e425
Filed by Helix Energy Solutions Group, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 and Rule 14d-2(b)
of the Securities Exchange Act of 1934
Subject Company: Helix Energy Solutions Group, Inc.
Commission File No.: 0-22739
The following documents are filed herewith pursuant to Rule 425 under the Securities Act of 1933:
Press Release of Helix Energy Solutions Group, Inc. dated March 6, 2006; and
Slide presentation to investors and analysts in connection with the presentation by Helix
Energy Solutions Group, Inc. at the Raymond James Institutional Investors Conference in Orlando,
Florida on March 7, 2006.
Transcript of presentation by Helix Energy Solutions Group, Inc. at the Raymond James 27th
Annual Institutional Investors Conference on March 7, 2006.
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PRESSRELEASE
www.HelixESG.com |
Cal Dive International, Inc. · 400 N. Sam Houston Parkway E., Suite 400 · Houston, TX 77060-3500 · 281-618-0400 · fax: 281-618-0505
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For Immediate Release
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06-009 |
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Contact: |
Wade Pursell |
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Date: March 6, 2006
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Title:
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Chief Financial Officer |
Helix to Present at Raymond James Conference
HOUSTON, TX Helix Energy Solutions Group, Inc. (Nasdaq: HELX) will discuss its strategy and
expectations for 2006 on Tuesday, March 7, at Raymond James Institutional Investors Conference in
Orlando, Florida.
The presentation will begin at 8:05 a.m. (Eastern Time). Audio of the presentation will be
broadcast live from www.wsw.com/webcast/rj19/helx/. The slides will be available on the Helix
website, www.HelixESG.com, by first clicking Investor Relations and then Presentations.
Helix Energy Solutions, headquartered in Houston, Texas, is an energy services company that
provides innovative solutions to the oil and gas industry worldwide for marginal field development,
alternative development plans, field life extension and abandonment, with service lines including
diving services, shelf and deepwater construction, robotics, well operations, well engineering and
subsurface consulting services, platform ownership and oil and gas production.
FORWARD-LOOKING STATEMENTS
This press release and attached presentation contain forward-looking statements that involve risks,
uncertainties and assumptions that could cause our results to differ materially from those
expressed or implied by such forward-looking statements. All statements, other than statements of
historical fact, are statements that could be deemed
forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, including, without
limitation, any projections of revenue, gross margin, expenses, earnings or losses from operations,
or other financial items; future production volumes, results of exploration, exploitation,
development, acquisition and operations expenditures, and prospective reserve levels of property or
wells; any statements of the plans, strategies and objectives of management for future operations;
any statement concerning developments, performance or industry rankings relating to services; any
statements regarding future economic conditions or performance; any statements of expectation or
belief; any statements regarding the proposed merger of Remington Oil and Gas Corporation into a
wholly owned subsidiary of Helix or the anticipated results (financial or otherwise) thereof; and
any statements of assumptions underlying any of the foregoing. The risks, uncertainties and
assumptions referred to above include the performance of contracts by suppliers, customers and
partners; employee management issues; complexities of global political and economic developments,
geologic risks and other risks described from time to time in our reports filed with the Securities
and Exchange Commission, including the Companys Annual Report on Form 10-K for the year ending
December 31, 2004; and, with respect to the proposed Remington merger, actual results could differ
materially from Helix expectations depending on factors such as the combined companys cost of
capital, the ability of the combined company to identify and implement cost savings, synergies and
efficiencies in the time frame needed to achieve these expectations, prior contractual commitments
of the combined companies and their ability to terminate these commitments or amend, renegotiate or
settle the same, the combined companys actual capital needs, the absence of any material incident
of property damage or other hazard that could affect the need to effect capital expenditures, any
unforeseen merger or acquisition opportunities that could affect capital needs, the costs incurred
in implementing synergies and the factors that generally affect both Helix and Remingtons
respective businesses as further outlined in Managements Discussion and Analysis of Financial
Condition and Results of Operations in each of the companies respective Annual Reports on Form
10-K for the year ended December 31, 2004. Actual actions that the combined company may take may
differ from time to time as the combined company may deem necessary or advisable in the best
interest of the combined company and its shareholders to attempt to achieve the successful
integration of the
companies, the synergies needed to make the transaction a financial success and to react to the
economy and the combined companys market for its exploration and production. We assume no
obligation and do not intend to update these forward-looking statements.
ADDITIONAL INFORMATION
Helix and Remington will file a proxy statement/prospectus and other relevant documents concerning
the proposed merger transaction with the Securities and Exchange Commission (SEC). Investors are
urged to read the proxy statement/prospectus when it becomes available and any other relevant
documents filed with the SEC because they will contain important information. You will be able to
obtain the documents free of charge at the website maintained by the SEC at www.sec.gov. In
addition, you may obtain documents filed with the SEC by Helix free of charge by requesting them in
writing from Helix or by telephone at (281) 618-0400. You may obtain documents filed with the SEC
by Remington free of charge by requesting them in writing from Remington or by telephone at (214)
210-2650. Helix and Remington, and their respective directors and executive officers, may be
deemed to be participants in the solicitation of proxies from the stockholders of Remington in
connection with the merger. Information about the directors and executive officers of Helix and
their ownership of Helix stock is set forth in the proxy statement for Helixs 2005 Annual Meeting
of Shareholders. Information about the directors and executive officers of Remington and their
ownership of Remington stock is set forth in the proxy statement for Remingtons 2005 Annual
Meeting of Stockholders. Investors may obtain additional information regarding the interests of
such participants by reading the proxy statement/prospectus when it becomes available.
