Helix Energy Solutions Group Inc (HLX) 2020 Q4 法說會逐字稿

Greetings, and welcome to the Helix Energy Solutions Group Fourth Quarter 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded on Tuesday, February 23, 2021.

I would now like to turn the conference over to the Executive Vice President and CFO, Mr. Erik Staffeldt. Please go ahead.

Good morning, everyone, and thanks for joining us today on our conference call for our fourth quarter 2020 earnings release. Participating on this call for Helix today are Owen Kratz, our CEO; Scotty Sparks, our COO; 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 Investors 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 on Slide 2, in our most recently filed annual report on Form 10-K and on 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 Investor section of our website at www.HelixESG.com.

Owen?

Good morning, everyone. We hope everyone out there and their families are doing well and staying safe. To our employees and customers in Texas and the Gulf Coast region, we hope you've weathered the storm and are on the path back to recovery.

This morning, we'll review our Q4 performance, our operations in this challenging environment, our view of the current market dynamics and provide our preliminary expectations for 2021.

Moving to the presentation. Slides 5 to 7 provide a high-level summary of our results. The impact of the North Sea seasonal slowdown is evident in our financial performance in the fourth quarter. Our Well Intervention group and our Robotics group both experienced a significant drop in activity in the North Sea, as North Sea customers scaled back during the winter months. This is normal and expected during this time of year, but it's worth noting. On a positive note, we were able to secure additional spot work in the Gulf of Mexico in both Well Intervention and Robotics, allowing us to exceed our expectations in that region.

Revenues in Q4 were reported $160 million, with a net income of $4 million and EBITDA of $35 million. Our gross profit decreased to $14 million from $35 million in the previous quarter. For our year-end -- for our year-to-date results, our revenues were $734 million, with net income of $22 million compared to $752 million of revenues and net income of $58 million in 2019. We generated EBITDA of $155 million in 2020 compared to $180 million in 2019.

In 2020, there were many headline factors that impacted our performance, but the COVID-19 pandemic was predominant. We entered the year with many positive indicators for 2020 and beyond. The pandemic that emerged in Q1 immediately reduced activity levels in 2020 and extended a potential market recovery further out. Our team adapted well to the changing environments and minimized operational disruptions throughout the year. The Q7000 had a successful initial project. Our Robotics group expanded its renewables offering, working on a wind farm site clearance project much of the year. Our team performed well; an encouraging point as we continue to manage the impacts of COVID-19.

On to Slide 8. From a balance sheet perspective, our cash balance at the end of the quarter was $291 million compared to $259 million at the end of Q3. During the fourth quarter, we generated $40 million of operating cash flows and spent $1 million on CapEx. For the year, we generated free cash flow of $80 million, marking the third consecutive year of positive free cash flow. Our net debt at the end of the quarter was $58 million, and our net book to -- net debt to book capital was 3%.

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. 2020 presented an extraordinary and challenging environment to us due to the COVID-19 pandemic, yet our teams and partners, both onshore and offshore, continued to respond well to the challenges presented and are doing a fantastic job. The COVID-19 pandemic has presented many logistical challenges, including travel restrictions, quarantines, testing and screening of our personnel. Despite these challenges, in the fourth quarter, we continued to operate 13 vessels globally. And throughout 2020 and through the pandemic, we have operated in 14 countries with minimal operational disruption despite the logistical challenges.

We have established very high standard of safety measures and protocols that thus far have worked well against the virus, including pretesting over 11,000 to date personnel prior to allowing them to join the vessels. And whilst it's impossible to guarantee the virus will not reach a vessel, we believe we have very good measures in place should an infection occur offshore. Our program is designed to react quickly to any person showing symptoms including steps to quarantine and remove offshore staff as soon as possible. We continue to mandate social distancing and tracking of any close contacts. Additionally, we also have cleaning crews in place that perform frequent deep cleaning of the vessels. Altogether, we feel these protocols have greatly limited the exposure should an infection occur. Most of our onshore offices remain closed, and our teams are doing a fantastic job working remotely, keeping our business functioning.

