Helix Energy Solutions Group Inc (HLX) 2014 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Helix Energy Solutions' third-quarter 2014 earnings conference call.

(Operator Instructions)

As reminder this conference is being recorded today, Tuesday, October 21, 2014. I would now like to turn the conference over to Terrence Jamerson, Director of Finance and Investor Relations. Please, go ahead.

Good morning, everyone, and thanks for joining us today for our conference call on our Q3 2014 earnings release. Participating on this call for Helix today is Owen Kratz, our CEO; Tony Tripodo, our CFO; Alisa Johnson, our General Counsel; and Erik Staffeldt, our Finance and Treasury Director. Cliff Chamblee, our Chief Operating Officer, is off on a well-deserved vacation, so I'll sub in his place to provide the operational update.

Hopefully you all have had an opportunity to review our press release and related slide presentation released last night. If you do not have a copy of these materials, both can be accessed through the Investor Relations page on our website at www.HelixESG.com. The press release can be accessed under the Press Releases tab and the slide presentation can be accessed by clicking on today's webcast icon.

Before we begin our prepared remarks, Alisa Johnson will make a statement regarding forward-looking information.

During this conference call we anticipate making certain projections and forward-looking statements based on our current expectations. All statements in this 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 in 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, 2013.

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?

Good morning, everyone. Moving right over to slide 5, which is a high-level summary of Q3 results, I have to say we are very pleased with Q3 results. The $137 million of EBITDA and $0.71 of earnings per share represents a significant increase over a very good Q2, which came in at $109 million of EBITDA and $0.55 per share of EPS.

Revenues increased to $341 million in Q3 up from $306 million in the prior quarter. Both the well intervention and the robotics businesses contributed to the 12% sequential increase in revenues. I believe Q3 represents good results for both the well intervention and robotics businesses and demonstrates the earnings ability of our existing assets and service bays at high levels of demand and utilization.

Turning to slide 6, high utilization of our well intervention fleet at 97% in the third quarter continues to be a major factor in our strong operating results. In addition, our financial results were bolstered by a high revenue project performed by the Skandi Constructor off Canada. The combination of these two factors generated unusually high gross profit margins at 41% for Q3.

The robotics business turned best results since the Canyon business was acquired by Helix in early 2000. (technical difficulty) percent utilization of the long-term chartered fleet, combined with the high level of activity, plus 197 days of spot market vessel utilization were the key factors in producing these strong results. As we've previously indicated, we normally expect Q3 to be our best quarter for robotics, due to milder weather conditions in the North Sea.

On to slide 7, from a balance sheet perspective, our cash and liquidity levels continue to remain very strong. Cash increased to $547 million. That, along with the unused portion of our credit facility, kept total liquidity at a fairly consistent level of approximately $1.1 billion. Net debt at quarter end decreased and was roughly zero.

I'll now turn the call over to Terrence for an in-depth discussion of our contracting service results. Terrence?

As Owen said, Q3 was another great quarter for Helix, putting us in a strong position for 2014, especially given the fact that historically given that Q4 has been a weaker quarter compared to the previous Q2 and Q3. This year should be no different, given the fact that two of our vessels will enter dry docks this quarter, which I will touch on in the upcoming slide.

Through the first nine months of the year, we should expect revenues and profits to be higher compared to the same period in 2013 due to the addition of the H534 and also having a full three quarters of the Skandi Constructor. However, the business units have done a great job of also improving margins each quarter this year, as well as year-to-date 2014 versus last year.

As Owen alluded to earlier in his opening remarks, the two main catalysts being one, sustained levels of high utilization across the entire fleet, as well as across a greater number of assets. Two, successful well interventions performed by the Skandi Constructor.

This quarter she wrapped up a job in Canada. If you'll recall, at the beginning of the year, she finished up a job down in West Africa.

Also, our production facility continues to produce a consistent return. For the year, this business has yielded, on average, approximately $24 million in revenues each quarter with roughly 50% profit margins.

