Helix Energy Solutions Group Inc

NYSE:HLX

Earnings Call Analysis

Company's Strong Performance Set for Growth

The company reported a robust utilization of its vessels, with Q5000 and Q4000 seeing utilizations of 96% and 98%, respectively, which are projected to continue and improve in rates for 2024. The Q7000's activities are expanding with contracts set to carry into 2026, including a significant 12-month commitment for decommissioning work in Brazil. Brazilian operations enjoyed a 99% utilization rate, with boosted contracts likely to yield better results in 2025. Robotics marked its best year since 2015 and is poised for continued success in 2024. Helix Alliance experienced a strong quarter despite a typical slowdown, with high utilization across liftboats and other assets. As the year closed, the company celebrated 2023's successes, with anticipation for an even stronger 2025 driven by a global team's performance and new contracts. This assurance is further solidified by strategic financial maneuvers, like refinancing convertible securities to reduce funded debt to $373 million and remove any significant debt maturities until 2029.

Overview of 2023 Performance and Market Optimism

In a challenging offshore energy market, the company navigated 2023 with resilience, manifesting strong activity levels across all segments, demonstrated by increased global offshore energy activities, robust utilization in key markets, and strategic contract extensions. Noteworthy were the strong operations in the Gulf of Mexico, steady performance in North Sea markets, and successful expansion into Well Intervention services. Despite a quarterly revenue drop to $335 million and a net loss of $28 million due to refinancing costs, the full year saw revenue surpassing $1.29 billion with a gross profit of $200 million. The recorded net loss of $11 million would have been positive if not for one-time losses, indicating an underlying operational profitability. With an EBITDA double from the previous year at $273 million and substantial free cash flow, the company's restructuring efforts have set the stage for continued multiyear recovery.

Strong Fleet Utilization and Geographical Expansion

The quarter showcased exceptional fleet utilization, with standout performances from vessels like the Q5000 and Q4000 in key regions and forecasted higher utilization at improved rates for 2024. The North Sea operations defied seasonal downtrends, achieving 100% utilization and strong booking into summer 2024. Similarly, in Brazil, excellent utilization amplified the company's regional footprint. An integrated approach under the Helix SLB Subsea Services Alliance suggested sustained performance advantage, while Robotics presented a best-performing year signifying productivity across the globe. Despite some stacking of assets due to seasonality, the company's strategic response indicated agility and adaptability in managing fleet deployment.

Financial Stability and Outlook

An emphasis on balance sheet restructuring led to the elimination of convertible notes and deferral of significant debt maturities until 2029. With $332 million in cash and a solid liquidity position, the company prepared for future investments and operational costs. The leadership expressed confidence in sustained positive free cash flow and anticipated stronger performance in the latter half of 2024, in line with previous year's trends and seasonal adjustments. Yet, it remains cautious about the variability induced by maintenance cycles and project schedules.

Guidance for 2024

The company provided clear financial metrics for 2024, with revenue expectations ranging from $1.2 to $1.4 billion and slight EBITDA improvements. Free cash flow projections included anticipated earn-out payments, while CapEx focused on maintenance and renewal to support operational excellence. The guidance reflected calculated assumptions with acknowledgment of potential deviation risks based on market conditions and operational variances. Importantly, complete transparency about the timing of cash flow generation offered stakeholders a realistic view of future financial health.

Segment and Regional Performance Expectations

For 2024, the Gulf of Mexico is projected to remain a stronghold, with contracted work ensuring robust vessel utilization. The North Sea's atypical non-seasonality observed recently may return to traditional patterns. In Brazil, newly secured contracts extend work into Q4 of 2025, auguring well for revenue longevity. Robotics and offshore wind farm support, although facing slower growth, are anticipated to sustainably expand over multiple years. The alignment of strategic assets with long-term contracts presents an optimistic view of the company's positioning in growth markets.

Strategic Positioning in Market Segments

The company's prudence in not chasing the offshore wind market beyond its core competencies has paid dividends, ensuring growth in specialty niches like cable burial and site clearance. A leadership position in Riser-based intervention and Shallow Water Abandonment further fortifies Helix's market stance. Acknowledging potential reductions in EBITDA contributions for 2024 in the Abandonment segment, the company nonetheless foresees a robust market thereafter. Helix's differentiated offering as an integrated service provider simplifies complex full field abandonment, positioning it favorably against competitors.

Closing Remarks and Long-Term Outlook

The concluding remarks reiterated Helix's deepwater intervention leadership and its strategic advantage in Shallow Water Abandonment. With the North Sea market potentially reverting to seasonality, the company remains prepared for any impact on 2024 operations. Extending charters in Brazil cemented a confidence in long-term vessel profitability, showcasing proactive business strategies aligned with emerging market opportunities and underpinning a multiyear positive outlook for Helix.

Earnings Call Transcript 2023-Q4

[Operator]

Greetings, and welcome to the Helix Energy Solutions Fourth Quarter and Year-End 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Tuesday, February 27, 2024.

I would now like to turn the conference over to Brent Arriaga, Chief Accounting Officer. Please go ahead.

[Brent Arriaga, executive]

Good morning, everyone, and thanks for joining us today on our conference call for our fourth quarter 2023 earnings release. Participating on this call for Helix today are Owen Kratz, our CEO; Scotty Sparks, our COO; Erik Staffeldt, our CFO; 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 don't have a copy of these materials, both can be accessed through the For The Investor page on our website at www.helixesg.com. The press release can be accessed under the Press Releases tab and the slide presentation 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?