We have responded to the revenue reductions caused by the pandemic stacking 2 vessels during part of the year, the Seawell in the North Sea and the Q7000 in the Canary Islands, swiftly reducing our cost base as well as cutting capital expenditure and reduced SG&A spending. I'm extremely proud of our offshore staff, our onshore staff and partners for the way they have tackled these unforeseen challenges, and whilst having to operate in these testing circumstances, they have achieved in 2020, very good safety standards, equaling solid results of 2019, coupled with one of our best years in relation to operational uptime. Our teams do make a difference.

Over to Slide 11. Even in this environment and our usual lower utilization due to seasonal conditions, during the fourth quarter, we produced revenues of $160 million, resulting in a gross profit margin of 9%, producing a gross profit of $14 million, compared to $193 million in revenue and $35 million gross profit in the third quarter.

Our year ended with revenues of $734 million, resulting in a gross profit of 11%, producing a profit of $80 million. EBITDA was $155 million, exceeding the top levels of revised guidance that we issued earlier in the year in response to the pandemic.

Considering the effects of the virus, the fourth quarter seasonal weather conditions affect on utilization and warm-stacking of 3 vessels, we still attained reasonably good levels of utilization. The Well Intervention fleets achieved utilization of 56% globally in the fourth quarter and the Robotics chartered vessel fleets achieved utilization of 100% globally during the quarter.

Even with the challenges presented to us by the pandemic, 2020 was one of our best-performing periods in relation to safety management and operational uptime performance. Our fleets operated at 98.5% uptime efficiency, and safety statistics in most categories were reduced compared to 2019, with many vessels now achieving multiple years being LTI free. We are extremely pleased to know our teams continued our efforts with such a high standard of performance.

In the Gulf of Mexico, we had both the Q4000 and the Q5000 working and operational during the quarter. Our North Sea business has been the one most affected by COVID pandemic. The Well Enhancer completed its yearly campaign in Q4 and was then warm-stacked as we seasonally do for the harsher winter months in Leith, Scotland along with the Seawell.

In the West Africa region, the Q7000 remained warm-stacked in the Canary Islands and then commenced transit back to Nigeria for its contracted work that is currently ongoing. Performance in Brazil was at the usual high standards as both vessels performed very well achieving utilization of 98% in Q4. The Robotics chartered vessel fleet was very active in the quarter between ROV support, trenching and renewable works globally, completing 336 days of utilization across 7 vessels.

Slide 12 provides a more detailed review of our operations of Well Intervention business in the Gulf of Mexico. The Q5000 had 89% utilization, while continuing to work for BP until mid-February, undertaking ultra-deepwater production enhancement operations and performing extremely well. The vessel remains working for BP into Q2. We've now signed a 5-year global frame agreement with BP for work on a call out basis. However, at this time, we expect BP has little planned for heavy well intervention requirements in the Gulf of Mexico in 2021, and we, therefore, expect to be working the vessel in the spot market.

The Q4000 performed well with 78% utilization due to a small gap in schedule alignment between projects, completing work in ultra-deepwater for 4 clients. We also utilized the Helix-Schlumberger jointly owned 15K system from one of the clients from the Q4000. Both vessels remained under contract for most of Q1 and have work visible in Q2. However, currently due among other things, to the uncertainty of COVID restrictions and the uncertainty of government regulations regarding the permits and moratorium, we do expect less utilization for our Gulf of Mexico Well Intervention business in 2021 than in previous years.

Moving to Slide 13. Our North Sea Well Intervention business has been the one most affected by the reduced work requirements related to the COVID, leading to a continued warm-stacking of the Seawell. The Well Enhancer worked into October, then had a gap between projects prior to commencing work in December. The Well Enhancer achieved 26% utilization in Q4, working for 2 clients in the quarter, including completing one temporary abandonment scope followed by an environmental cleaning project, then undertaken a production enhancement scope. The vessel was then warm-stacked in Leith, Scotland.

The Seawell remains stacked in Leith, Scotland with a significantly reduced operating costs and reduced crew levels to a minimum manning allowance. Both monohull vessels remained in warm-stacked condition throughout the winter seasonal period as in previous years. And we're, at this time, optimistic that we will reactivate both vessels in 2021 with the Well Enhancer scheduled to go back to work this month, and we're currently hopeful to have the Seawell back to work later in Q2.

The Q7000 entered the fourth quarter in warm-stack mode in Tenerife in the Canary Islands, again, at a significantly reduced daily operating cost of the vessel. The vessel then transited back to Nigeria at the end of Q4 and commenced contracted works at the end of January 2021.