Moving on to slide 10, in the Gulf of Mexico we have had high utilization on both of our vessels and the standalone IRS unit throughout the year. For Q3 the Q4000 had another strong quarter with 89% utilization. She was down approximately 10 days near the end of July for thruster repairs.

We continue to be pleased with the performance of the H534 since she was placed in service back in mid February. For the quarter, the vessel was fully utilized and the vessel has been on hirer every day since entering the Gulf.

IRS number 2 was also on hire for the entire quarter and has seen an increase in operating days each quarter this year. Entering Q4 we expect strong utilization from all three of these assets.

Moving over to our North Sea fleet, not much difference in utilization levels of this asset base versus our assets in the Gulf of Mexico. For Q3, the Seawell, Well Enhancer and Skandi Constructor had a combined utilization of 99%.

The Skandi completed her first well intervention project in Canadian waters in mid August. She then mobilized back to the North Sea where she will enter dry dock in early November for approximately 30 days.

We also have the Seawell entering dry dock in early December of this year. This vessel is not expected to be placed back into service until early Q2 of 2015, as she undergoes a major refit project.

Next going into robotics, for this business we have seen an increase in both utilization and gross margin across our chartered vessel fleet and robotics assets in each quarter of 2014. In Q3, we achieved 90% utilization off of our chartered vessel fleet, which included 197 days from spot vessels. That's 36 more than what we saw in Q2.

In our North Sea market we continue to benefit from a strong trenching season. We utilized four of our five trenchers throughout the quarter, on both oil and gas and wind farm projects.

The REM Installer, which is also North Sea based, concluded a seven-month walk-to-work project during the quarter and is now currently in route to our Gulf of Mexico region to meet existing demand. The vessel is scheduled to arrive here later this week.

In the past, we have met increase in demand in the Gulf with spot vessels throughout all of 2014 as well as in 2013. In our Asia-Pacific region, the Olympic Canyon continues on its ROV services project offshore in India.

Before moving on I also want to point out that we returned the Olympic Trident back to the vessel owner in September of this quarter. This vessel had been in our fleet since late 2007. This now put us down one vessel to four long-term chartered vessels for the remainder of the year and until the Grand Canyon II and III enter the fleet in early Q1 and Q2 of 2015 respectively.

Moving on to slide 12, I'll leave this slide detail and vessel utilization for your reference. With that, I'll turn it over to Erik for key balance sheet metrics.

Thanks, Terrence, and good morning. Please turn to slide 14.

Slide 14 provides an illustration of our debt instrument maturity profile at September 30. Debt reduction during the quarter was a result of the required quarterly payments of our term loan and the semi-annual payments of our MARAD debt.

Moving on to slide 15, it provides an update of our year-end gross and net debt levels, historically and at September 30. We continue to maintain a strong liquidity position, approximately $1.1 billion of liquidity, our net debt level of approximately $7 million decreasing quarter over quarter.

Our year-to-date operating cash flow increased to $302 million driven by our strong operating results. We have used cash from operations to fund $208 million of capital expenditures, $17 million of debt repayments, $8.5 million of stock repurchases.

Our cash position has increased by $68 million year to date. At quarter end, our net debt to book capitalization ratio was less than 1%.

I will turn the call over to Tony for a discussion on our 2014 outlook. Tony?

Thanks, Erik. Let me move straight to slide 17, which presents our updated 2014 guidance. Given the much stronger than expected year-to-date results, we now expect the full-year 2014 to be better than we previously guided and have upped our full-year EBITDA look to greater than or equal to $390 million from our previous number of $360 million, with EPS now at somewhere between $1.85 to $1.95. I think it's fair to say that we believe there is more upside to this number than downside.

Of particular note, we are now forecasting a top-line revenue growth of approximately 50% for the well intervention business and 23% for the robotics business.

As previously suggested, the fourth quarter will be a different story than Q3. As we mentioned earlier both the Skandi Constructor and the Seawell have dry docks during quarter four, with the Seawell commencing an extended dry dock for a major refurbishment that will extend for some 90 plus days in 2015. Furthermore, the robotics business should experience its normal seasonal drop-off, and the large amount of spot market work we saw in quarters two and three is expected to decline in Q4.

