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WIKI ANALYSIS
Helix Energy Solutions (NYSE:HLX) is an oilfield services company that builds, maintains and maximizes the output from offshore oil and gas reservoirs. It has two business segments, Contracting Services and Oil and Gas Operations, of which the former accounted for $1,182.8 million in revenues or 67% of the the company's total revenues in 2007.[1]
The company operates primarily in the Gulf of Mexico where 95% of its 677 Bcfe in proved reserves is located.[2] Its presence in this region was boosted by the acquisition of Remington Oil and Gas Corporation in July 2006 for $1.4 billion in cash and stock.[1] The company's operations and vessel utilization in this region routinely suffer in the first quarter due to hurricanes, storms and other extreme weather conditions. In 2007, hurricanes Katrina and Rita cause $25.1 million in plug and abandonment overruns and $9.6 million in abandonment liability while, in 2006, the same hurricanes caused $16.8 million in inspection and repair costs.[3]
Company Overview
As mentioned earlier, Helix Energy Solutions operates primarily in the United States and, more specifically, the Gulf of Mexico Region. In 2007, 99% of the company's 224 proved developed oil and gas reserves were located in the United States, with the remaining 1% located in the United Kingdom.[4] Similarly, 97% of the company's proved undeveloped oil and gas reserves were located in the United States, with the remaining 3% located in the United Kingdom.[4] Overall, in 2007, the company owned 224 proved developed reserves and 453 proved undeveloped reserves.[4]
Business and Financial Metrics
In 2007, the company had $1,767.4 million in total revenues, a 29% increase from $1,366.9 million in 2006.[1] In the same year, its net income was $288.1 million, a 14% increase from $252.8 million the year before.[1]
The company attributed the revenue increase in its Contracting Services segment to the full deployment of assets from three 2006 acquisitions and higher contract prices for well operations and pipe laying services.[5] The revenue increase in its Oil and Gas Operations segment was attributed to a 33% increase in oil and gas production from 2006, due largely to the acquisition of emington Oil and Gas Corporation.[5]
As of 30 September 2008, the company's net profit margin was 13.10%.[6]
Business Segments
The company is divided into two business segments: a) Contracting Services; and b) Oil and Gas Operations.[7]
- Contracting Services (67% of total revenues and 69% of gross profit in 2007):[7] This segment builds, manages and repairs oil and gas reservoirs that are "marginal" i.e. no longer wanted by or too small to be material to larger corporations.[8] Some of the segment's other services include exploration, modeling and inspection of potential future reservoirs and the decommissioning of abandoned pipes and platforms.[9] In 2007, the Contracting Services segment made $1,182.8 million in revenue, up 26% from $937.3 million in 2006. [7] as of 31 December 2007, this segment had a backlog of $1.1 billion, of which $630 million was expected to be completed in 2008.[9]
- Oil and Gas Operations (33% of total revenues and 31% of gross profit in 2007):[7] This segment purchases and maintains oil and gas properties for the company.[10] In 2007, the Oil and Gas Operations segment made $585.5 million in revenue, up 36% from $429.6 in 2006.[7] In July 2006, Helix Energy Solutions bought Remington Oil and Gas Corporation, thus acquiring oil fields and production facilities located in and around the Gulf of Mexico.[11] As a result, by December 2007, 95% of the company's active oil fields were located in and around this region.[11]
Trends and Forces
Infrastructure in the Gulf of Mexico is prone to damage from hurricanes and storms
In 2007, hurricanes Katrina and Rita caused the company $25.1 million in abandonment overruns. In 2006, the same hurricanes cost $16.8 million in inspection and repair costs while, in 2005, the cost was $7.1 million. In the last quarter of 2007, the company increase its abandonment liability to $9.6 million for repair work yet to be completed on damaged properties.[12] Although insurance recoveries have partially offset the costs associated with repairing damage caused by these hurricanes, with 95% of the company's productive reservoirs located in the Gulf of Mexico, its operations are highly susceptible to hurricanes, storms and other extreme weather conditions that periodically affect the region. In 2008, 17 hurricanes, storms and tropical depressions required government monitoring around the Atlantic area.[13]
67% of the company's proved reserves are undeveloped
Depending on the level of certainty associated with recovering oil and natural gas, reservoirs can be classified as either proved or unproved. Proved reserves can be further classified as proved developed non-producing (PDNP) or proved undeveloped (PUD). PDNP reserves have had enough work done to ready them for drilling, but no oil or gas has been extracted yet. PUD reserves have had no work done on them, but predictions about the amount of oil and natural gas in these reserves are assumed to be relatively accurate.[14] As of 31 December 2007, 67% of the company's proved reserves were classified as PUD and 12% were classified as PDNP.[15] In other words, 79% of the the company's proved reserves may not end up being produced or developed.[15]
Oil price fluctuations affect the company's total revenues and net income
In September 2008, the company attributed its quarterly revenue increase in the Oil and Gas Operations segment to a 57% increase in oil prices from the year before.[16] Similarly, in 2007, 53% of the revenue increase in its Oil and Gas Operations segment was attributed to an increase in oil prices.[17] In December 2008, however, oil prices fell to a 3-year low of $46.85 per barrel as compared to $140 per barrel in July 2008.[18] These fluctuations in oil prices will adversely affect the company's total revenues and net income.