Moving on to Slide 14. In Brazil, our operations for Petrobras go -- continued to go extremely well, again, producing another quarter of operational excellence with a continued strong performance regarding safety, uptime and efficiency. Both vessels achieved strong utilization in the fourth quarter, and we continue to be ranked as one of the top rig contractors by Petrobras.

The Siem Helix 1 had 98% utilization in Q4 and completed abandonment work on 6 wells working in an environmentally protected area. The Siem Helix 2 had 99% utilization and completed production enhancement work on 1 well and abandonment work on 4 wells during the quarter.

I'd also like to highlight that for the second consecutive year, our Brazil subsidiary has been awarded supplier of the year by Petrobras for operations of Maritime rigs.

Moving on to Slide 15 for our Robotics review. Robotics had another good quarter and a solid year in 2020, operating 7 vessels during the quarter, with 4 vessels working on non-oil and gas renewables projects, resulting in an increase in our renewable service lines and further geographical expansion. In the fourth quarter, the chartered vessel fleet utilization was 100% with both Grand Canyon vessels fully utilized and an additional 152 days of utilization from spot chartered vessels.

In the fourth quarter in the North Sea, 3 vessels were utilized primarily on renewable energy projects and the Grand Canyon III was utilized 100% undertaking renewables and oil and gas trenching, and the Kristiansand and the World Peridot were 100% utilized, working 74 days combined, continuing site clearance and survey works on the wind farm projects.

The Skandi Acergy, a large construction vessel, the spot chartered to undertake a decommissioning scope for 22 days as part of a combined Well Ops UK and Robotics projects. And the (inaudible) was also project spot chartered for 17 days on a further decommissioning scope.

In the APAC region, the Grand Canyon II had 100% utilization in Q4, performing works on renewable energy project in Taiwan, providing accommodation and installation support. The vessel has secured work in 2021 and 2022 to provide ROV support in the APAC region and has recently just completed a further renewables project installed in a tidal turbine in Japan.

In the Gulf of Mexico, our pay as go vessels, the Ross Candies, had 39 days of utilization in Q4, working for ROV support for 5 clients. As mentioned previously, the Robotics group had a relatively good year, especially expanding services globally in the renewable sector.

I would like to highlight some statistics and key points to provide further detail regarding how we have expanded and anticipate transition and further into the greener renewables sector. In the renewables sector in 2020, we worked for 9 clients on 16 projects. We worked in 6 countries, the U.K., the U.S., Belgium, Norway, France and Taiwan, and again, recently, in 2021, completed work in Japan. In 2020, we had 5 vessels working in renewables, completing over 1,100 vessel days.

Over the course of last year, we had free trenching assets work in renewables, undertaken infield turbine to turbine trenching as well as export cable trenching and 12 ROVs assigned to work in this sector. We expanded our services to include site survey, debris removal, boulder removal, UXO clearance and detonation, trenching, installation support, tidal installation support, accommodation support and ROV support. This highlights our geographical and service line expansion in 2020 that we intend to stay in focus as we aim to continue to move forward in this sector. We've also recently increased our sales staff for these services.

Over to Slide 16. I'll leave this slide detailing the vessels, ROV and trenching utilization for your reference.

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 achieving what was under the circumstances, an exceptional year. There is no doubt that we expect 2021 will be for Helix in some ways even more challenging than 2020. Thanks for your hard work and teamwork and working at an extremely high standard in an extraordinary and challenging year.

Moving to Slide 18. It outlines our debt instrument and the maturity profile at December 31, 2020. Our total funded debt was $405 million.

Moving to Slide 19. It provides an update on key balance sheet metrics, including long-term debt and net debt levels at year-end. Our net debt approximated $58 million, our cash position at the end of Q4 was $291 million. Our quarter end net debt to book capitalization was 3%.

Moving to Slide 21. In March of 2020, our sector was devastated by the impact of COVID-19 on the demand for oil. Nearly a year later, the environment continues to be weak with many remaining uncertainties. The pandemic has accelerated the interest in green energy investments, moving away from traditional oil and gas. In addition, in the U.S., we're facing regulatory uncertainties from a new administration. Our customers have responded to COVID by slashing spending in 2020 and thus far are being very cautious before committing to spending in '21. Thus, at this time, we're not counting on a recovery in 2021. And in fact, as we have previously expressed, 2021 is shaping up to be more challenging for our business than 2020.