Again, this is a normal weather-driven seasonal dip for the robotics business due to our strong market presence in the North Sea. Furthermore, we have reduced our long-term charter fleet in the robotics business from five to four with a termination of the Olympic Trident charter at the end of quarter three. This has been planned for quite some time now in anticipation of both the Grand Canyon II and the Grand Canyon III entering the fleet in 2015 plus our desire to reduce capacity in the usual seasonal low winter months.

Moving over to slide 20, slide 20 discusses a broad view of Helix's business outlook beyond 2014. For our well intervention business, we expect Gulf of Mexico demand to remain strong in 2015 and beyond. Both the Q4 and the H534 have healthy amounts of backlog in 2015.

We could see a return to lower market activity in the winter months in the North Sea. Owen will discuss this more a bit later. That being said, the Well Enhancer is expected to sail to the Mediterranean in December and remain there for a portion of the winter months.

Dry docks will be a factor in 2015. Again, the Seawell is forecast to be out of service for the first quarter, undergoing a major refurbishment upgrade. Both the Q4 and the H534 have scheduled regulatory dry docks in 2015.

On the robotics side, we are currently forecasting another strong year for Canyon coming off a record year in 2014.

Let we move over to slide 21 to discuss CapEx. We're forecasting full-year's CapEx of approximately $385 million. This is up from the $375 million we previously forecasted, as we are putting some more ROV units in the water to capture market opportunities.

Of the $385 million of CapEx $305 million represents growth capital associated with the Q5, the Q7, the 2C and Helix vessels slated for Brazil, along with the additional ROV units.

I'll skip slides 22 through 24 and leave them for your reference and turn the call over to Owen for closing remarks. Owen?

Thanks, Tony. Previously I suggested that the Company's strategic plans called for us to grow our EBITDA on average 20% per year through 2016. The updated forecast for 2014 is for an increase in revenues of 38%, an increase of EBITDA of 30%, and an improvement in EPS of 77% to 87% year over year. Therefore we are off to a good start to realization of our long-term growth objectives.

Q2 was very strong and Q3 was even stronger. This was primarily due to the tremendous efforts and scale of our operating personnel. In 2014, we benefited from the addition of the H534 being added to the fleet, a strong winter level of work for the North Sea business, a much improved operating plan, and execution from our robotics team, and generally strong performance from all of our groups.

Going into each year our guidance takes into account the fact that there is always operating and market variables that create challenges in realizing our full learnings potential. While the 2014 results are exceeding the expectations reflected in our initial guidance, we believe that these results, especially the Q3 results, are indicative of the earnings potential from our existing assets and services. However, before extrapolating too much from these Q3 results, we need to refocus the perspective on the long-term growth plan.

Heading into Q4, we have scheduled dry docks, as has been mentioned, for the Skandi Constructor and the Seawell. We're also anticipating slower activity in the North Sea versus last winter. I believe this has less to do with any macro issues and is more of a result of producers scaling back activity in reaction to last winter.

Prior to this last winter, the past few years have seen relatively mild winters in the North Sea. Therefore, producers scheduled more well intervention work in the winter of 2014 than they may have been more comfortable with in the past. However, this past winter saw a return to a more normal, or you could say harsh winter, and our customers incurred significant costs as a result of the weather.

As a result, we expect that our customers will take a more conservative approach to scheduling well intervention work this winter in the North Sea as a reaction to last winter's weather conditions. This effect could be somewhat offset by the success that our North Sea group has achieved in expanding the geographic range of operations to now include Canada, the MARAD and Africa.

The Seawell will also be out of service for an extended period undergoing a mid-life refurbishment and upgrades. We'll have regulatory required dry docks for the Q4000 as well as the H534. On the other hand, construction of the Q5000 is progressing and we're expecting this asset to enter service in early Q3 of 2015.

