significant impact on planning and the Green Party now shares more power. The result has been a slower pickup in the North Sea work. But this is a new mature basin. So we are seeing and expect to continue to see a pickup in production enhancement work. There's also been a shift in the government position from wanting to preserve infrastructure to promote marginal production development to a public driven stance to want more field abandonment and removal.

Since the government will be on the hook for to fund a portion of this, we're seeing the direction from them is to take an overtime approach. We expect field decommissioning to grow and remain a strong market over time. Helix is well positioned, and we plan to take steps to expand our presence in this niche not only with our current riserless capability in the North Sea, but with the introduction of the first nonrig riser-based asset to the North Sea.

The Gulf of Mexico was severely impacted by COVID and the drop in the commodity price in 2020. We were fortunate to have had a legacy contract with BP that was originally signed back in 2013. That contract came to an end this year, and the market is reverting back to a more traditional spot market. This negatively impacted the results from our 2 Gulf of Mexico assets this year.

Fortunately, the visibility on demand is increasing and the potential exists that both assets will be highly utilized in 2022. Our rates are still relatively low as we're impacted by the alternative rig rates. However, rig availability has tightened and most forecasts are for a significant improvement on rig rates, which is starting to happen.

We expect improvement through 2022 and a strong 2023. We've also broadened our surface offering to include hydraulic stimulation. We did this initially to bolster utilization, but it may actually grow to be a new market for us as the volume of work increases.

In 2014, following the downturn of 2015, we began a strategy to increase demand for our services by expanding geographically. Brazil was the first region that we targeted to establish a presence in. We're able to achieve 4-year contracts for 2 monohull riser-based intervention vessels. We were the first in our industry's history to successfully deploy a non-rig monohull developed for riser-based and intervention. These vessels remain the only nonrig monohulls available with that capability along with the Well Enhancer.

The first vessel, the Siem Helix 1 has now completed its full year contract. And the Siem Helix 2 contract expires at the end of the year. There's been a significant amount of field divestment by Petrobras. The result is that there's a growing client base for our services other than Petrobras. Our intentions are to redeploy the SH1 out of Brazil for most of 2022.

We are in negotiations with Petrobras for an extension of the contract for the Siem Helix 2. Our intent is to keep the SH2 in Brazil. We believe there's a long-term market there for at least one of our vessels.

In late 2019, we deployed our first major asset in West Africa, the Q7000 to Nigeria. After a COVID delay, we continued work in earnest at the start of 2021. The West Africa market is a prime market for primarily production enhancement. We expect strong demand for this service in the region. We initially believed that there is potential for a 150-day campaign every other year. The Q4 -- the Q7000 has worked continuously, however, throughout the year with very little nonproductive time.

We have visible work in Nigeria potentially through the first half of 2022. And that's just Nigeria. And we're now starting to market and gain interest from the Angola market, which is potentially even larger. We believe the West African market has the potential to fully utilize one of our riser-based assets on a permanent basis.

The latest region that we've been working towards establishing a presence in the Asia Pacific market. This market has transitioned over time from a development market to be one that in the future, we anticipate will be dominated by field abandonment work.

The Australian government is increasingly demanding to see decommissioning occur following a significant bankruptcy which left the decommissioning liability with the government. We expect this to be a strong market, which could potentially utilize one of our assets on a permanent basis. We already have our first contract in place in Australia, although the start of the work has been delayed, now expected in the second half of 2023. We expect this will provide the opportunity to secure additional work likely ahead of that time or after.

As you can see, we have multiple sources of potential utilization. We have 7 intervention assets, 2 vessels in the North Sea and 2 vessels in the Gulf, which will continue to support these regions with expected improvement on utilization and over time, significant improvement on rates. For the remaining 3 assets, although we're not there yet, we see demand eventually to exceed our supply.