[Kenneth Neikirk, executive]

During this conference call, we anticipate making certain projections and forward-looking statements based on our current expectations and assumptions as of today. Such forward-looking statements may include projections and estimates of future events, business or industry trends or business or financial results. 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 risks, uncertainties, assumptions and factors, including those set forth in Slide 2 of our presentation and our most recently filed annual report on Form 10-K, our quarterly reports on Form 10-Q and in our other filings with the SEC.

You should not place undue reliance on forward-looking statements, and we do not undertake any duty to update any forward-looking statement. We disclaim any written or oral statements made by any third party regarding the subject matter of this conference call. Also during this call, certain non-GAAP financial disclosures may be made.

In accordance with SEC rules, the final slides of our presentation provide reconciliations of certain non-GAAP measures to comparable GAAP financial measures. These reconciliations, along with this presentation, the earnings press release, our annual report on Form 10-K and a replay of this broadcast will be available under the For The Investors section of our website at www.helixesg.com.

Please remember that information on this conference call speaks only as of today, February 27, 2024, and therefore, you are advised that any time-sensitive information may no longer be accurate as of any replay of this call. Owen?

[Owen Kratz, executive]

Good morning. We hope everyone out there and their families are doing well. This morning, we'll review the fourth quarter and full year 2023 results, performance and operations. We'll provide our outlook for the market both what we currently are experiencing as well as our expectations beyond that, and we'll provide our guidance for 2024.

Moving to the presentation, Slide 6 through 9 provide a high-level summary of our results and key highlights for the quarter.

During the fourth quarter, activity levels across all segments were very strong. With the increased activity from the global -- solid global offshore energy market driving improved rates. Highlights for the quarter include strong activity and utilization in the Gulf of Mexico, a resilient North Sea market, well intervention, including a seasonal project in the Mediterranean, completion of our New Zealand Well Intervention campaign, Robotics and Helix Alliance's solid seasonal adjusted contribution. Production in facilities continue to be a steady performer.

And on the sales front, the Helix Producer I was extended in an additional year to June 2025. In addition, we were awarded a 12-month extension with Trident in Brazil for the SH1. We expect to benefit from the market rate contract in 2025. We also secured a minimum 6-month contract for the Q4000 in West Africa at favorable economics. And we just recently established a 5-year joint frame agreement with [ TELUS ] for their offshore decommissioning requirements primarily on the Gulf of Mexico shelf.

Revenues for the quarter were $335 million, a decrease of $61 million, from third quarter results. Our net loss was $28 million, primarily driven by a $37 million loss associated with the refinancing of our 2026 Convertible Senior Notes. Adjusted EBITDA for the quarter was $71 million.

Our fourth quarter results were overall in line with expectations, driven by our core Well Intervention markets in the North Sea and Gulf of Mexico, with our Robotics and Shallow Water Abandonment segments, providing good performance given the impact of the winter weather.

For 2023, revenues improved by over $400 million year-over-year to $1.29 billion. Our gross profit improved by $150 million to $200 million. We reported a net loss of $11 million in 2023, which included that $42 million loss on the earn-out associated with our Shallow Water Abandonment acquisition, and another $37 million loss associated with our refinancing efforts. Without these 2 losses, our net income would have been significantly positive in 2023. Nonetheless, net loss still decreased by $77 million to $11 million despite the aforementioned losses.

Our EBITDA increased to $273 million in 2023, from $121 million in 2022. Operating cash flow of the year was $152 million, resulting in free cash flow of $134 million, with both results representing significant improvements compared to 2022.

The fundamental improvements in the offshore market, both domestically and internationally, continue to support the foundation of a multiyear recovery for our business. With the market recovery taking shape, we expect to build on our 2023 performance with incremental improvements for 2024 and a potential step change in 2025. Our expansion into Shallow Water Abandonment services has solidified our leadership position in this reemerging market. Helix continues to execute on its strategy of becoming the preeminent offshore energy transition company.

I'd like to thank our employees for their efforts and high level of execution in 2023, executing safe and efficient operations for our customers has established us as a leader in our industry.

On to Slide 10. During the fourth quarter, we executed on our express desire to restructure our balance sheet, moving away from convertible notes to a more traditional debt increment. We issued $300 million senior notes due in 2029. And following that, we repurchased $160 million of our convertible notes.

In early January, we issued a redemption notice for the remaining balance of our convertible notes, a transaction we expect to close during the first quarter. This restructuring effort extends our maturity, simplifies our debt structure, eliminates dilution risk from the convertible notes and mitigates the ultimate cost of replacing our convertible notes. We believe these efforts provide clarity and predictability to our balance sheet and position our investors to benefit from the improvement in the offshore market.

On to Slide 11. From a balance sheet perspective, our cash balance at year-end was $332 million, with liquidity of $431 million. For the year, our operating cash flow was $152 million, including $63 million of dry dock and recertification costs. We spent $20 million on CapEx, resulting in $134 million in free cash flow. At year-end, we were in a net debt position of $30 million.

I'll now turn the call over to Scotty for a more in-depth discussion of our operations. Scotty?

[Scott Sparks, executive]

Thanks, Owen, and good morning. Moving on to Slide 13. The team's offshore and onshore outperformed again, producing another very while executed quarter, completing a very strong 2023.

In the fourth quarter of 2023, we continue to operate globally, with minimal operational disruption, of operations in Europe, Asia Pacific, Brazil, the Gulf of Mexico and off the U.S. East Coast. We continue to operate at high standards, again, with strong uptime efficiency for the quarter.

During the fourth quarter, we generated revenue of $335 million, and a gross profit of $49 million, and gross profit margin of 15% compared to a gross profit of $31 million in the fourth quarter of 2022, significantly improved year-over-year.