While we're still in the midst of our 2015 budgeting process and this process is not yet complete, it would be premature for us to provide more granular guidance for 2015 at this time. However, we can say the following.

First, don't expect the kind of year-over-year growth as seen from 2013 to 2014. The previously mentioned factors will serve as headwinds in 2015.

Second, while our financial results may not necessarily be at the same trajectory that we saw in 2014, our growth strategy is firmly intact and given the assets under construction and combined with the backlog in hand, we have the foundation for achieving the long-term growth goals.

Third, our balance sheet is even stronger than we anticipated. Finally, our operating execution has never been better.

So with that general update, we will be happy to turn it over for any questions now.

(Operator Instructions)

Jim Rollyson.

Good morning, guys, and great quarter this quarter.

Thanks, Jim.

Again. Owen, trenching in the robotics business has certainly been one bright spot for you this year, and obviously 4Q will suffer just the seasonal issues that you talked about. Do you have any visibility at this point, or maybe you can provide some color on what visibility you do have looking into next year? Because it seems like this is usually the shorter cycle of your business lines, and just curious what you're seeing develop for 2015 in that front?

The others may have some insight on it as well, Jim. From my perspective, the trenching always seems to be a bright spot for us, but it's very difficult to anticipate the actual timing of the projects. They seem to shift to the right very easily. I think if you go back to 2013, we were anticipating a good trenching year and the project slipped into 2014.

Looking out forward, we do see projects on the horizon for 2015, so I'm not forecasting a bad year. But I would caution that the uncertainty of the timing of those projects could shift to the right.

Let me add this, Owen. We have one anchor, large, long-term trenching project in the Middle East next year, which will serve as a foundation for our trenching activity next year. We expect it to be good, but it's too early to tell whether it's going to be as good as 2014 or not.

Understood. Makes sense. It's been a great year for that. I presume your comments on the North Sea winter activity and just going back to normal levels versus what you saw last year, is that the driver behind the Skandi coming to the Gulf of Mexico? And maybe any color you have for work opportunity you have for the Skandi Constructor in the Gulf.

Certainly we're using the Skandi Constructor. She's finished the job last winter in Africa, and then Canada, so we're definitely looking at the Skandi Constructor as our sort of global asset. Too early for us to really comment on any Gulf of Mexico activity, but we'll have more color on that once we get through with our budgeting process.

Perfect. Last one, Owen, obviously this market's been very focused on the decline of oil prices here in the last couple months. Just curious, from your perspective when you guys are going through budgeting and evaluating things how you think about the world, if we have extended lower oil prices at current levels, where that impacts your business and how much that you think that impacts your business. Thanks.

One of the things that I love about our business is that we've moved from being an upstream player, which is in the more cyclical side of the business, to being more life-of-field oriented. When the oil prices drop and the drill bits stop turning, the producers typically turn to more intervention to enhance the existing reserves. So, I think we have somewhat of a natural hedge in that regard, so it really doesn't worry me any.

Great. Appreciate it.

Jeffrey Campbell.

I guess in line with the last question about the oil prices, and it's one that I hear a lot from clients, with fourth- and fifth-generation Gulf of Mexico rig day rates at or below $300,000 now, is there any evidence that you can see of movement to use these assets in well intervention?

First, I think it's important to note that it's the rigs that have historically always done the intervention to work over. What has been transpiring is an evolution in the marketplace to use non-rig alternatives. With these lower oil prices, there's going to be a lot of movement to find lower costs. I think the rig rates is only part of the equation, though. When you add in the fact that we're so much faster at a rig at doing the same work, we have a lot of headroom before the rig rates become a problem for us.

Right now, our fleet, also you can see by the utilization, the demand is in excess of what we have the capacity for right now. I guess rig rates could come down. I guess it could slow the growth in how quickly our rates can expand at that point. But, right now, I don't see any problem from the rigs.

Okay, great. That's very helpful. I noticed that the rental intervention riser system had its third straight quarter of rising utilization, and I was wondering if you see any appetite for additional IRS assets as rentals, and is this something that you would consider putting capital to?