Raymond James 27th Annual
Institutional Investors Conference
Orlando, Florida
March 7, 2006
Owen Kratz - Chief Executive Officer
Wade Pursell - Chief Financial Officer
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Certain statements made herein contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The words "expect," "will," "look forward to" and similar expressions are intended to identify
forward-looking statements.
The expectations set forth in this filing regarding accretion, returns on invested capital, achievement of
annual savings and synergies, achievement of strong cash flow, sufficiency of cash flow to fund capital
expenditures, achievement of debt reduction targets and the proposed merger of Remington Oil and Gas
Corporation into a wholly owned subsidiary of Helix are only the parties' expectations regarding these
matters. Actual results could differ materially from these expectations depending on factors such as the
combined company's cost of capital, the ability of the combined company to identify and implement cost
savings, synergies and efficiencies in the time frame needed to achieve these expectations, prior
contractual commitments of the combined companies and their ability to terminate these commitments or
amend, renegotiate or settle the same, the combined company's actual capital needs, the absence of any
material incident of property damage or other hazard that could affect the need to effect capital
expenditures, any unforeseen merger or acquisition opportunities that could affect capital needs, the costs
incurred in implementing synergies and the factors that generally affect both Helix's and Remington's
respective businesses as further outlined in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in each of the companies' respective Annual Reports on Form 10-K for the year
ended December 31, 2004. Actual actions that the combined company may take may differ from time to
time as the combined company may deem necessary or advisable in the best interest of the combined
company and its shareholders to attempt to achieve the successful integration of the companies, the
synergies needed to make the transaction a financial success and to react to the economy and the
combined company's market for its exploration and production.
Forward-Looking Statements
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Helix and Remington will file a proxy statement/prospectus and other relevant documents
concerning the proposed merger transaction with the Securities and Exchange Commission
("SEC"). Investors are urged to read the proxy statement/prospectus when it becomes
available and any other relevant documents filed with the SEC because they will contain
important information. You will be able to obtain the documents free of charge at the website
maintained by the SEC at www.sec.gov. In addition, you may obtain documents filed with the
SEC by Helix free of charge by requesting them in writing from Helix or by telephone at (281)
618-0400. You may obtain documents filed with the SEC by Remington free of charge by
requesting them in writing from Remington or by telephone at (214) 210-2650. Helix and
Remington, and their respective directors and executive officers, may be deemed to be
participants in the solicitation of proxies from the stockholders of Remington in connection
with the merger. Information about the directors and executive officers of Helix and their
ownership of Helix stock is set forth in the proxy statement for Helix's 2005 Annual Meeting of
Shareholders. Information about the directors and executive officers of Remington and their
ownership of Remington stock is set forth in the proxy statement for Remington's 2005
Annual Meeting of Stockholders. Investors may obtain additional information regarding the
interests of such participants by reading the proxy statement/prospectus when it becomes
available.
Additional Information
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Helix Strategy
Contracting Services
Oil & Gas Production
Financial Information
Report Card
Presentation Outline
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Helix Energy
Solutions Group, Inc.
Ticker symbol:
NASDAQ: HELX
Website:
www.HelixESG.com
Trading will commence on the NASDAQ with new
ticker symbol HELX on Monday March 6, 2006
Helix Energy Solutions
H E L I X E N E R G Y S O L U T I O N S
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Strategy
H E L I X E N E R G Y S O L U T I O N S
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Industry Macro Issues
H E L I X E N E R G Y S O L U T I O N S
Increasing World Demand for Oil and Natural Gas
Global Production Rates Peaked or Peaking
Globalization of Natural Gas Market
Increasing Number of Mature and Small Reservoirs
Increasing Ratio of Contribution to Global Production from
Marginal Fields
Increasing Offshore Activity
Increasing Subsea Development
Highly cyclical costs
Cyclical Commodity Prices (but with secular upward trend)
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Helix: A Full Cycle Energy Service Company
H E L I X E N E R G Y S O L U T I O N S
We provide development solutions and related services to the energy
market and specialize in the exploitation of marginal fields where we
differentiate ourselves by taking oil and gas production as well as cash
as payment for our services.
Production Contractor
Service Contractor
Oil & Gas Producer
Oil & Gas Producer
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Two Stranded Strategy
Services
Production
&
=
Reduced
Cyclicality
(Steady Growth)
And Superior
Financial Returns
H E L I X E N E R G Y S O L U T I O N S
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Q4000
Seawell
Intrepid
Express
Caesar
25 ROVs
4 Trenchers
Structure / Resources
Structure / Resources
Service
Contracting
Marco Polo
Independence Hub
Gunnison
Shelf Contr.
