Helix Energy Solutions Group Inc (HLX) 2011 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the review of fourth quarter 2011 results, 2012 outlook with investors conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. (Operator Instructions) As a reminder this conference is being recorded, Thursday, February 23, 2012. I would now like to turn the conference over to Mr. Tony Tripodo. Please go ahead.

Good morning, everyone. Thanks for joining us today. Joining me today is Owen Kratz, our CEO; Cliff Chamblee, Executive Vice President, Contracting Services; Johnny Edwards, Executive Vice President, Oil and Gas; Alisa Johnson, our general counsel; Lloyd Hajdik, our Senior VP of Finance; and at this time, I'd also like to introduce Terrence Jamerson, who's coming over from Canyon, our Robotics business unit to assume the investor relations responsibility from Stephen Powers. Stephen is actually swapping positions with Terrence and has transferred to Canyon. Terrence has been with the Helix organization for four plus years.

And at the end of this call, I'll have Terrence supply you his contact information and particulars. Hopefully you've had an opportunity to review our press release and the related slide presentation released last night. If you do not have a copy of these materials, both can be accessed through the investor relations page on our website at www.HelixESG.com. The press release can be accessed under the press releases tab, and the slide presentation can be accessed by clicking on today's webcast icon. Before we begin our prepared remarks, Alisa Johnson will make a statement regarding forward-looking information. Alisa?

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 our slide 2 and in our annual report on Form 10-K for the year ended December 31, 2010, and any subsequent Form 10-Q. Also during this call, certain non-GAAP financial disclosures may be made. In accordance with SEC rules, the final slides of our presentation materials provide a reconciliation of certain non-GAAP measures to comparable GAAP financial measures. The reconciliation along with this presentation, the earnings press release, our annual report, and a replay of this broadcast are available on our website. Owen Kratz will now make some opening remarks.

Good morning, everybody. We'll start with slide 5, which is a high level summary of fourth quarter results. Quarter four's revenues increased from $372 million in Q3 to $396 million. The increase is attributable to our oil and gas segment, a factor of both higher production and higher oil prices. As we previously signaled, our contracting services revenues declined in Q4 due in part to the transfer of the well enhancer to West Africa, however, we expect contracting service revenue to return to Q3 levels in the first quarter of 2012. In addition to the good operating results, we continued to generate a significant amount of cash flow with $166 million of EBITDA in Q4.

Moving to slide 6 and 7, quarter four's reported EPS is $0.16. However, backing out the impairment charges and other items noted in our press release, our Q4 EPS would have been $0.66. Much of the impairment is related to declining economics in natural gas fields. Utilization remained high in our well intervention business at 98%, however, accounting convention required us to defer the mobilization revenues for the well enhancer until Q1 of this year. We did achieve 100% utilization for our two reel pipe lay assets, albeit at no profit contribution. The outlook for the contracting services business is definitely looking up. Given that both our production and reserves are now more heavily weighted to oil, we're transitioning our reporting format to speak in terms of barrels of oil equivalent versus cubic feet of gas equivalent.

Our oil and gas production in the fourth quarter average 24,000 barrels of oil equivalent, up from 21,000 barrels of oil equivalent in Q3. Quarter three's production was impacted by tropical storm activity, and production from our Phoenix field continues to outperform our expectations. Again, much of our oil production is sold at Louisiana Light Sweet prices, which is at a significant premium to the west Texas intermediate prices. We sold our oil production at an average price of nearly $111 a barrel in Q4. The entire -- excuse me, for the entire year, our oil and gas production amounted to 8.7 million barrels equivalent or in BCFE equivalent, 52.2 BCFE. Tony?