Given the fact that many of our customers are still working through their 2021 budgets, establishing their own spending priorities and formulating which projects get sanctioned and which do not, we feel it's premature to provide quantitative guidance for 2021 at this point other than to say we expect 2021 financial results for Helix to be lower than 2020. We hope to be in a position in April to provide more quantitative guidance.

That being said, we can say this much on how we see the year unfolding in the near term. We expect to be free cash flow positive in '21, as we have previously stated. We expect Q1 to be stronger year-over-year. We expect to have 6 well interventions vessels to be working in Q1. Beyond Q1, we anticipate working 5 intervention vessels in the spot market where currently visibility is limited. We expect visibility and utilization will be on a quarter-to-quarter basis.

The Gulf of Mexico Well Intervention, both vessels will likely be in the spot market for the remainder of the year. With the added current regulatory uncertainty, we generally expect lower levels of activity in '21. In the North Sea Well Intervention business, we expect to have 1 vessel working most of the season, whether second vessel gets deployed will be dependent on the strength of the market. In Brazil, the Siem Helix 2 is on contract into December, the Siem Helix 1 is on contract into April, and we're currently in commercial discussions with Petrobras regarding the continuation of work thereafter. In West Africa, we expect to work into Q3 with possibilities thereafter.

Robotics may have a weaker year with less site clearance work expected in '21. Production facilities should be consistent with the potential of a production enhancement opportunity.

Once again, with many uncertainties we're currently seeing, we feel it is a bit premature to provide quantitative guidance for '21 at this point. We hope to be in a position in April to provide guidance.

Providing more color by segment and region on Slide 22. First, our Well Intervention Gulf of Mexico. Q5000 is working for BP into Q2. The Q4000 has contracted work into March. In the U.K. North Sea, the Well Enhancer commenced operations in mid-February with contracted work into Q2. The Seawell remains stacked with earliest opportunities around midyear. Q7000 commenced operations in late January with contracted work expected to last into Q3.

In Brazil, the Siem Helix 2 is contracted into mid-December. The Siem Helix 1 is contracted into mid-April. We are in commercial discussions with Petrobras for work thereafter. The vessel is scheduled to have an approximate 40-day dry dock currently forecasted for midyear.

Moving now to our Robotics segment, Slide 23. Robotics work in Q1 will be affected by the winter slowdown before likely rebounding in the spring and summer months. The Grand Canyon II in APAC is on contract in Q1 and is expected to have good utilization for the balance of '21 in that region. The Grand Canyon III is contracted to be performing trenching in the North Sea, Baltic Sea and offshore Egypt for multiple customers with expected strong utilization. The vessel is scheduled to have an approximate 2-week dry dock and good utilization is expected into Q3. We were awarded follow-on wind farm survey and site clearance work to commence in Q2.

Moving to production facilities. HP1 is on contract for the balance of '21 with no expected change. We have a production enhancement opportunity on the Droshky field expected to take place in Q2.

Moving to Slide 24. Our CapEx forecast is in the $20 million to $40 million range. The majority of our CapEx forecast is maintenance and project related. It also includes the production enhancement opportunity at Droshky.

Reviewing our balance sheet. Our funded debt of $405 million is expected to decrease by $91 million as a result of scheduled principal payments. In January, we paid off the balance of the Q5000 loan. Our cash at year-end was $291 million.

We anticipate tax refunds in the amount of approximately $19 million in 2021 as a result of the tax changes from the CARES Act.

I'll skip Slide 26 and leave it for your reference. At this time, I'll turn the call back to Owen for closing comments.

Thanks, Erik. Going into 2020, we were expecting the recovery that began in 2019 to continue. Instead, COVID-19 hit and expectations for 2020 were not possible to predict.

We withdrew our guidance and focused on the challenges we were facing. By the end of Q2, we felt that we understood the challenges and were able to issue guidance with our Q2 results. Our people did a fantastic job meeting the challenges, and we were able to revise guidance.

Through continued hard work from our teams, we were able to lower our costs and improve our efficiencies. Our COVID-19 protocols proved largely successful. And in spite of identifying a number of positive cases over the course of the year, we incurred minimal operational down days attributable to COVID.