To recap, we see one vessel in the North Sea supporting riser-based decommissioning, 1 vessel supporting production enhancement in Nigeria and Angola, 1 vessel supporting decommissioning work in Asia Pacific and 1 or 2 vessels in Brazil. Beyond that, a potential market is developing in Guyana, and we're seeing further activity potentially in the Mediterranean and Canada.

Rates are below where they need to be, but we're generating free cash flow. We're seeing gradual improvement in rates offset by the loss of the legacy rates on our 3 long-term contracts. We are anticipating meaningful rate increases by 2023. Between a variety of global utilization opportunities and the chance for meaningful rate improvement, we feel the market offers us a lot of upside. It's incumbent upon us to prioritize those decision points and deliver results.

To try and give some color on our Robotics group, let me begin by saying that this is where we report our involvement in the offshore wind market. There are 4 components of our robotics contribution; ROVs, vessels with ROVs, ROVs in support of our intervention vessels and trenching and UXO boulder clearance. Trenching and UXO boulder clearance is derived from the offshore wind market. It's a bit lumpy, as is the market, but the expected EBITDA contribution on a lumpy basis is anywhere from $8 million to $20 million a year.

We have plans to increase our volume of work in these niches as well as expand our offering and capabilities for site assessment and prep beyond UXO boulder clearance with relatively low capital costs. Of our work-class ROV work roughly half, plus or minus, is in support of our intervention assets. If -- and that vessel utilization improves, so will this segment. The remaining work for our work-class ROVs is from providing ROVs and vessels of opportunity to our ROVs on third-party vessels in support of construction support, primarily with the potential to add work from the offshore wind market. Expanding our involvement in the offshore wind market is the goal for us, but we plan to be prudent and avoid EPC works or provision of new vessels other than those we already operate.

As I stated at the beginning, our strategy is to increase free cash flow and then return value to shareholders. The tactics we intend to focus on to achieve an increase in free cash flow are one, increased demand for our assets through geographic expansion, increased demand results in greater utilization, which results in pricing leverage, which would be in addition to demand leverage from this -- from simply a market recovery. Two, we'll expand our offerings in field decommissioning.

First, we're developing technologies that provide a step change in capability with our existing assets for decommissioning. And second, we will launch an aggressive new marketing campaign highlighting our broadened decommissioning capabilities. Three, we have potential to reduce our operating costs and will pursue the cost reductions. Four, we'll explore and implement plans to expand our offerings to the offshore wind market in a prudent manner, steering clear of the risky and low-margin vessel in EPC niche. And five, we will maintain capital spending discipline with a focus on return on capital for any potential expenditures.

The next year will be a transition year for us as we further establish these markets and redeploy our 3 non-North Sea or Gulf of Mexico assets. We may accept some lower than cost contracts during 2022 to bridge as we build the demand that's listed here and including this potential for servicing wind farm developments. We see work building. 2022 may be a transitional year -- but we have initiatives that are in place and a bright future beyond.

With that, I'll turn it back for questions.

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

(Operator Instructions) Our first question comes from the line of James Schumm with Cowen.

So Owen, you touched on this, but my first question was to ask about some additional color on the market in Brazil. Petrobras has been selling some noncore assets. And so that potentially reduces their well intervention needs. But presumably, now you have a new opportunity from new clients, so can you just talk a little bit about that? You mentioned a digestion period. So could you explain that? And then just wondering, if these new operators might prefer local Brazilian competitors, I know there's a lot of old rigs down there that have accepted some very low day rates. So just curious to get your thoughts on all that.

Okay. Well, first, the digestive periods that I was talking about applies more to the North Sea than Brazil, where you've had a large number of properties divested into the hands of smaller companies, and there's been some consolidation, which will take some time for the integration and everything to occur.

With respect to Brazil, I think the divestments occurred a couple of years ago that are really leading us to assume that there's visible work. In fact, we're tendering on anywhere from 2 to 4 years' worth of work, that's not Petrobras related. So that's a real potential.