Yes. Continuing on slide 7, from a balance sheet and cash flow perspective, quarter four was very good for Helix. Our cash balances increased by $171 million from $375 million at the end of Q3 to $546 million at year end. We also paid down an additional $18 million of principle on our term loan. Our total liquidity now stands at a very healthy $1.1 billion and our net debt has been reduced to $609 million at year end. After a committed focus to balance sheet improvement, we have now reduced our net debt to cap ratio from an unhealthy 60% at year end '08 to below 30% at year end '11. I'll now turn the call over to Cliff for an in-depth discussion of our contracting services results.

Thanks and good morning, all. As you can see, contracting services had a good fourth quarter with total revenues of $225 million, up from a year ago but slightly down from Q3. Our gross profit margins at 22% in quarter four was down quarter to quarter, but significantly higher than a year ago when it was only at 4%. Utilization was high in this business unit with both well ops and Canyon vessels at 98% and 93% respectively. The pipeline vessel utilization was at 87% with the Express and the Intrepid working in the pipeline mode and the Caesar in accommodations mode down in Mexico.

Moving over to slide 10. This slide shows the equity and earnings contribution of the Independence, Marco Polo, and the now support Crest JV. The results are fairly consistent with Q3, so I'll leave the slide for your reference. On to slide 11, well intervention business is continuing to be very robust at the point we're looking at alternatives to expand that capacity. To that point, we announced last week that we plan to commence construction of a new build semi submersible well intervention vessel this year, styled after the Q4000. The Q had nearly 100% utilization between working for Shell and Anadarko and has broke through the year end of 2012 and beyond. Our two North Sea vessels were also very busy with 96% utilization and also carry a great backlog going forward. The well enhancer sailed to West Africa in December and is performing very well setting new water depth records for that vessel of roughly 500 meters.

On the Robotics side, Canyon experienced high utilization for the construction support vessels as well. In addition to that, the individual oil to be used in trenching assets realized higher utilization also. We completed the first road drill projects with our new assets and we are optimistic about this service line and hope to grow this business very rapidly. The renewable side of the business also continues to be a highlight for us in the fourth quarter. And along with our new vessel at Grand Canyon, which will be delivered this summer, we believe this business will change and grow for us.

On over to slide 13. In the subsea construction, the pipeline group, which historically has been Gulf of Mexico focused, has two of the three assets outside of our traditional US Gulf of Mexico arena. The Intrepid's been in California and the Caesar in Mexico, while the Express continues to experience high utilization here in the Gulf. The outlook for this business is actually improving nicely. On to slide 14. This slide is just a bit of confirmation on the utilization side, which I've been speaking about in all three of the groups. So with that, I'll turn it over to Johnny for the oil and gas side of the business.

Good morning. Please turn over to slide 15. Both slides 15 and 16 provide the financial highlights for the fourth quarter. Production and revenue for Q4, 2011 was higher than Q3, basically due to better run time and oil price improvement. The Phoenix field with the HP1 continue to produce very well in Q4. Our production mix was two-thirds oil. As per the footnote on page 15, we recorded impairments in Q4 of $108 million; approximately $79 million was related to natural gas properties where our economics could not support the carrying values of those properties with the lower gas prices. The remaining $28 million was related to ARO impairments, the largest being our only UK property, which was negatively impacted by regulatory changes in the well abandonment process.

To slide 16, I'll make a note that the absolute dollars of operating costs were slightly higher in Q4 mainly due to two facility upgrades on the shelf where we had some piping corrosion and a more active shelf well work-over program to improve our shelf production. Our operating costs per BOE actually decreased. Slide 17 and 18 provide much detail on our year end reserve report. Slide 17 provides the breakout of reserves in oil, gas, and oil equivalence for the reconciliation of reserves from year end 2010 to year end 2011. The total proved reserves at year end 2011 are about 39 million barrels equivalent.

This is the first year that we provided SEC probable reserves. The probable reserves are almost 20 million barrels equivalent. Most of the downward revision improved natural gas reserves mainly at our Bushwood field moved to probable. We added both proved and probable oil reserves at mainly a Phoenix field due to our better than expected production performance. The reserves are shown in oil equivalence because we're now over 58% oil for our proved reserves.