Competition
There are more than 90 publicly traded energy companies focusing on oil wells, drilling, exploration and drilling equipment.[19] Of these companies, the following have been identified as competitors by Helix Energy Solutions.
- Global Industries (GLBL) provides construction, drilling and contract services to energy customers mostly in the Gulf of Mexico.[20] In 2007, Global Industries made $992.51 million in total revenues, $159.96 million in net income and had a profit margin of 16.12%[20]
- Oceaneering International (OII) focuses on deepwater production and contracting.[21] In 2007, Oceaneering International made $1,743.08 million in total revenues, $289.62 million in net income and had a profit margin of 16.61%.[21]
- Acergy S.A. (ACGY) builds "surface to seabed" products that aid in contracting and pipelaying services.[22] In 2007, Acergy S.A. made $2,663.40 million in total revenues, $153.60 million in net income and had a profit margin of 5.82%.[22]
| Annual Revenue (in $ million) | Annual Net Income (in $ million) | Profit Margin | |
| Helix Energy Solutions (HLX) | 1,767.44 | 316.76 | 17.9% |
| Global Industries (GLBL) | 992.51 | 159.96 | 16.1% |
| Oceaneering International (OII) | 1,743.08 | 289.62 | 16.6% |
| Acergy S.A. (ACGY) | 2,663.40 | 153.60 | 5.8% |
References
- ↑ 1.0 1.1 1.2 1.3 Page 97, 2008 HLX 10-K, Consolidated Statements of Operations, Helix Energy Solutions
- ↑ Page 6, 2008 HLX 10-K, Business Overview, Helix Energy Solutions
- ↑ Page 49, 2008 HLX 10-K, Management’s Discussion and Analysis of Financial Condition and Results of Operation, Helix Energy Solutions
- ↑ 4.0 4.1 4.2 Page 32, 2008 HLX 10-K, Properties, Helix Energy Solutions
- ↑ 5.0 5.1 Page 48, 2008 HLX 10-K, Management’s Discussion and Analysis of Financial Condition and Results of Operation, Helix Energy Solutions
- ↑ Helix Energy Solutions, Google Finance
- ↑ 7.0 7.1 7.2 7.3 7.4 Page 81, 2008 HLX 10-K, Notes to the Consolidated Financial Statements, Helix Energy Solutions
- ↑ Page 4, 2008 HLX 10-K, Business, Helix Energy Solutions
- ↑ 9.0 9.1 Page 9, 2008 HLX 10-K, Business, Helix Energy Solutions
- ↑ Page 78, 2008 HLX 10-K, Notes to the Consolidated Financial Statements, Helix Energy Solutions
- ↑ 11.0 11.1 Page 5, 2008 HLX 10-K, Business, Helix Energy Solutions
- ↑ Page 99, 2009 HLX 10-K, Notes to the Consolidated Financial Statements, Helix Energy Solutions
- ↑ 2008 Atlantic Hurricane Season, National Weather Service National Hurricane Center
- ↑ Natural Gas Resource Base, Natural Gas Supply Association
- ↑ 15.0 15.1 Page 27, 2008 HLX 10-K, Properties, Helix Energy Solutions
- ↑ Page 49, 2008 HLX 10-Q, Management’s Discussion and Analysis of Financial Condition and Results of Operation, Helix Energy Solutions
- ↑ Page 47, 2008 HLX 10-K, Management’s Discussion and Analysis of Financial Condition and Results of Operation, Helix Energy Solutions
- ↑ Oil Prices Drop - Forces Big Energy to Retreat, TIME
- ↑ Oil Well Services & Equipment, Google Finance
- ↑ 20.0 20.1 Global Industries, Google Finance
- ↑ 21.0 21.1 Oceaneering International, Google Finance
- ↑ 22.0 22.1 ACGY Acergy S.A., Google Finance
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