I don't know that all of the properties that the Petrobras has divested has lessened their demand for intervention though. They still have a high requirement to increase their production and well intervention is the lowest hanging fruit method of achieving that. So I think Petrobras is serious about their intent to extend the current contract. We just need to arrive at rates that are fair.

James, I'll add to that. A couple of things here. Petrobras' well count is significant in size. Currently, after the divestitures, they still have a well count that's in similar size to that of the entire North Sea or the U.K. section of the North Sea.

And you mentioned the local rig rates, the local rigs have all been taken up now. They're all contracted. Any rigs coming in contract will be international mobilizations. So we do see a tightening market. And like Owen says, we are in quite significant tender activity in Brazil.

And then finally, the -- most of the people that they've divested properties to our international IOCs, therefore, as far -- there's strict requirements for local content. And I think as long as you comply with the local content requirements, which we do, then there's no real preference between non-Brazilian and us. And remember, we've been down there for a number of years right now, and we do have an established Brazil -- Helix to Brazil entity.

Most of our onshore employees in Brazil are local nationals and a good portion, 70%, 75% on the vessels are local nationals.

Great. And so just to sort of follow up on that. So maybe putting Petrobras aside and you talked about the overall well count, it is a huge market down there. Is there any reason other than your negotiations with Brazil, I mean, presumably, that should be a 2-vessel market for you guys at some point in the future. But for now, you're going to move the Siem Helix 1 out of there. Is that fair? Is it fair to think that it might get moved back in 2023?

That's correct. In fact, I think it may be a little earlier. I think we -- you might see us move it back there, depending on the contract negotiations that are going on right now, it could be that we moved the vessel back towards the end of 2022. But I do see at least a 2 vessel market potential in Brazil. And quite honestly, Petrobras should have 2 vessels, and there's probably enough work considering the overlap of the schedules of the work that we're -- that we have visibility on, is probably a market for 2 vessels outside of Petrobras.

Okay. Great. My last question is, just, I guess, I think a lot of people have been surprised that oil prices are very high now. A lot of these operators pay you guys out of their OpEx budgets, not CapEx. So I guess a lot of people are sort of thinking, you would have a more robust demand environment right now. Just curious, are you seeing increased competition for your services from like riserless light well intervention vessels? Or are you seeing increased competition from drilling rigs or anything related to that?

Well, let me take the light well intervention vessels first. We were the first to develop the light well intervention capability with the scope vessels. Those 2 vessels still dominate the work in the North Sea. We do see potential competition in the North Sea, but we've been taking competition for a number of years. Island offshore had 4 vessels, 3 of them working in the North Sea. So that's not new, but Island is sort of diminished and you're seeing others stepping up. And you'll always have people stepping up.

Riserless intervention is fairly simple to deploy on a vessel of opportunity, and therefore, in downturns, you usually see vessel owners seeking to increase their utilization by offering riserless intervention off the vessel. Typically, what happens is the producers will try it. It doesn't go that well and then they revert back to us basically.

In the rest of the world, we are seeing -- yes, there's been several attempts in the Gulf of Mexico to provide riserless intervention. BP more recently has sort of taken up the banner, and they intend to use riserless intervention, which is what led partially to the restructuring of the contract that we have with BP. We are not going to be doing the riserless intervention for them. We will be doing the riser-based intervention for them.

And then in Asia Pacific, we are seeing one competitor. They don't have an asset finished yet, but they are marketing that they'll be available for riserless, that I believe, they have a 5-year call-off agreement with Chevron. So we will see riserless in Asia Pacific. But there's a vast difference between demand for riserless and demand for riser based. The capabilities of riser based are so much greater than riserless. And if you look at it, the efficiency of running the systems is not that different. And actually, the commerciality of riser versus riserless, but we can offer both. We've just been doing it for a decade now, and we're a firm believer that riser-based provides the producer with the greatest service.