Slide 18 provides a breakout between proved, developed, and undeveloped reserves by shelf and deep and by oil and by gas. The combination of higher oil prices and oil reserve additions actually increased our PV-10 at year end 2011 for the proved reserves to almost $1.5 billion, which is higher than our year end 2010. Looking forward, we have some very exciting opportunities. In the Bushwood field, we expect to add production from two wells in 2012. The Nancy well was drilled in fourth quarter 2008, has now been completed, and is waiting to flow. First production from Nancy is now estimated in Q3 of 2012.

Also, we've contracted a rig now to drill the Danny II oil well. This well is an exploration well targeting oil production just below the Danny oil well. The Danny II is expected to spud by May 1, of 2012, with first production in Q3 of 2012. We have multiple drilling opportunities in the Phoenix field. We have filed the APD for the Wang exploration oil well. We also have a PUD oil well we'd like to drill at Phoenix that's called our Head and Neck PUD well in the main pay zone.

We expect to receive the Wang APD at any time now, and we're trying to secure a drilling rig as we speak. We are targeting drilling the Wang well in Q3 of 2012. The timing, of course, of these wells would be dependent upon receiving the required drilling permits and securing a rig. Over to you, Lloyd.

Thanks, Johnny. Slide 19 details our commodity hedge positions covering our 2012 production and a portion of our 2013 production. The 4.6 million barrels of oil equivalent hedged for 2012 covers about 60% of our forecasted combined production of 7.5 million barrels equivalent. And regarding our oil hedges, 75% of our current hedges in place by volume for 2012 and 2013 are based on the Brent benchmark to better correlate our financial hedges against the actual pricing we're receiving for our Gulf of Mexico crude sales. The actual spread between the WTI benchmark and what we actually receive for our crude oil sales in the fourth quarter was approximately $20 per barrel.

Generally speaking, we have a goal of hedging up to 75% of our forecasted proved developed production for the current year, and we begin to layer in hedges on our forecasted production from our proved undeveloped reserves only when the reserves are very close to the first production. Turning over to slide 21. This slide profiles our current debt levels and liquidity position at December 31. And as Tony mentioned earlier, we paid down an additional $18 million of our term loan in the fourth quarter. And for the full year 2011, we have repaid a little over $210 million in debt, bringing our gross and net debt balances down to $1.2 billion and $609 million respectively at the end of the year.

We ended December with $546 million of cash on hand; and again, that's up $171 million from the $375 million at September 30th. And as mentioned earlier, our liquidity position stands at a very healthy $1.1 billion at the end of the year. And as we mentioned in our press release, earlier this week we closed an amendment to our credit facility to allow for a new $100 million term loan committed by a syndicate of banks. And the terms of this loan are the same as the revolver and is expected to fund some time in March. Together with proceeds from the term loan and an incremental $100 million of existing liquidity, we intend to call $200 million of our high-yield bonds with a redemption date in late March. Net debt balances do not change, but the cash interest savings from replacing the more expensive 9.5% debt is very significant from now until the January 2016 maturity of the high yield. Tony?

Yes. Turning to slide 23, where we present our 2012 outlook. We're following up a very strong 2011 with another strong outlook for 2012. Forecasting EBIT tax at approximately in the $600 million, and I'll get into the basic assumptions that underlie that number. While this is lightly down from 2011 levels, we don't anticipate being able to match 2011 production levels due to the slower pace in securing permits for our two key exploration projects scheduled in 2012. Also, even though we forecast stronger market conditions for our contracting services business in 2012, four dry docks present a bit of a head wind.