The market was soft overall, but we were able to meet our original guidance issued at the beginning of the year in all business units with the exception of a slight miss in the Gulf of Mexico on lower utilization and a big miss in Well Ops UK. We saw this in the last oil price collapse of 2016 as the North Sea declined the worse, but it was also the first region to recover. We're expecting a North Sea recovery in 2021, but how strong that will be is yet uncertain. Looking forward to 2021, we'll again be facing some challenges.

The COVID impact on the market continues, but the vaccine rollout is underway. We expect demand for our services to ramp up through 2021, but we don't know at this time how quickly that will happen or to what degree. Production recovery in shales is uncertain at this time, and the effect on supply is unknown. The customer focus on green energy is certainly impacting the budgets of most majors and many other E&P companies. This leads us to believe the work volume will remain anemic. But oil and gas is not dead. There's a transition occurring, where the majors may be pulling back from oil and gas in favor of capital deployment in renewables, smaller producers are stepping in and fields are changing hands. It may be a bit early to see the effects of this in 2021 as budgets are being set in an uncertain environment, but we do expect commodity prices and work volumes to increase in 2022.

More specific for Helix will be what happens to our long-term contract renewals. As you are all aware, we have 3 long-term contracts of what can now be considered legacy rates. Outside of Norway, we believe these are the only long-term contracts ever issued for subsea well intervention. Prior to these contracts, essentially an entire subsea well intervention market was a spot market. We've signaled for some time now that our expectations are for the market to return to being a spot market until a meaningful recovery occurs. We recognize that at least in the near term, those producers that can support long-term contracts are also dealing with the same uncertainties that face our entire sector. It's simply difficult to commit to long-term spending.

Our contract for the Q5000 in the Gulf of Mexico with BP for 270 days per year will not be extended. Instead, BP has signed a global frame agreement with Helix for a 5-year term. This will be a call off contract. And while we're told that BP will rely heavily on intervention over the next 5 years, we also believe their intervention needs a fairly up to date, and there could be a hiatus from work for 2021. This will certainly put pressure on Gulf of Mexico utilization for our 2 vessels in the region. Given the transitional nature of 2021, this means we are currently not -- we don't have clear visibility on Gulf of Mexico utilization for our 2 vessels there.

Our other 2 long-term contracts are for the SH1 and the SH2 in Petrobras in Brazil. The SH2 contract runs in December, as Erik noted. So we anticipate any variance on that vessel would be minimal. The SH1 contract is due to end in April of this year.

We're in commercial discussions with Petrobras for work after April, but it's too soon to know the outcome of these discussions or the impact the SH1 will have on 2021 results.

We also have a meaningful recompletion plan for one of our wells on the Droshky field. This is scheduled to be done with the Q5000 following the release of the vessel by BP. We expect the recompletion work will likely proceed in early Q2. We're also in discussions for follow-on acquisitions similar to Droshky, with the goal of securing Well Intervention backlog and adding incremental production revenue. But it's too soon to be able to estimate the impact they'll have on 2021.

On the Robotics side of the company, the work-class ROV market remains soft. We do anticipate another strong year from trenching, and we'll continue to seek further expansion into the offshore wind market. But that market has become highly competitive. Our contract for UXO and boulder clearance that we were on for much of 2020 is scheduled to pick up again, as Scotty mentioned, following its seasonal shutdown. However, how much more site prep work and other renewable support work we can secure is yet another uncertainty.

We don't want to be in the same position as last year and have to withdraw guidance. Several of these major issues should be clearer as we get past Q1. We expect Q1 to be a relatively strong quarter, but we're electing to withhold full year quantitative guidance until visibility on key issues firms up.

As we've previously said, 2021 will no doubt be a challenging year for us. However, our balance sheet is strong. We do expect to once again be cash -- free cash flow positive in '21, which is an accomplishment in and of itself in this environment.

We'll continue to prudently manage our CapEx and have outlined the path to continue to lower our debt. We feel we're well positioned with great leverage to a market recovery, and we see opportunities in renewables, maturing fields, and oil and gas service space that we will be pursuing. Our team has proven to be very nimble as we face challenges, and we fully expect to be in a good place as the market evolves through this transition period.

Erik?

Thanks, Owen. Operator, at this time, we'll take questions.

(Operator Instructions) Our first question comes from Ian MacPherson with Simmons.