I'll just quickly add to that as well and just, one key point here is, the hugely developing decommissioning market cannot be furnished by rise of this intervention. You have to have riser-based operations to undertake full P&A activity and decommissioning activities. We're seeing an increase in P&A activity in Australia and Brazil and in the Australasia -- sorry, North Sea. So huge demand coming for P&A activity that can't be furnished by riserless intervention.

Our next question comes from the line of Igor Levi with BTIG.

When I look at the Gulf of Mexico few vessels working largely in the spot market, utilization has averaged in the 70% range for much of the year. so my first question is whether there's a reasonable assumption going into 2022 for those vessels? And then, as we try to think about the Siem 1 now being in the spot market, after leaving Brazil, what kind of utilization can that vessel expect?

So the Gulf of Mexico in the last quarter, we had about 70-odd percent utilization increased from Q2. We are seeing very firm utilization into Q4 and Q1 of next year. Usually, as we go into a new year, we would see about 700-odd days of visibility for the key units in the Gulf of Mexico. Obviously, we wouldn't win all that work and some work would get canceled.

Going into 2022, we're seeing much higher visibility over the 1,000 days mark. And we have pretty much the vessels booked for all of Q4 now going forward and well into Q1 and numerous discussions with other clients.

Regarding the Siem Helix 1, we are taking -- as Owen said, we will take it out of Brazil, and we're planning to mobilize that vessel on a number of different types of work. We're looking at all sorts of opportunities before we see the P&A market reactivate going into 2023.

So I think Owen alluded to that we might take vessel works, but we're looking at wind farm work, vessel construction work, maybe even trenching work. But we've got quite a few opportunities for that vessel. And it may be that other countries that can go or open up and we go straight back into one extension mode. So...

Great. And I know you talked about the wind opportunity, but I was hoping you could provide more color going into 2022 because I remember you previously mentioned that, while it's a growing market, the competition is quite fierce there. So I was hoping to understand how 2022 would compare to 2021 in that scope of work? And are you staying disciplined to maintain margins in such a competitive market?

Well, '22 rather '21 is actually a down year from '20, and that's a result that we achieved our first UXO boulder clearance contract in 2020. Quite honestly, the survey grossly underestimated the number of UXOs and boulders and that contract ran most of that year and into the next year. So that was sort of a banner beginning.

This year, we've been working hard to take the credibility from that first job and qualify to tender on additional jobs. The volume of work this year available, as I've mentioned in my comments, it's a bit lumpy. And 2021 was a softer year volume-wise for the work, but we were able to secure new contracts. And that's bolstered our credibility, and we're now on the tender list for most of the work going forward in that area.

When I said that we're going to grow, it's not only growing in chasing UXO and boulder clearance work and trenching. Boulder clearance work is site clearance, site prep. I think there's an opportunity for us to expand on our services there through alliances and organically with minimal CapEx to be able to provide a broader site assessment service to the project owners. That's working for the project owners. And while the competition is fierce, it is a specialty niche and I think demand is a better margin than the more commoditized segments.

On the construction support, which is where trenching is, we -- again, this was a bit of an off year, but we're seeing strong demand increase in trenching. In fact, I think Scotty mentioned, we're actually contemplating adding trenching capability going forward. So that niche will grow. Because of the expertise required there, I think we're -- we've been successful in maintaining our margins. And while the number of vertically integrated trenching that's been added to cable layers has sort of diminished the number of clients we work for, the broader market is growing at a much faster pace than the market share that we're losing. So therefore, our outlook is for a strong growth in that segment.

And then beyond that, just in general, we've seen recent headlines this year about EPC contractors taking huge losses on these wind farm works. I think with -- the pivot towards renewables, all of the contractors sort of when [Lemmings] going over the cliff, chasing the same contracts and the margins were just squeezed to that. I think where we're going to focus going forward is on the less capital-intensive but specialty niches providing support, both in the construction support and then upstream in the site clearance area with a future eye towards developing O&M web BOP capabilities. So that's where our strategy lies.