For the year, we generated revenue of $1.29 billion, and a gross profit of $200 million and a gross profit margin of 16%, very much improved compared to the gross profit of $51 million in 2022.

2023 has been a solid year for Helix, vastly improved over 2022, and we finished the year very strong, with the fourth quarter being our best fourth quarter since 2013. Visibility in 2024 and beyond is looking very positive. We have recently secured some good contracts at better market rates compared to our legacy contracts. It also sets up 2025 potentially for further improvement. Tender activity remains strong and our client base is increasing.

Slide 14 provides a more detailed review of our Well Intervention business in the Gulf of Mexico during the fourth quarter. The Q5000 had excellent utilization of 96%. The vessel performed very well, conducting production enhancement and abandonment campaign, utilizing our Helix SLB jointly owned 15K Subsea system. The vessel then completed work on a single production enhancement well for Shell, and finished the year conducting abandonment work on one well. The vessel has numerous wells contracted for 2024, and we expect the vessel to achieve high utilization at stronger rates.

The Q4000 had solid utilization of 98% in the fourth quarter, the vessel continued the multi-well production enhancement campaign for one customer, and then undertook a production enhancement project for another client. The vessel then commenced production enhancement works on our Thunder Hawk field. The Q4000 also has numerous wells contracted in 2024. And again, we expect higher utilization at better rates.

In the second half of the year, the vessel is scheduled to commence a paid transit in Nigeria, to undertake a minimum 6-month project, performing production enhancement works and a paid transit back to the Gulf of Mexico after. Both key vessels continue to operate under the integrated Helix SLB Subsea Services Alliance package, and we expect this to continue with the Q4000 [ works ] in Nigeria.

Moving to Slide 15. Our North Sea Well Intervention business continues to respond well to the increased demand in the region. Having a very strong fourth quarter, considering the winter period, that would usually lead to a seasonal slowdown or launch second periods for the vessels.

For the quarter, we achieved 100% utilization for both vessels. The Well Enhancer performed very well, working for 2 customers, performing production enhancement work on 3 wells, followed by decommissioning operations on 2 wells. The Seawell also had a good quarter, working for 2 customers performing decommissioning work on 2 wells, the vessel then completed a paid 22-day transit to the Western Mediterranean to conduct a longer-term decommissioning campaign expected to last into the summer of 2024.

Demand for our services continues to improve. As mentioned, the Seawell is fully contracted well into the summer of 2024. And following its approximate 50- to 60-day dry dock in Q1, the Well Enhancer has contracted and awarded work through Q3 of 2024, starting to fill out the year with further increased rates.

The Q7000 was 68% utilized, conducting the decommissioning contract in New Zealand throughout most of the fourth quarter. On completion of the works in New Zealand, the vessel has completed a paid transit to Australia to undertake several intervention scopes for 3 clients, commencing in the fourth quarter. The Q7000 is then contracted for 12 months-plus options to undertake well abandonment work with Shell in Brazil, including a paid transit to Brazil. The work is estimated to commence towards the end of 2024, so the Q7000 is contracted for most of 2025, with options that could potentially have it working in Brazil into 2026.

Moving to Slide 16. In Brazil, we had good utilization of 99% for the fourth quarter. The Siem Helix 1 had a strong quarter and was 100% utilized in Q4, undertaking work for Trident Energy. Performing decommissioning works on 6 wells and production enhancement work on one well. We have recently extended our contract with Trident to take a further year and much increased market rates commencing at the end of 2024 and for the most of 2025.

The Siem Helix 2 had 98% utilization in Q4, completing decommissioning activity on 3 wells and one production enhancement well with Petrobras. We, again in 2023, won the Petrobras Rig of the Year award. So congratulations to our teams both onshore and offshore in Brazil.

We keep enhancing our position in Brazil by further extending contracts at increased market rates. So as the legacy contracts roll off, this should lead to much better results in 2025, and we look forward to bringing the Q7000 to Brazil and commencing the Shell decommissioning contracts, again, that's improved market rates.

Slide 17 provides detail of our Well Intervention Fleet utilization.

Moving on to Slide 18 for our Robotics review. Robotics continued their good performance and had another strong quarter, closing out a very solid year being the best performing year in terms of revenue and EBITDA since 2015. The business performed at high standards with strong utilization, operating 6 vessels globally during the quarter, primarily working between trenching, ROV support and site survey work on oil and gas and renewables-related projects.

In the APAC region, the Grand Canyon II had 100% utilization in Q4. The vessel completed a long-term decommissioning project in Thailand and then finished the year on an ROV support project in Malaysia. The T1400-1 trenching system on board the Siem Topaz, a project chartered vessel continued work on renewable trenching projects in Taiwan, undertaking 92 days of trenching utilization in the quarter that is expected to continue into mid-Q4 of 2024.

In the North Sea, the Grand Canyon III was utilized 95%, performing an oil and gas trenching project for one customer prior to commencing a lump-sum renewable trenching project for another customer. The Horizon Enabler had 100% vessel utilization, completing oil and gas trenching work for 2 customers, then performing works on a renewables trenching project for another customer.

Also in the North Sea, the Glomar Wave completed 15 days of operations undertaken an ROV support project for renewables customers.

In the U.S.A., the Shelia Bordelon, the Jones Act-compliant vessel, which utilized 92% in Q4. The vessel performed work in the Gulf of Mexico with an ROV survey project for an oil and gas customer, followed by a seismic node installation project for another customer. The vessel then took a paid transit to the U.S. East Coast for an ROV support project on renewables works.

Helix Robotics performed very well in 2023. We have a good backlog visibility globally, and we are expecting further strong performance in 2024.

Slide 19 details our Robotics vessels' ROV and trenching utilization.