(Cal Dive)
Reservoir &
Well Tech Serv
Deepwater
Contracting
Well
Operations
Pipelay
Robotics
4 DP DSVs
4 Sat DSVs
15 Diving Vessels
3 Pipelay Vessels
Prospect Generation
/Exploration
Deepwater PUDs
Mature Properties
Oil & Gas
Production
Production
Facilities
180 + Engineers
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Contracting Services
H E L I X E N E R G Y S O L U T I O N S
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Two Stranded Approach
External
Contracting
&
=
H E L I X E N E R G Y S O L U T I O N S
Production
Contracting
Internal Backlog
And
Superior Return
on Capital
Reservoir
Engineering
Drilling
Facility
Solutions
Construction
Well Ops.
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H E L I X E N E R G Y S O L U T I O N S
Exploration
Appraisal
Development
Abandonment
Production
Application of Contracting Services
Prospect Generation
Drilling Eng
Well Design
Modeling
Development Eng.
Pipe/Umbilical Lay
& Burial
Tie-In
Facilities
IMR
Field Ops.
Production
Enhancement
Well Ops.
Drilling
Completion
Well P&A
Salvage
Decommissioning
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H E L I X E N E R G Y S O L U T I O N S
Deepwater
Focus on services that provide
best "niche" financial returns in
broader market and add value
for production contracting.
Shelf
Integrate Stolt and Torch
acquisitions into existing
operations and possibly
complete sale (retaining a
majority stake) of non-core
Shelf Contracting business.
Contracting Services: Near Term Goals
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H E L I X E N E R G Y S O L U T I O N S
Asset Type Cal Dive Stolt Torch Total
Moored Pipelay 0 1 2 3
DP Sat Diving 3 1 0 4
Moored Sat Diving 2 1 1 4
Moored Surface Diving 2 3 1 6
Diving Utility Boats 6 2 1 9
Portable Sat Systems 2 1 0 3
Total 15 9 5 29
Shelf Consolidation
2006 estimated EBITDA in the $100 - $125 million range with hurricane clean-up work
a key driver
Consolidated operations will have substance / critical mass to make further market
consolidation moves in GOM and internationally
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H E L I X E N E R G Y S O L U T I O N S
Market Differences (Mature vs. Growth)
Strategy Differences (Volume/Market Share vs. Less
Services)
Focus Objectives/Goals and Simplify Story for Investors
Unlock Value Selling Minority stake in higher multiple
business recouping all of investment made in assets
Maintain Control and Access to Assets
Why Shelf Diving Carve-Out
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H E L I X E N E R G Y S O L U T I O N S
Drilling/Completion
Production Facilities
Construction
Well Ops
Key Assets
Q4000
Mobile
Production
Units
Intrepid
Express
Caesar
ROVs
Q4000
Seawell
ROVs
Value Creating Methodologies
Slimbore
Wells
Re-
Deployment of
Floater
Pipe
Burial
Non Drill Rig
Intervention
'Full cycle cost can be reduced by at least 20%
compared to conventional approaches'
Strategic Advantage of Commercial Model
In the Deepwater
In the Deepwater
In the Deepwater
Reservoir & Well
Technology
180 +
Engineers
Reservoir
Management
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Services - Reservoir and Well Technology
CoreTeams(tm) - outsourced integrated
reservoir management and well
technology capabilities
OnDemand(tm) - consultancy services
Pulse(tm) - online analysis of upstream
data
FaultFinder(tm) - high definition analysis of
faulting
FlowDoctor(tm) - flow assurance service
LogDoctor(tm) - formation evaluation
services
ProductionMentor(tm) - production
optimization
PromotePartner(tm) service offered to oil
and gas companies to help maximise the
value of an asset through a promote, farm
out or divestment process.
SandMentor(tm) - sand production
analyzer
WellDoctor(tm) is our well integrity
assurance service
Transforming subsurface uncertainty into value
Helix RDS is a world class provider
of reservoir and well technology
services to the upstream oil and gas
industry. The combination of our
business scale, service scope, track
record and independence make
Helix RDS a unique service partner.
This capability and experience
continues to transform subsurface
uncertainty into significant value for
our clients around the globe.