(Operator Instructions) Our next question comes from the line of David Smith with Pickering Energy Partners.

So first, I wanted to say congratulations on getting to net debt neutrality. I hope it's not too early to ask this, but just given the improving outlook for your well intervention assets, especially into '23, I wanted to ask how you think about the merits of share repurchases versus a regular dividend or maybe a special dividend?

I'm stuttering because that's actually a Board decision, and I don't want to speak for the Board. But my personal opinion is that, I don't think that you'll see us establish a regular dividend. If the dividend gets paid, it'd be a special dividend. My personal preference is I like to see share repurchase, but I think most shareholders would prefer to see a dividend. So I think going forward, you'd see some kind of a hybrid blend.

Okay. I appreciate that. And second, just regarding the updated guidance, kind of a wide range in the implied Q4 Well Intervention revenue, if I think about that range, it kind of feels like the low end would have some schedule slippage versus your expectation. It seems like you could get to the high end with near full utilization in Gulf of Mexico and West Africa. Does that sound right? Or does your high-end revenue and Well Intervention assume you have some work in the North Sea?

No. I think you're directionally correct. And then how you're looking at this, we -- the Gulf of Mexico market in the fourth quarter has really solidified for us. And so I think we expect strong utilization there. In the West Africa region, I think we definitely have a path towards strong utilization. I think there's still some exposure there. So I think that's why you see the wide range.

I appreciate it. And if I could just sneak one last one. It's just thinking into '23 and the opportunity for riser-based P&A and decommissioning in the North Sea, is it fair to think about the Siem Helix vessels as a relatively competitive there compared to the Q7? Or does the difference in hull shape kind of reduce the operating window of the Siem Helix vessels versus the Q7?

There's a difference between the capabilities of the 2 vessels. The 2 vessels in the North Sea are riserless vessels.

No. No. Sorry, I was thinking about the Siem Helix vessels, right, as potentially the Siem Helix 1 as a potential candidate.

I think capability-wise, they're very similar. So they are -- we can mix and match and shift the fleet around. In fact, we've got potential for a vessel in the U.K., a vessel in West Africa, multiple vessels in Brazil, a vessel in Asia Pacific and Canada and the Med have opportunities. So we have a large geographic area to try and cover with 3 vessels. And I think they are fungible to a certain extent. There -- we are starting to take steps to qualify the vessels in all the regions because the North Sea, you have to have a special safety case in order to operate there. Australia is the same. So we are starting to get all of the certifications in place for all 3 vessels to be able to work in all regions.

Technically, the top sides on the vessels are exactly the same. It's the same towers, it's the same skidding systems, the same safety systems, same walk to work systems. So exactly the same equipment that can be utilized.

I appreciate that, Scott. I was just wondering, if the ship shape, all of the Siem Helix vessels versus the semi hull of the Q7000 made a difference in how long in the year each vessel could participate in the North Sea.

The primary difference is in the transit speed. Semisubmersible has perhaps better motions when stable, but transits at a slower speed, although the Q7000 was designed with shipshape hull so that when it gets up on its pontoons, it's able to achieve a higher transit speed than most semisubmersibles. But the monohull Siem vessels are much faster in transit. So as far as flying them to the different regions of the world, it's probably more accurate to think of the Q7000 covering a strong demand in single region or 2 regions, and then the SH vessels transiting quickly to cover the rest.

We do have a follow-up question from the line of James Schumm from Cowen.

So I was wondering if you could help me think about what utilization is needed for, let's say, the Siem Helix 1 to be breakeven. So it's going to be dependent on day rate. So maybe pick a day rate, don't tell me what it is, but is there any way you can help me think about what the minimum level of utilization you need is to get that vessel to be breakeven for you?