As you can see, based on our commodity price forecast, coupled with the hedges we have in place, we estimate realized commodity prices at $104.80 for oil and $4.56 for natural gas. That being said, we are actually realizing higher (inaudible) prices for oil than our forecast. CapEx spending is pegged at $445 million including an estimated $130 million in 2012 for the construction of the new build well intervention semi that we announced last week. On slide 24, the key assumptions and factors that go in our outlook are as follows. Number one, we have a very strong backlog for our well intervention vessels with the Q4000 fully booked in 2012 and building backlog into 2013. The well enhancer and Seawell are expected to stay very busy in 2012 as well.

We expect to grow in revenue base for Robotics, particularly for renewable energy trenching and coring services. We are adding capacity in ROVs, and we expect our Robotics business to have a very strong year. We have four dry docks scheduled for 2012 with an estimated P&L impact of $25 million. The dry dock schedule is presently scheduled as follows. The Intrepid in April upon return from California, the Q4000 in March, the Seawell in April and the well enhancer in July. The above schedule is subject to change, but this is our best estimate for now.

On to slide 25. For our oil and gas business, aside from the commodity price assumptions previously outlined, the key variables baked into our forecast are as follows. No significant tropical storm disruptions in 2012, much like 2011. The Danny II well in the Phoenix field, an oil target gets drilled in the first half of 2012, it's successful, and commences production mid-year. The permit and the rig for this well is secured. In the Phoenix field, either the Wang prospect or the Head and Neck PUD, both oil targets get drilled and commence production sometime in Q4. Permit is pending and rig negotiations are in process. As with 2011, we anticipate 90% of our oil and gas revenues to be from liquids, thus, we are highly levered to the price of oil.

On to slide 26. We will spend more in CapEx in 2012 than 2011, partly due to the estimated $130 million for the well intervention semi, and in part as we pivot to a growth mode with the goal of capturing the multitude of opportunities in our Robotics businesses. Thus $250 million is projected with a contracting service business including the $130 million for the new build. On the oil and gas side, we project to spend $195 million with the majority slated for drilling, and if successful, completion of the Danny II and either the Head and Neck and Wang wells. I'll skip slides 28 and 29 and leave them for your reference. And at this time, I'll turn the call back over to Owen.

Okay. Thanks, Tony. As you can see from this quarter's reported results, we're continuing to progress the transition of the Company in line with our previously stated strategy. We continue to improve the balance sheet and have now reached the targeted 30% debt ratio that we're comfortable with. We are now running a more efficient oil and gas business by high grading our properties and derisking the business model, while at the same time generating significant cash flow. We'll continue to try and monetize our non-core assets, but it's also time for us to begin adding new capacity for growth.

Our emphasis will be to add capacity and capability primarily in well intervention and Robotics. We're now asset constrained in those areas, so you'll see us add capacity there. We recently announced plans for construction of a new build semi submersible well intervention vessel based on the success and lessons learned from the Q4000. For now, we'll refer to it as the Q+. In the near term, we're adding a new vessel to the Robotics support fleet to be in service during the second half of this year, and we're looking at another vessel beyond that. We're adding a new trencher as well to be in service in the back half of this year. We're in process of also adding a minimum of six new work class ROVs over the next 12 months.

We're building new well intervention systems and seeking the best deployment platforms. There's a lot in the works. We're basically opportunity rich, but we will address growth as a measured pace with an ability to retain quality of service and only at a pace that allows us to maintain the strong balance sheet and liquidity position. I realize this is a bit vague; but as I said, there's a lot in the works. For the past few years, we focused on the balance sheet and have now put ourselves in a position to launch growth. So there'll be a period here during 2012 where the process will be the initiation of steps to grow, but actual results will ramp up over time, so stay tuned. And with that I'll turn it back over for Q&A.

Yes, before we do that, let me have Terrence introduce himself, and then we can go to Q&A.

Okay. Thanks, Tony. Good morning. As Tony mentioned, my name is Terrence Jamerson, and for the past four years, I've worked in our Robotics division serving as the general manager of accounting and finance of that business unit. I look forward to the new opportunity and working with each of you in the new investor relations capacity. My new phone number, which is actually the same as Stephen's old number is 281-848-6644. This number as well as my e-mail address is also posted on the Helix website under Investor Relations after the contact information tab. Thanks.