H E L I X E N E R G Y S O L U T I O N S
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H E L I X E N E R G Y S O L U T I O N S
Addition Of Modular-Based
Drilling System
Hybrid Slimbore Technology
Designed For Deepwater
Exploration And Appraisal
Scheduled Completion:
Early 2007
Drilling: Q4000 Upgrade
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Risk Mitigation on Internal
Exploration Prospects
Use of Q4000
Availability
Low Relative Cost for Drilling
Prospect Proximity to Existing Infrastructure
Ease of Development
Use of Partners on a Promoted Basis
High Quality Prospects
Low Cost Drilling
Many Investors / Few Opportunities
H E L I X E N E R G Y S O L U T I O N S
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Drilling with Q4000 - Value Proposition
60 Days of Work Indicative
Dayrate ($K/Day) Revenue
($MM) Gross Profit
($MM)
Construction 150 9 2
Well Intervention 200 12 4
Drilling for Third Party 300 18 6
Drilling Internal Prospect with two equal Partners 300 12* 4*
H E L I X E N E R G Y S O L U T I O N S
* - Return as for Well Intervention
- Upside of potential added hydrocarbon reserves with $6 million
lower cost basis
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H E L I X E N E R G Y S O L U T I O N S
Host production facilities
capitalizing on "Hub and
satellite" field concept of the
Deepwater Gulf
Fixed monthly demand
charges and volumetric
tariff charges
Farm-In opportunities
Installation of facility and
Subsea tiebacks
Minimal re-deployable
production facility
Production Facilities: Strategy
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H E L I X E N E R G Y S O L U T I O N S
Jointly owned (50%) with
Enterprise Products L.P.
TLP Capacity: 120,000
bbls/day and 300,000
mcf/day
Commenced production in
mid-2004 from Marco Polo
reservoir.
All K2/K2 North and Genghis
Khan wells should be
brought on stream before
mid-2006 boosting earnings
in 2006 and beyond
Production Facilities: Marco Polo TLP
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H E L I X E N E R G Y S O L U T I O N S
Jointly owned (20%) with
Enterprise Products L.P.
Semi-submersible Capacity:
Increased to 1 bcf/day
Project is in build phase and
will be deployed in MC920
(8,000 fsw)
Mechanical completion
expected in late 2006 with
first production in early 2007
We see good opportunities
for both associated construction
work and PUD acquisitions in
the surrounding area
Production Facilities: Independence Hub
Production Facilities: Independence Hub
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H E L I X E N E R G Y S O L U T I O N S
2004 2005 2006 2007 2008 2009
50 78 82 92 88 92
Each tree installation can generate:
Pipelay and Pipe Burial
Intrepid
Express
Caesar
Northern Canyon
Downhole Well Intervention
Q4000
Seawell (North Sea)
Robotic Maintenance
Canyon ROVs (28 units)
Source: Quest Offshore Resources, Inc. (GOM only)
Deepwater - Construction and Well Operations
Subsea Tree Orders Are a Good Leading Indicator
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H E L I X E N E R G Y S O L U T I O N S
2002 2003 2004 2005
Exploitation Additions
Purchased Reserves 157 150 116 225
other
Operator of 40 fields, 120
platforms and 500 wells
14 year history
Focus on Production
efficiency
Well exploitation and
enhancement
Hedge commodity risk
Total Proven Reserves as of Year-end (Bcfe)
Oil and Gas Production
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H E L I X E N E R G Y S O L U T I O N S
Acquisitions Working
Interest (%) Est. Acquisition
& Development Costs Est. Acquisition
Reserves Est. Marine Contracting Work Est. First Production Timing
Development
Property (PUD): $350 M - $400 M 130 - 200 Bcfe $100 - $130MM
Telemark 30 1Q 2008
Devil's Island 50 1Q 2007
Tulane 50 4Q 2006
Bass Lite 22.5 1Q 2008
Tiger 40 3Q 2006
Mature Property:
Murphy Package 100 $196 M - $221 M 75 - 85 BcFe $33 M - $45 M June 10, 2005
Oil & Gas Production: 2005 Acquisitions
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H E L I X E N E R G Y S O L U T I O N S
$27.00 per share cash, 0.436 Cal Dive shares per Remington share
$1.4 billion enterprise value based on 30.15 million Remington shares
58% cash / 42% stock
Tax free reorganization
Pro forma ownership: 86% Cal Dive, 14% Remington.
Remington debt free with cash estimated to be $2 per share at
closing
Conditions to closing.
Regulatory approval
Remington stockholder approval.
Expected close in second quarter
Remington team key to going concern
Retain all key management and operations personnel
Maintain Dallas office
Incentivized for future growth
Remington Acquisition Overview
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H E L I X E N E R G Y S O L U T I O N S
Access to both deepwater prospects and the means to exploit them.
Cal Dive operatorship.
Results in continuation of differentiated long-term earnings growth.
REM's prospect generation based growth strategy is highly
complementary to Cal Dive's production model.
REM will build on existing portfolio of deepwater PUDs.
Create extra exploitation value through the deployment of CDIS assets
for drilling, development, maintenance and abandonment.
Accelerates high impact, ready to drill inventory.
4 Tcfe reserve potential (1 Tcfe risked).
4x proved reserves on risked basis.
100% working interest in all deepwater prospects.
Strategic Rationale
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H E L I X E N E R G Y S O L U T I O N S
Helix can enhance financial results of key deepwater prospects by
promoting partnership arrangements
Exploitation of REM's prospect inventory will provide increased
backlog for Marine Contracting
Combined Shelf Production business has critical mass.
Operating synergies and purchasing leverage.