Slide 20 provides an overview of our Shallow Water Decommissioning business, Helix Alliance, for the fourth quarter. Helix Alliance had a strong quarter considering the expected seasonal slowdown due to better weather conditions, many of the units worked further into the fourth quarter than what we had expected. The offshore division had 9 liftboats operating in Q4, with a combined utilization of 80%, performing decommissioning services. Offshore also supplied 6 OSVs and one crew boats, with a combined utilization of 71%.

The Energy Services division had operations of 1,188 days of utilization for 20 P&A systems deployed conducting decommissioning services. The division have operations of 198 days of utilization for 6 coiled tubing systems.

In Q4, the Diving and Heavy Lift division had reduced combined utilization of 46% across the free diving vessels due to the sensitivity of diving operations in the winter season. The Hedron heavy lift barge had utilization of 76% undertaking decommissioning activities.

Last quarter, we reported that we had commenced work on our largest decommissioning contract to date, to decommission 39 wells, abandoned 15 pipelines and removing dispense of 7 platform stretches. We've been performing well on this contract thus far. However, as planned, the work has been suspended for the winter months, and we expect to recommence work on the project with some units later in Q1 and the heavy lift work to recommence in Q2.

At the end of December, our season did finally come to an end due to the winter weather conditions, leading to the stacking of a good portion of the fleet's P&A system and coiled tubing systems. We expect the first quarter of 2024 to be slow until weather conditions start to improve, leading to a slow ramp-up of the fleet in Q1 and into Q2.

Slide 21 provides detail of Helix Alliance vessels and systems utilization.

Looking back at 2023, we had a very good year. And yes, the market has improved, but more importantly, our global employees, offshore and offshore excelled, not only exceeding expectation in 2023, but also setting up a strong 2024, and with the recently awarded contracts, we expect an even stronger 2025. So I'd like to put out a big thank you to our employees and partners, stay safe and keep up the good work.

I'll now turn the call over to Brent.

[Brent Arriaga, executive]

Thanks, Scotty. Moving to Slide 23. It outlines our debt instruments and maturity profile as of December 31. During Q4, we initiated a refinancing of our convertible securities. We issued $300 million senior notes due 2029, and repurchased approximately $160 million principal amount of our 2026 Convertible senior notes. Our funded debt at year-end was $373 million.

In January, we issued a redemption notice for the remainder of our 2026 convertible notes, which we expect to settle in March. Following that settlement, we will have no significant maturities until 2029. The refinancing brings us to a simplified capital structure that eliminates dilution overhang and potential higher cost to settle those convertible notes in the future.

Moving on, Slide 24 provides an update on key balance sheet metrics, including cash, long-term debt, liquidity and net debt levels. At year-end, we had cash of $332 million, and availability under the ABL credit facility of $99 million, with resulting liquidity of $431 million. Our net debt position at year-end was $30 million.

As mentioned earlier, we are settling the remaining $40 million principal amount of our 2026 convertible notes. We anticipate the final redemption costs will exceed the carrying amount of those notes and any premium paid will increase our net debt.

Slide 25 presents a 5-year performance trend for certain financial metrics. 2023 not only marks our sixth straight year of positive free cash flow, but also represents our highest annual EBITDA since 2014, and our highest level of free cash flow since we began presenting this metric.

Slide 26 presents our diversified revenue mix by segment, geography and by the 3 components of our energy transition strategy for your reference.

I will now turn the call over to Erik for a discussion on our outlook for 2024 and beyond.

[Erik Staffeldt, executive]

Thanks, Brent. Based on the continued strength of the offshore energy market, our contracted work and the pipeline of bids and projects, we're providing guidance on certain key financial metrics from our forecast.

Revenue in the range of $1.2 billion to $1.4 billion, we do expect our revenues to be flat to slightly positive in '24. EBITDA range of $270 million to $330 million. Overall, we expect slight improvement from 2023, with improvements in the Well Intervention partially offset by a softer shallow water market -- Shallow Water Abandonment market. Free cash flow of $65 million to $115 million. This number includes an expected $58 million impact from the earn-out payment scheduled in the second quarter of 2024. Capital spend is $70 million to $90 million range, based on our expectations of the mix of regulatory maintenance on our vessels and fleet renewal, Robotics ROVs.

Moving on to Slide 30. Our CapEx forecast for '24 is probably impacted by dry dock maintenance periods on our vessels and systems. The Well Enhancer is currently in dry dock, undertaking an expected 50- to 60-day program. The HP1 is scheduled for dry dock in Q2, and the Q7000 will have a maintenance period during its mobilization in Brazil. Our CapEx range for 2024 is currently $70 million to $90 million. The majority of the CapEx forecast continues to be maintenance and project related, which primarily falls in to our operating cash flows.

Reviewing our balance sheet, our funded debt of $373 million is expected to decrease by $49 million in 2024, with the redemption of our 2026 convertible notes and scheduled principal payments on our MARAD debt. We expect to continue our share repurchase program with target repurchases in the $20 million to $30 million range in 2024.

Our forecast ranges include some key assumptions and estimates. Any significant variations from these key assumptions and estimates could cause our results to fall outside of the range provided.

Our quarterly results will continue to be impacted by seasonal weather in the North Sea and Gulf of Mexico shelf, primarily the first quarter and fourth quarter. In addition, the timing of our vessel maintenance periods and project mobilizations will cause variations between quarters.

Our quarterly financial performance in 2024 is expected to follow a similar cadence as our results in '23, with the second and third quarter being our most active quarters, and first and fourth quarters impacted by winter weather.