Very much so. I think it's proven itself to be a new niche in the market where there is a lot of demand. I think that went a long ways behind the announcement of our alliance with OneSubsea. The plan for the OneSubsea alliance is to build rental systems and own them jointly with OneSubsea and expand our market share into that market.

Okay. That was also very helpful. My last question actually was with regard to the alliance and OneSubsea. Specifically, when you announced the collaboration you identified that expanding your vessel capabilities beyond established well intervention was an important consideration in forming the alliance. I was just wondering if you could expand on which additional capabilities are more likely to come sooner? Maybe, what might come later, and why the alliance better positions you for that kind of expansion than you might have done on your own? And I'm thinking here the [majority], because you already have a relationship with Schlumberger, so that's really why I'm asking that.

Yes, that's a -- I could talk for about three days on that question, I think. I see so much potential in this marketplace right now. If you take the analogy of what happened in subsea construction from the 1970s through the 1990s, you saw more and more specialization occurring of the assets to improve efficiencies and, therefore, there was a bifurcation in the market. You had flat-bottom barges going through semi-submersibles to real layers, J-lay, and they all created their own separate niches.

I see the same thing occurring in the well intervention market and at a faster pace than what I first anticipated. You have several market niches of well intervention. And if you expand the definition of well intervention to be anything that a drill rig is used for, now, that doesn't require a 21-inch riser and 18 3/4-inch BOP, then you get into a huge potential application for these vessels.

I think the big driver, historically, up to this point, has been decommissioning. That's decommissioning in situ. The marketplace right now, because of regulatory factors, is looking more at a deconstruction methodology for decommissioning. I think there's a lot of room for R&D coming up with a better methodology to keep the decommissioning costs low. That's high on the priority list, and that would be the first one I see coming.

Beyond that, on the well construction side, in order to lower the cost of well construction, there's an awful lot that can be done without a drill rig. The top-hole section, the upper completion, cleanup and commissioning of the well at the end can relieve 30% to 40% of the time of a drill rig on site. I think that has a lot of potential. In fact, the vessels that we're sending down to Brazil will be used more in that role than the next section, which I'd say is the production enhancement section of the market.

This is the one that's really dear to our hearts. This is why we got into intervention and what we really focus on. And that's really the place where you see the advantages of a semi-submersible, like the one we have and the two that we're building.

There's an awful lot of room for production enhancement, including changing out of submersible pumps. That's a big area of development. And then, beyond that, starting to get into the blue skies. If you think about what could be done if coil tubing were deployed off of one of our vessels for coiled-tubing drilling, then you get into a whole new horizon of opportunities. So, in a nutshell, given the time we've got, that sort of shows the potential of this market going forward.

That was a great overview. I just want to follow up real quick on one thing you said to make sure I understood it. Are you saying that one of the goals coming down the line would be analogous to what we see onshore and the unconventional stuff where they're increasingly trying to drill more of the well with a top-hole rig -- a lower horsepower, less expensive rig -- and then turn less and less of the well over to the more expensive, high-horsepower rig? Is that an analogy that you were getting at there in well construction?

Yes, not only on well construction but I think on well decommissioning as well. I think the industry is going to move to a multi-phase approach to decommissioning where you're using different types of vessels for different aspects of the decommissioning to enhance the overall efficiency.

Thanks a lot, Owen. That was really helpful.

Joe Gibney.

Thanks. Good morning, guys. Just a couple of vessel-related questions on my end. Just trying to calibrate a little bit on well ops revenue in the quarter, specifically on the Skandi with the well intervention job in Canada, was there any deferred mobilization revenue for the Skandi this quarter? Just trying to isolate some of the boost that you guys saw sequentially there?

Yes, Joe, there was both deferred revenues and deferred expenses associated with the mow period. So, yes.

Okay. And on the H534, I know since it's entered the fleet mix has mostly been P&A -- if not all of its work P&A focused. Just curious if that mix is holding. I know from a rate perspective you guys have intimated this asset could garner Q4000-like day rates. Are those the rates that it is garnering today? Is it at that level, and is that mix still P&A focused?