Utilize Remington seismic library across Cal Dive assets
Remington possesses a top flight technical team
The transaction is immediately accretive to earnings and cash flow
Strategic Rationale
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H E L I X E N E R G Y S O L U T I O N S
Bottom-up reserve risk assessment based on historical success
rates.
Risked Pretax PV?10
Number Of Prospects Net Unrisked Potential Net Risked Potential Forward Curve $8.50 Gas / $55 Oil
(Bcfe) (Bcfe) ($MM) ($MM)
Low Risk Shelf (Ps > 50%) 44 165 109 $315 $248
Deep Shelf/Conventional High Risk 87 1,584 330 988 792
Deepwater 19 2,204 691 1,9151 1,4491
Total 150 3,954 1,130 $3,217 $2,488
Multiple Of Remington Proved Reserves 14x 4x
5-7 year drilling inventory.
Targeting 30% fleet utilization with Remington/ERT activity.
Remington Prospect Portfolio
1 Over $1 Billion of life of field services involved.
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Remington Deepwater Inventory
All Prospects: 100% Operated, 100% Working Interest
Noonan
45-65 MMboe potential
Transocean Amirante under contract
Q3 2006 exploration well
$102,500 dayrate (1/3 of current spot dayrate)
Option for second well at $135,000 per day
High quality inventory enables mitigation of exploration
risk through utilization of partners on a promoted basis
H E L I X E N E R G Y S O L U T I O N S
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Combined Deepwater Portfolio
Independence Hub
Telemark
Bass Lite
Marco Polo
Noonan
Devil's Island
Tiger
Gunnison
Tulane
Ty Webb
Motor Mouth
Al Czervik
H E L I X E N E R G Y S O L U T I O N S
Drillable with Q4000
Remington Deepwater Prospects
Helix Fields
Helix Production Facilities
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Combined Production : > 220 mcfe/d (2006)
Combined Proven Reserves : > 500 bcfe (end 2005)
Combined Deepwater Fields : > 30
Combined Risked Prospects : > 1,400 bcf
Associated Services Backlog : > $1,500 m
Post Remington Numbers
H E L I X E N E R G Y S O L U T I O N S
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Oil and Gas Production: Near Term Goals
Oil and Gas Production: Near Term Goals
Close Remington acquisition
Opportunities for mature property
deals possible as several
independent E&P companies
have divestment plans
International areas opening up for
our model e.g. North Sea
Reserve enhancement on existing
properties
Participation in "High Probability"
exploration prospects
H E L I X E N E R G Y S O L U T I O N S
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Cal Dive Hedges: As Of February 28, 2006
H E L I X E N E R G Y S O L U T I O N S
Production Period Instrument
Type Average Monthly Volumes Weighted Average Price
Crude Oil
Jan - Dec 2006 Collars 125 MBbl $44.00 - $70.48
Jan - Dec 2007 Collars
50 MBbl $40.00 - $62.15
Natural Gas
Jan - Dec 2006 Collars
718,750 MMBtu $8.16 - $14.40
Jan - Mar 2007 Collars 600,000 MMBtu $8.00 - $16.24
* Does not include Hedges on Remington Production
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H E L I X E N E R G Y S O L U T I O N S
Financial Information
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Consistent Top Line Growth
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Marine Contracting 32.7 63.9 93.9 139 128 110 164 240 259 300 500 700
Oil & Gas 4.8 12.2 16.5 12.6 32.5 70.8 63.4 62.8 137.3 243 272 400
36% CAGR
Revenues in Millions
H E L I X E N E R G Y S O L U T I O N S
Estimate
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Bottom Line
2002 2003 2004 2005 2006
12.4 32.8 79.9 150 191
82
Net Income in Millions
Range
H E L I X E N E R G Y S O L U T I O N S
Estimate
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Significant Cash Generation
2002 2003 2004 2005 2006
65.8 126.9 239.3 353 490
128
EBITDA in Millions (see GAAP reconciliation at www.HelixESG.com)
Estimate
Range
H E L I X E N E R G Y S O L U T I O N S
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2001 2002 2003 2004 2005 2005
12 5 7 13 17 22
Return on Capital Invested
4th QTR
12
5
7
13
17
22
Percentage (see calculation at Company's website - www.HelixESG.com)
H E L I X E N E R G Y S O L U T I O N S
42
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CAPEX MIX
Marine Contracting Oil & Gas Production
58 42
2002 - 2005
$1 Billion
Marine Contracting Oil & Gas Production
25 75
Contracting Services Oil & Gas Production
42 58
$ 1.5 Billion
2007 - 2009
Projected
$1.2 Billion
2006
Projected
Contracting Services
Oil & Gas Production
H E L I X E N E R G Y S O L U T I O N S
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MARAD
Construction and Other
Debt Long Term
Revolving Credit
(Amounts in Millions)
12/31/05
12/31/04
12/31/03
12/31/02
Debt To Book Capitalization
40%
35%
22%
40%
Convertible Notes
H E L I X E N E R G Y S O L U T I O N S
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Pro Forma Debt Summary
Pro forma interest coverage of 7.1x2 on TTM EBITDA.