Overall, we expect the second half of '24 to be stronger than the first half, with seasonal quarter impacts, the timing of our free cash flow generation is likely skewed to the latter part of the year.

Providing key assumptions by segment and region starting on Slide 31. First, our Well Intervention segment, the Gulf of Mexico continues to be a very strong market, supported by improving rates and expected strong utilization on the Q4000 and Q5000. Q5000 has contracted work in every quarter, with limited white space to fill in its schedule. The Q4000 is contracted to work into Q2 in the Gulf of Mexico. The vessel is scheduled to then transit to West Africa for a minimum 6-month contract in Nigeria, with a paid mobilization and demobilization.

In the U.K. North Sea, we expect both vessels, the Well Enhancer and the Seawell, to have very good utilization for most of the year. Well Enhancer is currently completing an approximate 50- to 60-day regulatory docking followed by contracted work into Q3. The Seawell is currently working in the Mediterranean into Q2 before being scheduled to return to the North Sea for contracted work.

Since mid-2022, the activity levels in the North Sea Well Intervention market have significantly increased, with limited seasonal impact in '22 and '23, we are anticipating a return to a seasonally adjusted utilization in the winter months in the North Sea in 2024.

Q7000 is currently working in Australia, with projects scheduled for 3 different operators. Projects are expected to continue to midyear, followed by a scheduled transit to Brazil and mobilization for its contracted work in Brazil.

In Brazil, the Siem Helix 2 is contracted into mid-December 2024 with Petrobras. The Siem Helix 1 is contracted performance well abandonment work for Trident, with the recent contract extending work in Q4 of 2025. We expect to benefit from the contract extension at market rates in 2025.

Moving to our Robotics segment, Slide 32. The Robotics segment continues to benefit from a tight market, where both oil and gas market and renewables market are extremely active competing for assets.

In the APAC region, the Grand Canyon II, it's under contract supporting renewables projects in Taiwan into the second half of 2023, with expected good utilizations for the balance of the year.

The Siem Topaz and the T1400-1 trencher are contracting expected to remain in Taiwan through mid-Q4 2024, In the North Sea, the Grand Canyon III is currently undergoing battery pack installation. The vessel is expected to begin trenching in April and have strong utilization into Q4. The Horizon Enabler has contracted trenching projects in Q3 and Q4. The Glomar Wave is forecasted to have good seasonal utilization, performing site clearance operations. In the U.S., the Shelia Bordelon is working in the Gulf of Mexico and expected to transit to the U.S. East Coast to provide wind farm support.

Moving to production facilities, the HP1 is on contract for the balance of '24, recently extended to June of 2025, with no currently expected change. We have expected variability with the production, as the Droshky field continues to deplete, Thunder Hawk is producing after completion of a well cleanout in January.

Continuing on Slide 33, we are expecting to have a more traditional season in our Shallow Water Abandonment segment, with greater seasonal impacts during Q1 and Q4. After a robust 18- to 24-month period of activity, we're seeing operators scale back to mitigate the impact of winter weather. We expect the second, third quarter to be very active with potential for competition for assets if and as schedules fill out.

We expect the Offshore Marine business to maintain good utilization on 5 to 7 liftboats, with some variability on the OSVs and crew boats. Energy Services should have good utilization on 12 to 14 P&A spreads, and 1 to 3 coiled tubing units. There is seasonality in Diving and Heavy Lift business, where the Epic Hedron is currently idle, with limited opportunities. But we do expect a very active season during Q2 and Q3.

I'll skip the remaining slides, starting with 35 and leave them for your reference. This time, I'll turn the call back to Owen for a discussion on our outlook beyond '24 and closing comments.

[Owen Kratz, executive]

Thanks, Erik. As we begin a new year, I thought it would be appropriate if we just restate what Helix does. As you're aware, since 2012, the Helix business model has been focused on the late-life aspects of the oil and gas market, and providing specialty support to the development of offshore wind renewables energy.

As a result, we offer services in 3 areas key to our energy transition focus. First is maximizing existing reserves that remain -- avoiding new drilling. This incorporates subsea access for production enhancement well intervention, marginal field production processing with our FPU, blow out containment contingency services and end of life operating, and reservoir management with the potential for owning and operating end-of-life fields.

Second is our offshore abandonment. This includes shallow water full field abandonment of wells, pipelines and facilities, and deepwater subsea decommissioning, including well P&A.

The third leg is specialty support services for development of renewable energy projects, namely offshore wind farms. This includes jet and cutter trenching of the cables, Boulder site clearance and recently, UXO clearance. Combined, our focus is on the energy transition and sustainable energy from end-of-life reserves through abandonment to development of offshore wind farms.

Our strategy is to remain focused on these areas where we have expertise and efficiencies, with a significant market position with ample growth opportunities within each of these niches. For deepwater production enhancement and well abandonment, Helix is an efficient, purpose-built alternative to the use of drill rigs for nondrilling activities.

For fuel abandonment, Helix offers an integrated service, including all required engineering, planning, management and assets. For both of these, we have support of our Robotics and diving depending on water depths. Our Robotics has evolved over time, allowing Helix to become a global leader in jet and cutter trenching of the wind farm cables. We've also evolved our robotics perform site clearance for wind farms and recently added in-house UXO removal capabilities.

So let's look at the market outlook for each of these segments. First, deepwater well intervention. In 2023, about 60% of our revenues were generated from our assets that compete for work historically done and largely still done by drill rigs in non-drilling mode. There's a sizable market share still done by drilling rigs. Helix's pricing is understandably sensitive to drill rig rates, which are driven by market supply and demand. Drill rig rates and utilization have been rising and are expected to continue rising as many analysts have indicated.