Nice results in Q4, and I'd certainly rather have no guidance than shaky guidance, so I respect that decision as well. But I wanted to ask first just a detail. I thought the Q5000 was expiring earlier, year-end '20. So is it going to be on the legacy BP dayrate throughout Q1 ending early Q2? Or will it be working in BP, but not necessarily the legacy dayrate this current quarter?

Yes, Ian. So obviously, as Owen mentioned, the contract is not being extended. And obviously, we're towards the end of the contract now. Everything that is happening now is outlined in the contract. And so I think the assumptions that you're making on the existing contractual rates to continue is appropriate.

Okay. And then as you're contemplating the lack of not necessarily a complete lack of work, but just a lack of visibility of the years' work for the Gulf of Mexico, does your scenario analysis right now contemplate the decision to ultimately only work 1 vessel as opposed to 2 after the Droshky recompletion in early Q2?

I think, Ian, I'll start off and then I'll pass it off to Owen. Obviously, I think everything is currently on the table. I think we expect it to be a soft market in general, softer than last year. I think, in general, our thought process is we would steer work to 1 vessel, try to get that vessel field up before we pass it on to the second vessel. So I think that's definitely a potential that's on the table.

I think we see opportunities into Q2. We think it's probably going to be quarter-to-quarter for that market, and we definitely expect it to be a challenge in '21. Owen, I don't know if you want to add additional color?

I think that pretty much sums it up, and we can be specific. We're going to be putting most of our work onto the Q5 as -- once we get released from the commitments and -- but we do right now, we are anticipating that the Q4 will work. It's just what utilization it will achieve is in question.

Okay. Understood. And then lastly for me on Droshky. So we're getting some guidance for the CapEx on the recompletion, and then we would assume there will be some production uplift as yet unquantified, but that would presumably also be a revenue and profit bump relative to the normal stable contribution from production facilities that we see in a typical period. Correct?

That's correct. And as I said in my color comments, it is a meaningful recompletion, but it just -- recompletions are light switch, they either work or they don't. So we're going to be cautious until we know.

Our next question comes from Mike Sabella with Bank of America.

I was wondering if you could just kind of talk -- I know it's a little too early to give a firm idea of what we should expect out of Brazil for these renegotiations. But could you just kind of talk us through what the market looks like down there? I mean I know we hear a lot of positive anecdotes coming out of what Petrobras is doing down there for offshore rates on -- rates on floating rigs have appeared to gone up. I know it's not a direct correlation to what you all do down there. But just generally it seems like the market is improving down there. Can you just talk to us a little bit about what you're seeing down there as you work with Petrobras to decide what happens with these 2 vessels?

I'll take that, and you guys can add to it, if you want. We are -- we do think that Petrobras is going to be increasing their drilling program and adding rigs, and we've seen that already. I think what's going on down there is a combination of the short-term disruption caused by COVID in demand in 2020, balanced by their long-term needs. And it's further complicated by a change in the tendering laws in Brazil, which limits their ability to extend contracts or consider multiyear extensions.

That's made it a little difficult.

But as Scotty mentioned, this is the second year that we've been there -- we've won their supplier of the year for rigs award. The relationship is good. The efficiency is great. We think they have a need for the vessels. It's a matter of trying to weave the legal path and fit in with their near-term intervention requirements, and we're in that -- we're in to commercial discussions with them now on it.

Yes. I think Petrobras has one of the largest subsea well counts. They definitely have the work. They're very, very happy with the vessels. They're very happy with our safety culture, which is a big thing for Petrobras. And like Owen says, we're in commercial discussions and Petrobras do not have commercial discussions unless they have a need for work, so.

I think it's pretty apparent also that with the new tendering laws, they're going to be required to come out for a tender at the end of next year. I think the intent of Petrobras has expressed us verbally all along was that they expect a long-term relationship with these vessels in Brazil long term. And I don't see anything right now that would change that expectation.

Understood. And then if you were to kind of -- I know you've mentioned ROVs down year-over-year. If we were to kind of, I guess, split this into more legacy oil and gas type work and kind of the more renewable type work. What was the split in 2020? And is the expectation that both of those pieces kind of fall in tandem? Or are they moving in different directions?