Projected Pro Forma 2006 Debt Service Coverage of 9.6x2
Projected Debt to TTM EBITDA at Closing: 2 to 1
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1 Floating rate, seven-year term, 1% amortization.
2 See GAAP reconciliation at Company's website - www.HelixESG.com.
H E L I X E N E R G Y S O L U T I O N S
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2006 Objectives (Excluding Remington)
Contracting Services
Revenues: $650 - 750 million
Margins: 25% - 35%
Equity earnings: $27 - 32 million
Achieve mechanical completion of the
Independence Hub
Begin construction for next facility
opportunity
Oil and Gas Production
44 - 47 Bcfe of production
Begin production from at least one
acquired PUD
Make first North Sea acquisition
Financial
Earnings in range $2.30 - $3.30/share
Safety
TRIR below 1.8
Production Contractor
Service Contractor
Oil & Gas Producer
Oil & Gas Producer
H E L I X E N E R G Y S O L U T I O N S
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HELIX ENERGY SOLUTIONS GROUP, INC.
Raymond James 27th Annual Institutional Investors Conference
March 7, 2006
Moderator: All right. Try to keep this on time. Our next presenter company is probably the
simplest story youll see today. Recently changed their name, actually yesterday, from Cal Dive
International to Helix Energy Solutions and well let Owen tell you exactly what that means.
Owen Kratz: Good morning. Basically, we thought it was getting to be too simple, so we
thought wed change the name. No, Helix is ... let me make sure I word this right. Where we are
with the name change is that we feel like we have developed the model that weve been working on
for the last 17 years. We feel like its developed sufficiently now that it needs a concerted
effort to really try and put out a clear message as to what we do, rebrand the company. And
therefore, we thought the name Cal Dive, although it was a sentimental thing for us to ... you
know, hard thing to do, but we thought we needed a name that more accurately reflected who we are,
what we did and where we were heading.
And this presentation, I think, will also explain you know, the selection of the name Helix.
But first, let me just start here with some industry macro stuff. And this has ... I guess the
bottom line here ... what we see and what has been driving the model development over the last 17
years is that theres more and more small reservoir discoveries. Theres more mature fields.
Theres more and more subsea developments.
The service sector is a very cyclical sector with extreme ranges. The service companies for a
long time have been seeking a way to capture more value that they create in the reservoirs, and the
producers are reluctant to let that happen and treat the service contractors more as a commodity.
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March 7, 2006
So weve been trying for a long time to develop an alternative to this. What weve come up
with is a model whereby we own and control key services during the life of a reservoir from start
to finish. But by key, Im not talking about all of the services, all of the commodity type
services, but the ones that applied with the right methodology can significantly impact unlocking
the value in specifically marginal fields.
You know, by having a lower ability ... a lower cost of development. And we could develop any
field with a lower cost, but where we have our competitive advantage then, of course, would be in
the marginal fields. What weve done is married that group of services with being our own best
customer by either partnering with producers, thus aligning interest, or buying the marginal fields
and adding them to a portfolio which basically is our backlog.
Having said that, the name Helix came about from the recognition of the fact that we have two
strands, just like the DNA molecule. We have the services and we have the production blended
together. The idea is to reduce the cyclicality, accelerate growth, have a smoother cash flow and
generate better returns than whats typically available in the service industry.
This slide just shows how were structured. Were basically two groups, the production side
and the service side. You can see the services we have with the assets listed, and I wont go
through them. But one thing I might note is that some additions to services would come down under
Well Ops where we are adding drilling as a service besides just the well intervention.
Moving on to the contracting services, the name is also appropriate because we have two
strands in the way that we contract our work. One is, we do market our services to the external
market. And part of the selection process of which services we have in the company is dictated by
the demand that we see in markets for specialty niche services.
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HELIX ENERGY SOLUTIONS GROUP, INC.
Raymond James 27th Annual Institutional Investors Conference
March 7, 2006
The other side is, we are our own best customer, and we market to our production group with
our services. This builds basically the internal backlog. When you see other contractors touting
the backlog that they have, instead of that, this is what youll see us tout, because in our
experience, in order to achieve a significant backlog of contracted work, you have to build that
through reducing margin and taking on contractual risk. And the whole idea of our model is to try
and avoid that kind of a business.
This slide just shows you that we have over time ... we started off in 1992 making
acquisitions of mature fields with the abandonment ... the most downstream sector. Over the years,
we have added services, specifically moving ever upstream in the process. And this allows us to
enter the market on production acquisitions at any time during the cycle. And it also then allows
the full suite or tool box to apply in order to lower our F&D cost.
Near term goals for contracting are basically focusing on the deep water and adding to
existing ... adding to the existing service lines that we already have, focusing on those services
that really significantly unlock the value in the reservoir. And at the same time, beginning a
process now as we gain critical mass of divesting the more commodity type services and redeploying
the capital to the services that can make a bigger impact on the value creation in the reservoir.