Okay. We're ready for Q&A now, operator.

Certainly, thank you. (Operator Instructions) And our first question comes from the line of Marshall Adkins with Raymond James. Please go ahead.

Good morning. Owen, I want to get a little more specifics on the that we're calling it, the new build. Walk me through what's going to be different about this, how are you going to fund it, timing, and what kind of rate of return do you think you're going to get on this thing?

Let me --.

A lot of questions there, I know.

Yes. Well, the Q plus is basically taking the methodologies that are incorporated in the Q4000 and just putting it on a slightly larger platform. Some of the things that we've learned from the Q4000 is a primer for a little larger air gap, a little greater deck load. It's basically the Q4000 plus. With respect to -- I'm not sure I remember all of your questions.

Overall costs and how do you think the returns are going to be on this one, et cetera, et cetera?

I think -- well, the overall costs I might as well mention, it's going to be in the neighborhood of $0.5 billion. On financing this, it's our intentions right now to finance this on our own balance sheet, but the timing of the payments, we believe we're going to be able to fund this out of our existing cash flow without an increase in debt. With respect to the returns, if you go back and historically remember, the initial returns on the Q4000 were relatively low. We were the pioneers in this market, and it took a few years to ramp up. Without getting into too much detail, let's just say that I think the visibility of the backlog and the acceptance of our methodologies and the quality of our service means that this one will hit the ground running in about three years with much better returns than what the Q4000 started with. And we have -- in general, we have mid-teen return on capital targets for the corporation, and I think this will follow in that range.

Fantastic. Last question from me. Owen, you've been around a while. Not that you're old, but I'd like to get your perspective, or at least your gut feel on the market going forward, both for pipelay [and well] intervention now that we're starting to ramp up around the world. You've got all kinds of new build rigs out there. It just seems like everything's headed your way on a somewhat lag basis, but I'd rather hear it from you in terms of what's your perspective out over the next two years for that industry in general?

Well, I'll speak more to the part of the industry that I'm really excited about and that's the well intervention side. I mean, for years if not decades now, our vision has been that oil and gas provence is going to go to ever deeper waters. The commercial way of developing that is subsea. To make that viable, the oil and gas doesn't know how much water's over it. So you have to come up with paradigm shifts in the way that you doing things. The area -- I think there's been a lot of focus on doing that on the subsea construction side. I think there's been less focus on the what you do on the well side. Most of what's done in the deep water is currently done on drill rigs, and it's been our focus to come up with drill rig alternatives of segmenting the work that drill rigs do, providing vessels that are more efficient at doing them and therefore approaching the deep water drilling a little differently than the shallow water drilling. Now, that has a lot of different segments depending on how you divide that scope up. It's been our preference to focus on a vessel design that is -- there's two schools of thought in this area. One is to build smaller vessels that are more task-specific and therefore, lower cost. In these early days of the developing market, our preference has been to focus on larger vessels with greater capability looking forward to the future regulatory demand, and I think with the Q4000, I think it's surprising how right we got it. And this vessel is just a continuation of that process. But this industry, the subsea well intervention market is still in its infancy, which is what really excites me. And I see this as restarting the growth of the Company, but certainly not the end of where we can take this.

Very helpful. Thank you.

Our next question comes from the line of Michael Marino with Stephens. Please go ahead.

Good morning, Owen.

Good morning.

I was curious if you could expand on that a little bit as it relates to the Gulf of Mexico and maybe more near term. In the prepared remarks there was some -- notable to me, at least, was optimism in the Robotics business in the Gulf of Mexico. And I was curious if that impacts the -- if your thoughts on the Express are optimistic as well?

On the Express being the pipelay vessel?

Right. In the Gulf.