To summarize the recent rig report, the long duration up cycle remains healthy and solid growth as anticipated in most regions globally. Significant ultra deepwater demand is expected in the North of Mexico, Brazil, Africa and Mediterranean. Slower-than-expected reactivation of cold-stacked rigs and a lack of new builds is expected to further drive opportunities for offshore drilling. And leading-edge day rates for ultra-deepwater floaters are expected to exceed $500,000 per day in 2025.

To put this into perspective, current ultra-deepwater rates are over $400,000 a day now, with harsh environment rigs that discounted this in the $350,000 a day range, which is the rate that Helix currently prices to. In our forecast, there are legacy rates that are still working -- that we're still working through, but our average day rate is currently around $300,000 a day.

All to say, there are still meaningful increases in our rates that we expect to come over time. Blended with ongoing longer-term legacy rates, in 2025, there could be as much as a 20% to 25% increase in rates over our current average rate.

Next, let me say a few things about abandonment. I've covered deepwater abandonment as it's part of what we compete for against rigs. I would add that the volume of work and the pressure both from the public as well as the regulatory bodies is increasing, primary basins for Helix are the U.K., Brazil, Australia and the U.S. Gulf, all of which have substantial work for years to come.

In July of '22, we acquired Alliance, as a reentry into the Gulf of Mexico Shallow Water Abandonment, to complement our deepwater abandonment. The year prior to the acquisition, Alliance generated low $20 million EBITDA. Our expectations were for the shallow water abandonment market to significantly become active in the wake of the Fieldwood bankruptcy and accelerate further following a bankruptcy of Cox, both of these have occurred.

After generating roughly $50 million of EBITDA for the full year of 2022, we initially forecasted 2023 to be $60 million, with an earnings potential for that business at $70 million EBITDA. Actual results for 2023 came in at more than $85 million of EBITDA due to a greater volume of work than expected from multiple major recipients of properties from the Fieldwood bankruptcy.

We can't guide to this level of activity for 2024 as clients may slow their work for 2024, and we cannot be certain that we'll recapture another large turnkey project this year, although the potential remains there. The Cox bankruptcy did occur in 2023, but it's taking time to run through the courts. We had expected this work to come to market in 2024, but that may be a bit delayed.

We're forecasting the shallow water market to generate similar EBITDA levels that we guided to for 2023, which is a meaningful reduction in EBITDA contribution year-over-year, however, we do expect a meaningful increase from there in 2025, and believe there'll be a strong shallow water market in the Gulf of Mexico for years to come.

Finally, let's take a quick look at the offshore wind market. With increased cost of capital and higher costs along the entire supply chain, we're seeing some projects delayed or canceled. This market is sustainable and will grow, but we've always tempered expectations that the growth may be less than the exponential forecast some previously thought.

We're also seeing that it's a challenge to achieve margins among the contractors that rushed into the market. We prudently decided to stay within our core competencies and leverage our Robotics expertise to participate as a specialty niche provider for cable, burial and site clearance. We believe there is significant growth ahead for offshore wind -- as a whole to generate growth for Helix in the 2 niches as we explore other peripheral niches. We're continuing to grow and our renewables work as a percentage of revenue is technically decreasing but only because of the greater rate of growth from our other business lines.

I'd like to take a few minutes and touch on the point that illustrate why Helix is differentiated and has such a positive multiyear outlook. First, again, is deepwater intervention. While there is competition in light well intervention that comes and goes, Helix created the light intervention market and has been at it for over 25 years. Many competitors have tried but few have succeeded. It's just not that simple, and Helix is the leader.

In rig alternative, Riser-based intervention, Helix is the undisputed leader and operator of 5 of the 7 assets globally that are capable of non-rig, Riser-based intervention. This market is growing as the mature deepwater fields become more plentiful. Competitive encroachments, not likely, first because it's not that simple to do. And second, Helix has decades of experience in refining the technology, enhancing efficiencies.

Third, a majority of the work is still not done by drill rigs, which are more expensive, have a larger carbon footprint and are about 30% less efficient at work that Helix does. And of course, the drilling rigs are being used to meet drilling needs. These are expensive assets, the high cost of capital, high shipyard pricing and the time required to deliver, we continue to be well placed in the market.

Turning to Shallow Water Abandonment. We believe the Gulf of Mexico should be a strong demand-driven market for at least the next 7 years. To perform the full abandonment of field requires a mix of a number of different assets, resources and capabilities. Over the downturn years, the shallow water contracting community collapsed to a great extent. It's populated by shallow water contractors rarely having the requisite ownership of assets that can perform fully-integrated field abandonment.

As the properties come out of bankruptcy and flow back to the successor ownership, largely the majors, they also no longer have their -- the majors no longer have the requisite teams in-house to manage the work and do this -- to manage their work in -- but some will reconstitute shelf deco teams and tender work through their supply chains. While others will contract project management consultants to tender and manage the work on an outsourced basis.

Either way, these clients don't have all the assets. We believe the market will be strong enough that most, if not all, Gulf of Mexico assets will be utilized as they were in 2023, and the market will be even tighter going forward.

Helix Alliance is well-positioned with a meaningful market share of all classes of assets. We're capable of working under any of these above contracting methods. Helix is the only contractor capable of providing the guarantee of availability to offer a truly-integrated service, managing all aspects of a full field abandonment is much simpler under a single contract, with a single contractor that can guarantee the availability of the assets.

We believe in the integrated value proposition we offer clients, backed by Helix's decades of delivering efficient results. This capability and expertise is also scalable globally, as we see strong markets developing, especially in Brazil and Australia.