The shelf work is where we started from. It is our roots, but it is more of a commodity type
service. The development in the shallow water Gulf of Mexico, anyway ... and Id like to be just
specific about the Gulf of Mexico ... the development is pretty much complete. Most of the work on
the shelf in the Gulf of Mexico is inspection, repair and maintenance.
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HELIX ENERGY SOLUTIONS GROUP, INC.
Raymond James 27th Annual Institutional Investors Conference
March 7, 2006
Obviously with the hurricanes, thats still a very, very good market. Internationally,
theres still opportunity to grow in the shelf water depths, but in the Gulf of Mexico, what we
decided to do was be aggressive and consolidate the market. Its needed it. Its needed it for
decades, believe me. And by doing that, were able to increase the quality, look at a long term
vessel replacement program, upgrade the methodology, be a more attractive employer for bringing in
people. And theres still a lot of up side here for further consolidation, both in the Gulf of
Mexico and internationally.
The reason for us wanting to consider a divestment of this group ... and when I say
divestment, were only talking about a minority interest share going. We still want control of
these assets. But we believe that we could reinvest the capital at a better return in the other
side of the company.
But one of the primary reasons for us wanting to do this at this point is to clarify what we
do. And I think that commodity type business sort of clouds the picture, and you have to sort of
keep flipping back and forth. The commodity type business in the service sector grows
volumetrically by gobbling up market share. You know, consolidation, adding vessels. You know,
the typical volumetric growth model.
On the other side of the company, focusing on unlocking the value on marginal fields, were
actually more interested in employing less rather than more services. Our growth is achieved by
applying those services again and again to a number of reservoirs and then cumulatively building
the value that were creating in the reservoirs. And thats where our future growth really will
come from.
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HELIX ENERGY SOLUTIONS GROUP, INC.
Raymond James 27th Annual Institutional Investors Conference
March 7, 2006
But this market here does still have potential growth. It does still have great potential
value as an enabler to penetrate new markets such as the North Sea and southeast Asia. So we want
to stay involved and we want to keep a majority interest in this.
Turning to the services in general, you can see again a breakdown. This slide is a bit
redundant, but the point Id like to make here is that with the services that we now have applied
using our methodology, which is a little different than the way most producers would use our
assets, we do have the ability to lower our F&D costs by at least 20 percent when applied to our
own reservoirs.
Just turning to each of the service lines individually for a second, starting with the most
upstream ... Ill work my way downstream in the process. Last year, we acquired Helix RDS. Its a
reservoir technology provider, a third party provider on an outsource basis to producers. Its the
largest in Aberdeen, combined with our in-house reservoir skill sets ... we now have over 200
people involved in the reservoir side of the company.
And if you look on the right hand side there, the number of services and skill sets that we
have in-house, its pretty impressive. We have at least as many skill sets and probably a broader
array than certainly smaller producers. And quite honestly, I think we probably have a better
reservoir of skill sets than most producers our own size.
Moving downstream a little bit from there, we are adding drilling on board the Q4000 this
year. This is something that we wanted to do when we first built the vessel. The problem was
market acceptance of us as a driller was probably not there, because again, the way were going to
drill is not exactly the same way that a drilling company would. What we would use is a
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March 7, 2006
hybrid
slimbore technology which is a proven technology, but its just not that prevalently used, more for
commercial reasons than technology reasons.
Its very suitable, though, for marginal field development, which is why we wanted to add it.
The market wasnt ready for us then, and we did not have the portfolio of projects to hedge that
market risk. And therefore, we never put the equipment on board. I will say that the vessel does
not require any modification. That was all done during the build process. All thats required
right now is for us to order the long lead items such as the tensioners and then install them.
Theres no shipyard time. Its all at the dock.
So as soon as everything gets in, well be able to put it into service with very minimal down
time and looking at being able to go drilling in early 07. Now, this is an upstream move for us,
but if you think about it, its a logical one. By using the Q4000 on drilling, we have
availability of rig time, which is very valuable in this current cycle. We also have a relatively
lower cost of drilling.
The type of upstream moves that were talking about making are around our existing
infrastructure. Therefore, the cost and risk of development is slower, as well as the risk of the
expiration. You know, were drilling in well understood reservoirs.
And then also, by moving upstream and the whole process of acquisition, we get on the right
side of the promote trends. Right now, we found over the last two years that weve had to pay a
pretty high promote cost to get into deals, and thats when we dont get pref-righted out of deals.
Theres just too few prospects out there and too many people chasing them and too much money
chasing them.
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HELIX ENERGY SOLUTIONS GROUP, INC.
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March 7, 2006
By moving upstream here, were on the right side of the fence. Well be able to further
mitigate our upstream risks by bringing in partners. And that should be no problem at all. This
gives you ... I dont know. Ill let you look at this in your own time. Its putting the Q4000 in
drilling is actually another benefit is a better return on the assets in general. Were able to
command a much higher day rate in drilling. And you can see when drilling $300,000 a day generates
about six million in gross profit, which is more than the current applications of the vessel.