I think our path forward -- if you look at our Company, I think it's best to think of us as having a preference for focusing on the highly specialized niches. I think the Q4000 fits in that realm. I think what we do in Robotics, we're not a commodity type robotic provider. We really focus on -- we're the number one provider of the specialty trenching market, recently penetrating into the robotic drill market. So it's the specialty aspects of the marketplace that I think we bring the most to bear and have the greatest competitive advantage. Given the limited balance sheet, future growth I think will be slanted in that direction. With respect to the Express, that -- it's a real pipelay vessel. It's in the subsea construction market. While it's a very capable vessel, if you look at the limitations of our balance sheet and the competitive position we have in the marketplace, I don't think that that's an area where you'll see us as focused on future growth. I do -- having said that, though, the market is finally recovering after Macondo. The backlog is growing. Hopefully we'll see the margins improve going forward as the market strengthens. But I am a little worried about the supply side in that marketplace. So all things considered, I think you'll see us take a de-emphasized look at the subsea construction market going forward and a greater focus on Robotics and well intervention.

Okay. And more specific to your near-term outlook or your 2012 outlook on the Gulf of Mexico, you noted some anticipated recovery or continued recovery in the Gulf. Maybe a little bit more color on the ramp there in 2012 in the Gulf?

Well, going into 2011, we were very pessimistic about the outlook on subsea construction in the Gulf of Mexico. We positioned the vessels outside of the Gulf. Through the year, I think the market has greatly improved and our backlog has actually filled in quite nicely. But I think I'll turn this over to Cliff because he works closer with the day-to-day and let him give you his perspective on the Gulf of Mexico subsea construction market.

Okay. Thanks. Yes, for 2012, I don't think per se in the Gulf we see a huge ramp up. As someone mentioned earlier, there's a lot of drilling rigs being built and a lot of permits being released or more than there were. But we're a lag time easily 12, 18, maybe 24 months behind that. The good news for us is we've got a pretty decent backlog. When you were asking specifically about the Express, and it's been really the only vessel in the Gulf here, lately we had the Intrepid out in California and Caesar down in Mexico, as I mentioned. But from a backlog for Express, we've got work here for it now. It's been busy and continues to be busy, and we're going to move it out of the Gulf for projects that we've got over in the Mediterranean in Europe. But the good new is when that's over there and it's booked up until September, October and it comes back here for work. We've also got work booked for the Intrepid here in the Gulf of Mexico as well. So, it's not great times in the Gulf of Mexico, but it certainly is improving, and we're keeping these assets moving around so that we typically have one, maybe two here to fill the requirements.

Okay. Great. Thanks for the color.

Our next question comes from the line of Martin Malloy with Johnson Rice & Company. Please go ahead.

Congratulations on the quarter.

Thank you.

Is there an update on the Statoil contract?

I'll take that. The Statoil contract was delayed in their announcement severely and was supposed to have been announced February 15. February 15 came and went and there's been no word. So the simple answer is, we simply don't know. And we're -- there's -- we simply don't know. Having said that, we've just decided that enough time has gone by and enough effort. And we've decided to move on rather than focus on the Cat B. And that's what prompted our announcement last week of building the new vessel.

Okay. And you mentioned being asset constrained in the well intervention ROV markets. Can you talk about what you're able to do in terms of pricing there?

The pricing is increased. We're able to increase the price. Cliff, you want to speak to the specific pricing that you're seeing?

Yes. Okay. Well, on the well intervention side, we're pretty optimistic about that or very optimistic about that. And with the backlog that we mentioned with the Q in the Gulf and through this year and most of '13 as well already filled up, hence the rates are coming up and hence the new build. And the same with the two well intervention vessels that are based out of the North Sea, one being in Africa at the moment, but it's going back to the North Sea. Now we're seeing rates to continue to improve in that theater as well. And also on the Robotics side, not so much on the ROVs themselves, but the vessel side that we have, we see the rates continue to increase there as well. But probably more importantly is the utilization side of it from the Robotics side is increasing. And we're able to move those assets, bounce them back and forth between here and the UK sector as well.