It's going to depend on the type of work we take on, James. So if we're in well intervention mode, then we should get to breakeven. But right now, to get through this winter, we're targeting lose less type work that will be in construction support or wind farm support or even solar type support. So the first part of the year, we're definitely going to have, I'd say, strong utilization, but the rates won't support a breakeven position. Then it will depend how quick we can get the vessel back into the Well Intervention market. And like we've said, we're chasing work for that in the North Sea and Angola. So it's really dependent on the modes of work we take on.

Okay. And then just, I guess, lastly for me, what does the vessel maintenance and dry dock schedule look like next year relative to this year? I think you just mentioned you pushed some CapEx into 2022. So any early thoughts on what CapEx might look like next year, would be much appreciated.

Yes. So I think in general, Jim, we have talked about in the past, high level that our CapEx would be $30 million to $40 million per year in that range. I think this year, we're probably going to be at the lower end and because as we mentioned, some of our CapEx spending has been pushed. I think that next year will probably be a little bit heavier dry dock year. We have the Q4000 has a scheduled one, the Siem Helix 2, the HP1. And I think the Well Enhancer as well as the Seawell. So it is going to be a heavier year. So I think we'll probably be on the higher end of the range that we provided and maybe even exceeded a little bit just because of the CapEx that's been pushed into '22.

James, if it's okay, I'll just go back to your first question. I just wanted to point out, I should have pointed that earlier though, our cost base in the various different modes is wildly different. When we are in Well Intervention mode, we have 140 people on the vessel. When we're in the construction support, wind farm support, trenching, we're going to have less than 40 people on the vessel. So it will be -- lose less, but the cost basis will be different as well.

Just to follow-on on that, I think it's worth noting that we -- that's why I call '22 a transition year because I think we'll need to do that with the Siem Helix 1 vessel for '22. And then by '23, I would expect the vessels to all be back into full intervention mode.

And we do have another follow-up question from the line of David Smith from Pickering Energy Partners.

Owen, just want to circle back to your comments about your strategy to increase free cash flow. I think the third pillar you mentioned was to reduce the cost structure. Wondering if you could help us with any color on maybe what items have been identified, maybe the magnitude of what you're targeting?

It's a bit early to mention everything, but one thing I'll mention is a continuation of our program in conjunction with our Schlumberger alliance to cross train personnel so that we can reduce personnel on board. That's only possible because of the alliance and the single-point contracting nature of what we offer the clients, but that would -- that would have the ability to lower our offshore operating costs.

All right. I appreciate it and look forward to when you can tell us more of the cost out plans.

And we do have another follow-up question from the line of James Schumm from Cowen.

So I guess, lastly, and I promise this is my last one, is there any commentary on robotics as a whole? I mean, you guys have talked about it. Just directionally for next year, I mean, it seems like a lot of renewables work is picking up. Is there anything you can offer in terms of like your visibility going into '22 versus what it was last year? Or just anything to help us gauge how this business looks next year, would be great.

I would say we've seen an improving year for next year. Certainly, one of the vessels will be in APAC region and a full contract for the year. So that's stable as it is this year. And we've also got that large decommissioning project in Thailand that will carry on into Q1 and potentially further.

For the U.K., Europe, West Africa renewables area, we're definitely seeing an increase in trenching. We have awards that will most likely see us take on a second trenching vessel. So we should see an improved area there. There's a lot more tender activity on the boulder clearance side and site survey and prep. So we expect to pick up some of those works. We have been doing a very good job on those projects that we've undertaken and starting to build quite a good reputation. So see increasing ROV activity as well. A lot of our ROVs that were destined for oil and gas work and lower utilization are now forming over into the wind farm markets as well. So we should see an improvement, not sure yet how much of an improvement. It's not going to be a vast improvement, but it will be an improvement.

And there are no further questions at this time.

Thanks for joining us today. We very much appreciate your interest and participation and look forward to having you on our fourth quarter 2021 call in February of '22. Thank you.

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