The last segment I'd like to comment on is Robotics, specifically as we're positioned to provide offshore wind farm support. The forecasted rate for growth for the offshore wind farm work appears to be at a slower rate than most were forecasting, but it is still growing. We see this growth as being sustainable for multiple years.

Helix is the global leader for jet and cutter trenching of cables, and we see continuing demand in this niche. We have one trencher system that's yet to be deployed. We also have actively -- we're also actively renewing our work-class ROV fleet to maintain quality, operational credibility and continued strong performance.

In 2019, we began to enter the boulder removal market for site clearance. We're adding our second robotic boulder grab and recently added an in-house capability for UXO removal. We've established our credibility and see further growth building off this credibility. Our strength -- our strategy is to be patient and prudent with progressive growth in this market.

To close, let me highlight a few things impacting 2024 as compared to our longer-term outlook. First, since the summer of 2022, the North Sea has been active throughout the full year. We can't be certain that the market won't return to a seasonal market, which could impact 2024.

Second, we don't expect the -- we do expect the Q7000, SH1 and SH2 to work in Brazil for multiple years to come. The Q7000 and SH1 have now been successfully contracted through 2025. All 3 vessels should show significant improvement in rates for 2025. As a result, we've extended the charters on the SH1 and SH2. The accounting treatment to blend an extended charter rates have a negative impact on 2024, of somewhere around $6 million EBITDA, which has been included in our guidance for 2024. But the positive impact of Brazil in 2025 is estimated to be close to $25 million to $30 million EBITDA for just the SH1 alone.

Third point is, the Q7000 expected to complete its work in APAC over the course of 2024. The past year, the vessel has been working under legacy rates, resulting in actually a loss for 2023. The contracts in hand for 2024 are all in APAC, at a mixture of legacy rates and new rates. We expect strong improvement of the EBITDA contribution in the range of $40 million, with another meaningful rate increase for 2025 as the vessel transfers to Brazil for its contract there.

Fourth, the Gulf of Mexico was a strong market for our Riser-based well intervention in 2023. The next year should be even better for our Well Ops U.S. division. Over the past few years, we focused on expanding our geographic footprint, and we're successful in establishing our credibility in West Africa. Demand for our services remains strong there, and it's a market we'd like to maintain.

With the Q7000 contracted elsewhere, we made a decision to take a contract in Nigeria, primarily because of multi -- much improved rates and terms and performed its work with the Q4000. The result of this will be an even better year for Well Ops U.S. division as the Nigeria work will report through the Well Ops U.S. The Q4000 is scheduled to begin transit in Nigeria in August, and then is anticipated the return to the Gulf of Mexico in 2025. So while the Gulf of Mexico has been a strong market for us recently, it's good to have opportunity to go where the rates and terms take us.

Fifth point is the Robotics. They had a great year in 2023 and we expect this should continue again in '24 and '25. We do have one trencher that could be deployed that was idle in 2023. We also have our startup UXO offering for the market.

Sixth point is that I have -- I've covered the Gulf of Mexico Shallow Abandonment market and the reasons for not expecting the overperformance of 2023 to repeat in 2024. Our expectations for 2024 are consistent with the initial guidance we gave for '23, but with the possibility of repeating the stellar 2023 again in '25.

And as I mentioned earlier, we just recently established a 5-year joint frame agreement with [ TELUS ] for their offshore decommissioning requirements, primarily on the shelf in the U.S. Gulf of Mexico, which we believe establishes the foundation for work for years to come.

In summary, we're expecting a 1-year pullback in Shallow Water Abandonment more than offset by the strength of our other business groups. We're anticipating further meaningful growth for 2025, all of this based on just our existing assets and operating leverage.

As I mentioned earlier, we recognized losses in 2023 related to the earn-out payment for Shallow Water Abandonment acquisition and related to our refinancing efforts, without which we would have been significantly higher earnings. In 2024, we'll be making the final earn-out payment of $85 million for the Alliance acquisition. We'll have some noise in the accounting and P&L as a result of completing the redemption of the remaining convertible notes that are still outstanding.

Following this, we have positioned ourselves to have a strong balance sheet, and be meaningfully free cash flow positive. Helix should be enjoying growth from the existing operating leverage -- from existing assets with many market opportunities. So that's it, Erik.

[Erik Staffeldt, executive]

Okay. Thanks, Owen. And operator, at this time, we'll take any questions.

[Operator]

[Operator Instructions] And our first question comes from James Schumm.

[James Schumm, analyst]

Thanks for all the detail. I think you partially answered this. I wanted you guys to quantify the increase in expenses on the blend and extend for the Siem Helix 1 and 2. You said $6 million of EBITDA. Is that per vessel? Or is that total?

[Erik Staffeldt, executive]

That is total, in '24.

[James Schumm, analyst]

Total in '24, is there a different number for 2025?

[Erik Staffeldt, executive]

Yes, there will be different numbers for '25.

[James Schumm, analyst]

But like in '24, are we just capturing -- is it the delta on one of the vessels? Or is it like the full impact? So -- and -- so maybe I'll ask that, but I'll also ask, is it fair to think about a cash OpEx of those vessels of close to $200,000 per day, including the new charter costs?

[Erik Staffeldt, executive]

So I'll say just that, obviously, the extension of those charters, given the strength of the market is something that we pursued. The impact that we're seeing in '24 is primarily related, obviously, to the return in value associated with the vessel itself, there will be some incremental increases in the services that are provided associated with that charter going forward. So there will be additional impacts in '25.

[James Schumm, analyst]

Okay. Is -- and maybe this is for Scotty, but like does that sound right, Scotty? Are we pushing close to $200,000 per day of OpEx on these assets?

[Scott Sparks, executive]

I think your numbers are a bit high there.