Thank you.

(Operator Instructions) Our next question comes from the line of Joe Gibney with Capital One. Please go ahead.

Thanks, good morning. Just a question on the dry dock schedule, the $25 million impact on EBITDA. Should the color there on when these dry docks occur. Should we be thinking about timeframe for each of these for vessels out of the fleet in the same three to four week bandwidth or is it a little bit longer? Just trying to drill down a little bit on those expectations.

I think, Joe, generally we estimate 30 days per vessel. It really depends on what you find once you bring it into dry dock. It sometimes it can take a few days less, sometimes it could take a few days more. For instance, back in October, we mentioned we had five dry docks. This time, we're saying four. And the reason why one has come off is because Express actually went through its dry dock earlier this year, and that was only a week process, and she's off and back to work. We don't expect that to be as good an outlook for the rest of the vessels, but it's just a pure estimate, and that $25 million is based on about an average of 30 days per vessel.

Okay. That's helpful. Just to clarify, your commentary, -- correct me if I'm wrong -- I think you referenced quarter one Marine revenue being equivalent to what you saw in the third quarter. Is that the case even with the dry dock of the Q4000 for 30 days? Is some of that just a function of this deferred mode revenue on the well enhancer; is that accurate?

Yes. Even though we'll lose about a month's worth of revenues on our highest revenue generating asset, the Q4000. We do expect Q1 revenues to bounce back to Q3 levels. And a part of that is a function of booking the MOB revenues for the well enhancer here in the first two months that we were unable to book in December.

Okay, helpful. And then just one last one for me. You referenced some of the capacity additions on the Robotics side. I was just wondering if you could repeat that. It looks like did you pick up another vessel on your chartered fleet. I thought the -- I believe it was the Normand Clipper was expected to roll off, it looks like you added a net vessel addition, and you referenced potentially another vessel coming on. What would be the timing of that additional chartered vessel, is that second half of '12?

Yes. What we do have coming on is a vessel called the Grand Canyon that's going to be delivered to us in probably June of this year, and we have a new trencher called the T1200 and a couple of ROVs that will go in there for mid- this year, but we're also negotiating for another one -- another vessel to follow that in 2013.

Okay. And it was six -- a net addition of potentially six work class ROVs in the next 12 months. Is that correct?

That's correct.

Thank you, gentlemen. I'll turn it back.

(Operator Instructions) And we do have another question from the line of Anthony Guegel from Upstream. Please go ahead.

Yes, hi. Regarding the Q plus, when and where will construction of this semi sub occur?

We've not announced the location of the construction because we're still in contract negotiations, which should be over here shortly, and of course, sensitive to the yards of announcement criteria, we're going to hold off on announcing where it is. But when it's due would be early -- right now, we're forecasting early 2015 for putting it into service.

Okay. And my other question, this engineering must draw upon some of your effort for the Statoil Cat B bid, but to be clear this is not a Norwegian C class type of semi sub that you'll be building, correct?

No. What we've done is ever since we built the Q4000, we immediately started a design process trying to look at what the next vessel would be. If you go back to the year 2000 with the Q4000, it was always our intentions to have a fleet of these. So immediately following the Q, we started incorporating design ideas based on how the Q was functioning. When the Statoil Cat B came up, it actually required a redesign to meet the Statoil spec, but it was a separate effort from what we had started previously. I think back then we were calling it the H4500. Then during the Statoil Cat B process, we continued an independent but parallel design process that led towards this vessel. So this is not the Cat B vessel that we're building, this is our own design based on the Q4000.

Okay. Appreciate it. Thank you.

And there appears to be no further questions at this time.

Thanks for joining us today. We are very much -- we very much appreciate your interest and participation and look forward to having you participate on our first quarter 2012 call in the next couple of months.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a good day, everyone.