Yes, the mix is still P&A focused -- I'm sorry, Owen, go ahead.

No, go ahead, Tony.

The rates are roughly a comparable to the Q4000.

Okay. Helpful. Last one from me, just Q7000, I know you cut steel as recently as April. What's the expectation now on fleet entrance? Is it still second half of 2016? Just maybe remind us where you are in terms of discussions with operators on this potential asset.

Well, I'm currently sitting here in Singapore right now, and I just saw the blocks of the Q7 and went over it with the project team and everything is on schedule and running along pretty smoothly on that project. With regards to the contracting of it, we've been trying to take our time on the contracting. And I know that's probably not what the investment community wants to hear, but with the opportunities that we're starting to see globally, it is the asset that we have that's available coming out next. So we're trying to really assess all of the opportunities and make sure we place it in the right place on the best contract. I know we said we were going to be shooting for a contract this year, but just because of the market conditions right now, we've been -- we've had the luxury of taking our time and looking at all of the options ahead on us. I say luxury because with the capabilities of the Q4000, personally, I'm not concerned with its utilization. So I just want to make sure that we put it in the right place that provides the best returns and the best strategic advancement for the Company.

Sure. Makes sense, given what's going on in the macro. Appreciate you guys' time. Thank you.

(Operator Instructions)

Trey Stolz.

Morning, guys. Just one quick question on the guidance, or slide 20 looking forward and trying to balance this. I know you don't want to be too specific on 2015 yet, but the language here, regulatory dry docks in 2015 and headwinds, and when I look at my model and add in the Q5000, which is a pretty significant bump up in operating income, should I be interpreting this otherwise? The cautionary language here on the dry docks, or is 2015 still a pretty significant bump up on well intervention, given that introduction of the Q5?

Let me take that, Trey. First of all, I think it's, again, premature to give specific guidance for 2015. We're doing a bottoms-up approach on our budget, so we don't even know the answer to that question, today. I guess it was important for us to point out that we'll have a significant amount of dry dock days in 2015.

You've got the Seawell out there for 90 plus or minus days. You'll have the Q4000 out there for plus or minus 45 days and the H534 for about 30 days. Then, the question is, if we stay on schedule with the Q5, that'll be a nice boost up. But we really don't know the answer to that question. We're still trying to sort it out. So, I've given you a long-winded answer that says we can't answer the question.

All right. That'll do for now.

I'd just add a little something to that, Tony, and that's what I was commenting on in my closing comments was just to refocus on the long-term plan. We've just gotten through a period here of introducing assets to our fleet, and we're seeing the results of that in the marketplace. We do have the Q5 coming towards the second half of next year, but that's the only major asset that we have being added.

Then, in 2016, we have three major assets being added. So, all I was trying to do is -- we saw a big jump up here as a result of the earlier efforts. 2015 was never planned to be a big growth year. 2016 is.

Owen, you wouldn't care to quantify what kind of increase in revenue we're seeing from day-rate raises, say 2015 versus 2014, or looking ahead to what's contracted in 2016?

All of our contracts are pretty well established, except for the Q7. Our rates are pretty much set out through 2016. So, there won't be any -- I don't see any great increases coming from rate increases. And, as one of the previous questions, there are headwinds in the industry right now for how aggressive you can be on pushing the rates up. So, I would anticipate that our rates are probably where they're going to be here for a little while.

All right, great. Thank you.

Martin Malloy.

Congratulations on the quarter.

Thanks, Marty.

I have a question just in terms of looking out. When you get the fleet up to nine well intervention vessels, I get to an EBITDA generation capability of close to $600 million and maybe your maintenance CapEx is somewhere around $75 million. Could you talk maybe about a little bit about your thoughts on uses of cash at that point?

Marty --

Do you want to jump in, Tony?

Yes, I'll jump in. First of all, I think -- and this is to Owen's point, is 2015, you've got all these moving parts. And, when you look at our earnings ability on a pro forma basis with the Q5 coming in, the CM vessels, which again are all under contract, the number you cite is a reasonable number, on a pro forma basis. So, I think that's a good point, Marty.