I think we've said for a long time and everybody knows that the ROV spot market is very quiet. That being said, last year, we had 12 ROVs working in the renewables sector. We do see a lot more tender activity for the renewable sector. We have some work already committed for renewables. We have 1 of the vessels locked up in APAC for the next 2 years. And we have a strong trenching season ahead of us. So the trenching side and the renewable side of the business will be there.

Please remember, last year, we had a very glorious project on the site clearance. That project was only supposed to last 60 days, and it went all year. So -- and we expect to pick that project up again in the spring of this year. So I think renewables will be slightly softer because we had such a good year last year. Trenching will be good and the ROV spot market will be down a little, but we're going to continue to try and add ROVs into the renewable sector as well. And we've expanded our renewable service lines and globally expanded on the renewable side, so.

I think I'll just add to that a little bit, Scotty. We -- as you said, we have expanded our renewables offering and have captured work in Asia Pacific and more recently on the tidal work in Japan, which is an interesting development.

The renewables market is a developing market. The contracting styles are changing. Everybody has pivoted towards renewables. So the competitive pressures in different niches are significant. So it's a matter of finding where you can play the best.

Trenching-wise, we're still the global leader, and I expect that to remain the same. Where else we can capture renewables opportunities, we're exploring those, and we'll see what happens here. But I'm excited about the international developments. And also, I think the U.S. is forecasted over the next few years to be the fastest growing, not the largest market, but the fastest-growing market, and we're well positioned in the U.S. considering the Jones Act implications of that work.

Got it. If I could just squeeze one more. I know you mentioned the free cash flow in 2021 expectations, I would say, positive. Can you help us sort of -- and I know the said expectations, I mean, it's clearly probably down from 2020 as well, given the guidance. Do you think you can kind of get to this free cash -- sorry, net debt neutral number by the end of the year and then kind of talk to us what happens next?

Yes. So part of the reason, obviously, we haven't given an overall guidance, Mike, is because there's a very wide range of possibilities out there. And I think that, obviously, on the upper end of the range, that puts us very close to the target that you're talking about. So that is a possibility. But as we said, right now there are so many uncertainties that we haven't provided specific guidance.

(Operator Instructions) Our next question comes from James Schumm with Cowen.

Nice quarter. I was -- if we could just go back to the Robotics guidance. Based on the qualitative outlook, is it reasonable to assume that vessel days could be down 20% year-over-year? And maybe revenues down 15% or so, just given the absence or maybe the step down in the site clearance? And then do you think that you can be profitable on an EBIT basis this year?

Yes. So I'll take that. There will be a step down in vessel days. Obviously, the -- at one point, we had 3 vessels working on the site clearance project, so that added a huge amount of vessel days into 2020. So we do expect a step down. And because of that, the revenues will come down also. But we do expect the Robotics division to be on the positive side of EBITDA.

Sorry, Scotty. But do you think it will be EBIT positive this year?

Are we -- are you asking specifically just the Robotics?

Just robotics. Just robotics.

I think that's definitely within the range of possibilities at this point, Mike.

Okay. And then I appreciate the uncertainty in the market that prevents you from giving 2021 guidance. But you said EBITDA will be below the $155 million this year. And so that appears to represent the upper boundary. Can you just help us think about a lower boundary, assuming no improvement or no worsening of the outlook for here -- from here? So for example, like maybe you're reasonably confident that EBITDA could stay above $90 million or $100 million this year. Can you help us think about that at all? Like, how wide this range could be as you see it right now?

I don't think it'd be prudent for us to discuss that right now because some of these issues are major swing factors. For instance, the Droshky recompletion, as I said, is a light switch. It's either going to work or it's not, and that has a major impact. And also, the disposition of the SH1. I really wouldn't want to telegraph putting the cart before the horse about success with Petrobras in Brazil just because of the nature of the market right now. But both of those are meaningful swing factors, which -- you get into some ludicrous ranges.

Our next question comes from Samantha Hoh with Evercore ISI.

I realize there's a lot of uncertainty, but I was just wondering if the current state of the commodity markets is kind of reminding you of another time in the -- perhaps not too far past where this sort of strength in commodity prices are taking customers by surprise and you may potentially see a heightened urgency for intervention work even in the Gulf of Mexico.

Just kind of curious if maybe -- I think -- I mean, obviously, you guys are being overly cautious, but I'm just surprised that there wouldn't be any sort of pickup in demand, especially from midsize or smaller private operators as Brent or oil is just at these levels. Curious if you could just maybe talk about whether or not it feels like another time in history where customers were surprised by the sort of strength in commodity prices.