[James Schumm, analyst]

Okay. Okay. And then maybe just shifting over to -- I think you partially or maybe fully answered this question, but I can't remember the last time the Q4000 was out of the Gulf of Mexico. So I mean, is this driven by a really strong contract and a really good day rate in Nigeria? Or is it some softness in the Gulf of Mexico? I know that for the offshore drilling market, the -- we might have seen a little bit of an air pocket here. Day rates have been sort of healthy, very good, but sort of flat lined here for at least a year. So I just didn't know if you're seeing any softness this year in the Gulf of Mexico.

[Owen Kratz, executive]

No. We're seeing a strong market in the Gulf of Mexico. As usual, going into the year, there's a bit of white space in the schedule, but nothing that we didn't expect to fill up. The move to Nigeria with the Q4000 was strictly driven by the rates and the terms that we were able to get there, as well as wanting to maintain our footprint in West Africa, which we believe is going to be a strong market for years to come. And after establishing our credibility, we'd like to sort of maintain that presence.

[Scott Sparks, executive]

I'll just add to that, Exxon came to us for this contract and single sourced it to us. It wasn't a competitive tender. So we're getting paid a very healthy [indiscernible] fee and decent day rate for the works over there. But if you look back 3 or 4 years ago, Exxon did no intervention work other than based on rigs. So this is quite a big relationship builder to keep supporting Exxon in Riser-based intervention, non-rig based intervention.

[James Schumm, analyst]

Okay. Great. And just a quick clarification on the Alliance. I just want to be clear, the EBITDA that you're guiding to for this year is -- what is it exactly? Is it $60 million or $70 million? What's the expectation there?

[Erik Staffeldt, executive]

I think it's in that $30 million to $60 million range. I think as Owen mentioned, similar to what -- that's what we had expected at the start of '23. And obviously, it came in much stronger. But I think we're expecting something in that range for '24, with a potential upside in '25.

[Owen Kratz, executive]

I can give a little more color on that. There was one major recipient of properties from Fieldwood that did an extraordinary amount of work in 2023, that tightened the market up quite a bit and drove utilization.

In addition to that, we had a very large lump-sum contract that we performed very well on. I think we mentioned that during the notes, and we'll be finishing that up early this year. That major, that had all of the work last year is pulling back for '24, as sort of regrouping with the intentions of beginning work again in '25. And then we also had Cox bankruptcy, got held up in the courts for a little while, and that work will be flowing back to successor owners by everyone's guess, a little later than what everyone expected. And that's causing a pullback in our expectations on the Shallow Water Abandonment for '24, but then returning to an all-out demand-driven market for '25.

[Operator]

Our next question is from David Smith.

[David Smith, analyst]

I don't want to beat this one to death, but just to revisit in the Shallow Water Abandonment guidance, I mean '23 was a great year, with revenue coming in 30% ahead of the guidance midpoint provided a year ago. So I just wanted to make sure I understand, if you could kind -- to compare the visibility you have for that segment today compared to a year ago? And maybe how much of that outlook is dialing in more seasonality or really just less demand visibility.

[Erik Staffeldt, executive]

So I'll give some high level and then pass it on to Owen. But overall, once again, it is a call off business. I think what we've seen so far this year is the first quarter with the winter weather, we've seen pullback in activity. I think we started to see that right at the end of December. So I think on a year-over-year basis, we definitely expect the first quarter to be slower.

I think with that, I think we also expect activities to ramp up significantly in the second and third quarter. As we view it, obviously, is really in the fourth quarter, is one, are they going to continue at the pace that they're doing? Or is there going to be seasonality there? So there's some variability there. But I would say, at least here at the start of first quarter, we're definitely seeing more of a seasonal impact than we did last year.

[Owen Kratz, executive]

I'll just add a little bit to that. Besides the major producer that had a lot of work last year, pulling back on their expectations for this year. There's the uncertainty of the Cox bankruptcy proceedings. I think this week, there's a hearing for the courts to finally approve Chapter 7, that's a little later, that's much later than what everyone was expecting the pace of it to move. We're just uncertain as to how fast that work comes to the market. It could be later on in 2024, but we don't want to guide to something that you can't bank on. So we're sort of taking the same view as we did going into 2023. And we'll see what happens with the Cox work.

[David Smith, analyst]

Understood and appreciate it. And follow-up was hoping to revisit the commentary about potential well intervention pricing in '25. I think I heard the comment that we could see a 20% to 25% increase in rates versus the current average. I wanted to make sure if that 20% to 25% was referring to average day rate and not a percentage increase.

[Erik Staffeldt, executive]

If compared to our average day rate, which we've talked about it, we have, I think, 3 sort of legacy contracts that are holding our rates back.

[David Smith, analyst]

That 20% to 25%, was that $1,000 per day? Or was that a percentage?

[Erik Staffeldt, executive]

A percentage. And those legacy contracts rolled off in '24 and have already been replaced with much better market rates for '25.

[David Smith, analyst]

Perfect. I appreciate that. If I could ask one clarifying question. Did I hear correctly, you all say that the Siem Helix 1 repricing should add $25 million to $30 million of EBITDA in '25 versus '24?

[Scott Sparks, executive]

Yes, that's correct. Yes, and I suspect -- in '25, the Siem Helix 1, most likely for the '25 for the Siem Helix 2 and certainly for the Q7000.

[Operator]

And there are no further questions on the phone. At this time, I'll turn the call back to you for closing remarks.

[Erik Staffeldt, executive]

Okay. Thank you very much for joining us today. We very much appreciate your interest and participation and look forward to having you on our first quarter 2024 call in April. Thank you very much.

[Operator]

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