I think in terms of looking forward beyond this ship-building phase we're going in, we expect to be sitting with a fairly and highly liquid position. And I think it's time that we evaluate returning money to shareholders in one form or another. I'm not saying we've concluded that. I'm saying we are certainly evaluating it, Marty.

Unless we see another strong phase of building vessels, where right now we don't have any new vessels planned beyond what's announced and perhaps one more, but going beyond that I think it's incumbent upon us to take a serious look at returning money to shareholders.

Owen, do you want to add to that?

I would just add that, that doesn't mean our growth becomes stymied. I think we just enter it into a new era of how to grow. Right now, we've gone from essentially 3 intervention assets and we'll be up to 9 or 10. By 2018, I think our market outlook is calling for something like market demand for about 20.

I think anytime that you start aspiring to hold onto greater than 50% of market share, I think you're really asking for -- you're tempting fate. But we have established ourselves as a strong, credible leader in our marketplace, so we have the luxury of sitting back then and really being a little more judicious about the rate of our build process. Right now, we needed the fleet and we progressively put it into service.

The next phase of growth, though, comes from starting to look at the fleet and figure out what services -- soft services can be added around the hard assets in order to create a value creation and sustained growth. Now, that's a lot less capital intensive than what we're doing right now. So then that gets back to Tony's comment that, at that point, I think you have to start looking at returning to shareholders.

Thank you.

William Alpaugh.

Is Q4 2013 a reasonable quarter to look at, that we should think about for Q4 of this year? In Q4 2013 you had down time for the Well Enhancer and zero contribution from the Helix 534. Can you do similar EBITDA, which was around $77 million in Q4 2013, given the 534 is in the fleet, even with the weaker winter?

Well, the other additional factors, William, for Q4 is both the Seawell and Skandi are in dry dock, somewhat offset by having the 534 in the fleet. But, with those two vessels in dry dock, I'm not sure it's a fair comparison.

Okay.

And I also think we had a much stronger trenching situation in fourth-quarter 2013 than we're expecting in the fourth-quarter 2014. So, again, without being too specific, I think it's maybe not a fair comparison.

Okay. In light of the weakness in the floater market, how stable are the day rates on the Q4000 and the Helix 534?

Our rates -- as I mentioned before, our rates are all set for the next few years, so they're pretty stable at where they are now.

Okay. Just one more. Any color on how many days, possibly, for the Q4000 and the H534 dry docks in 2014, and maybe when in 2014?

Sure. This is just an estimate because you never know once you get into dry dock, but we're estimating about 45 days for the Q4 and about 30 days for the 534. In terms of timing, and I don't think this is going to vary that much, we expect the Q4 to enter dry dock in early Q2 and the H534 to go into dry dock in late Q2, early Q3.

Okay. Thank you very much.

[Joe Murvar].

Hello. You guys have a very healthy CapEx cycle here in 2014 and 2015. For 2014 I would have expected net debt to tick up a little bit each and every quarter. That's been the wrong assumption, particularly here in Q3. What can you do to help us out from a net debt perspective? Where do you guys think you'll be at the year-end 2014 and year-end 2015? Thank you.

Good question, Joe. We have a major shipyard payment on the Q5 that we expect to make here in the fourth quarter, so we expect our cash position to come down a bit from where it is today. And, in 2015, we expect, again, we're going to be completing the Q5000. We'll have the final payment due on it. We'll also have spending accelerating on the two CM vessels, so I'd expect cash to come down a little bit, too, by the end of 2015.

Nevertheless, I expect us -- our cash position, our liquidity, to remain fairly healthy throughout the period of time. In other words, I really don't think our net debt is ever going to get above 10% through 2015, so we tend to be a little conservative in our thought process here. We do expect net debt to tick up a little bit because our CapEx program is starting to peak during the next 18 months.

Thank you for the help.

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 all on our fourth-quarter 2014 call next February. Thank you.

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