The short answer is yes and no. The North Sea, as we stated in our comments, we've seen this before where it was the most impacted, but the first to come back. That would be our expectations there. I think you have a number of smaller producers that will be a lot more aggressive than the majors. So we expect -- we are anticipating a pickup in the North Sea this year. We just don't know how robust that would be.

But even more so for 2022 as we expect the market supply and demand to tighten and commodity prices to continue to increase and the transition from majors to smaller producers will continue. That's setting up a fairly strong 2022.

In the Gulf of Mexico, you have the same thing, but it's compounded a little bit by the new administration's moratorium on drilling. There seems to be a lot of uncertainty among producers, both large and small as to what that actually means. Talking to the regulators, they're not exactly sure what that means either.

So as a result, it sort of put a freeze on -- and it came right during the budgeting process this year, which didn't help. So how -- whether or not we get beyond that in 2021 and the producers start anticipating the higher commodity prices of 2022, I think that's an occurrence that hasn't happened before; the regulatory uncertainty. And then on top of that, I'd say it's a bit early to tell whether or not the shale production is going to come back as strong as it did in the last -- out of the last down cycles.

My anticipation would be that it would not come back as strong, and that sets up for an even stronger 2022. So that's sort of -- that's looking at the last cycle, but anticipating that the shale recovery won't be as strong as it was the last time.

Okay. I think we're in the -- go ahead, sorry.

I want to just add to that, but we are seeing increased tender activity out of the U.K. and also, geographically, we're seeing more tender activity internationally. We've got more tenders than before out of Africa and the APAC region as well.

I'd also just like to add. Right now, we're seeing capital spending being reallocated towards renewables and away from oil and gas. But keep in mind, well intervention in our market is actually under the OpEx budget of the producers.

So as the demand ramps up and supply can't meet it and as the new smaller operators take over these fields, they're going to be very aggressive on the intervention side because it will take some time for the CapEx to ramp up production again, but intervention is a very, very low-hanging fruit and very quickly. So I do think that we're well positioned for it.

Okay. My other question had to do with COVID. And there's a lot of -- it sounds like there's a lot of incremental costs being carried, just sort of contingency planning and whatnot. I was wondering if you could quantify for us in maybe 2020, just like how -- what do you think the impact of COVID is just on the cost side, all the different measures that you've implemented? And -- I'm just kind of curious if you have that number handy.

So I'll take that. And as we said, we've put a lot of protocols in place. We're testing all of our personnel before they go offshore. We're having to quarantine people in certain countries before they can go offshore. Roughly, the cost of quarantine and testing, having to do medevacs when we have to has come in around in 2020 of about $8 million.

And that's for the full year in that, is that?

Yes, that's for the full year since the pandemic started. Obviously, that doesn't include the fact that we lost some revenues, and we had to stack a couple of boats, but we brought the operating costs down on those boats significantly. But the actual cost for testing, quarantine and moving guys around is about $8 million.

Our next question comes from Ian MacPherson with Simmons.

Erik, I wanted to -- before we see the K, I wanted to ask you what the dry dock expense was for 2020 that ran through operations, not CapEx. And then if you could frame that for me vis-à-vis your '21 CapEx guidance and what the dry dock slate looks like across the fleet for this year.

Okay. So just to recap. In 2020, we had, I think, at least 5 vessels, I think, heavily weighted to the first part of the year that were in dry dock. And Ian, I want to say that the number is approximately in the $20 million range. So -- but I'd like to get back to you on that. That's, I think, the amount that roughly flowed through operations.

As we look at our CapEx spending in 2021, the range is $20 million to $40 million. Majority of it is maintenance CapEx. As far as pure dry dock, we know that we have the SH1 scheduled for this year. And that one is a definite. And so I would tell you, it's probably in the same potential, probably on the low end, maybe $5 million on the high end, maybe $20 million that would flow through, through operations in '21.

Okay. So midpoint, probably a slight downtick in dry dock going through operations this year?

Yes.

There are no further questions at this time.

Okay, operator. Thanks for joining us today. We very much appreciate your interest and participation and look forward to having you on our first quarter 2021 call in April. Thank you.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.