If we brought on two partners, and this is an interesting note ... two equal partners means
that we still book $4 million in profit, which is the same returns that we generate now. And the
extra two million because of the accounting rules winds up as an elimination and lowers the cost
basis in the reservoir, and therefore improves the return in the reservoir. And thats how the ...
thats one example of how the model starts working together.
Moving on downstream on the facility side, we do provide floating production facilities on a
third party basis to producers to use as a hub. We do this on a fixed monthly fee with a tariff
charge. Oftentimes, this is a bankable contract. What this does is, it opens up opportunities for
us to farm in to the surrounding acreage and opportunities tying them back ... getting the benefit
both from the reservoir and from the tariff through the facility.
It also generates an awful lot of work for our other services and the inflation of the
facility and subsea tie-backs. The next phases, as you can see on the left bullet, we do have
aspirations of building another floating production facility in the near future, which would be a
smaller mini facility. Hubs are large facilities that you then tied all the surrounding reservoirs
back to, but there are an awful lot of stranded marginal fields out there. With a minimal
facility, you can then
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March 7, 2006
... if its redeployable with our existing assets ... we have a low cost method of going in and
producing each one sequentially. And thats the next phase of what were going to be doing.
You know, just to run through our own facilities real briefly Marco Polo, we own 50 percent.
Its not full to capacity right now, but at its current contractual commitments we do have full
pay out at five years with ... or its about a ten percent internal rate of return. Plus, we have
all of the up side from the excess capacity on board. K2 and K2 North and Genghis Khan are being
tied back, and we would expect this to be finalized by the end of 06, moving towards full capacity
on the unit for 07.
The next facility deal that we have is not quite in yet. Its being built in Jarong with the
top side thing built here in Texas. We own 20 percent of the Independence Hub deep draft
semi-submersible. It has six fields tying back to it and 8,000 feet of water. And again,
mechanical completion will be later this year with first production starting in 07. So an awful
lot happening at the beginning of 07.
Moving to the construction side of the company, you can see here from the tree order forecast
that things are good. Visibility is good and we dont have any reason to think that they wont
continue that way. But keep in mind that our model is all about ... you know, right now, demand is
good. Supply side is having a hard time keeping up, but either demand could drop ... and I also
never under estimate our industrys ability to over supply.
So just keep in mind that our business model is based on you know, things not always being
this great. Its a way to play the construction service sector without having to time the market.
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Raymond James 27th Annual Institutional Investors Conference
March 7, 2006
Switching to the oil and gas side of the company, this is just the historical ERT, what weve
always had here. Ill get to Remington in a second. But we operate 40 fields. Weve got a 14
year history. During that time, weve watched the company grow from less than ten million in
earnings to more than 150 million. So the model works.
We focus on well exploitation and enhancement in ERT, primarily mature properties, although
Ill show you what weve been doing in a second on the other side. But we do hedge our commodity
risk. You know, were not an E&P company that doesnt believe in hedges. Anytime that we can lock
in our acquisition economics and protect our future capital, we will be layering in hedges, and
Wade will go through where our hedges stand at present.
But I did mention that weve been successful recently with ERT on its own in penetrating the
more upstream part of the market. You can see the prospects that weve generated here for
acquisition. In total, its 205 to 285 BCF that weve added, which is well in excess of a hundred
percent increase in our reserves. Although weve been successful here, the promotes that weve
paid are pretty high.
Weve been pref-righted out of an awful lot of deals, and the pace of building our portfolio
was not matching or keeping pace with our aspirations for growing the service side of the company.
You know, with adding drilling on the Q4000 potentially another Q vessel, floating production
systems, adding the reservoir engineering ... we need a portfolio that in a down turn, has the
ability to generate about 30 percent of our own utilization. With that, then our cash flow is a
lot smoother, because ability is smoother and we can be a lot more aggressive on management
decisions.
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HELIX ENERGY SOLUTIONS GROUP, INC.
Raymond James 27th Annual Institutional Investors Conference
March 7, 2006
Shifting here to the Remington acquisition ... Im not going to go through ... I think Ive
got three slides on this. Ill just let you look through them on your own time. But let me
summarize the strategic rationale. The Remington acquisition adds both to the shelf and the deep
portfolio which for the reasons I just mentioned, we needed. It creates well over a billion
dollars in services backlog, which is analogous to the other contractors backlog claims.
It provides a hedge to our market risk of adding future services. Remember, we didnt put
drilling on the Q4000 because we didnt have a portfolio. This time, before we went ahead with the
Q4000, we figured it would be wise to have a portfolio as a hedge back up plan. The Q4000 with its
capabilities is capable of drilling all of the Remington deep water prospects.
We also believe in looking at this portfolio, that the right application of our full suite of
services can greatly enhance the value of this portfolio going forward. To do that, two things
have to be in place which also are characteristic of this portfolio. Its a hundred percent owned
by Remington and they operate the prospects. You have to be Operator if youre going to be able to
have an impact on the F&D cost.
And on the shelf, we have a strong record of production enhancement, so the shelf edition is
very valuable as well. This gives you an idea of what the real value of this Remington deal is to
us besides just the proven. This is the backlog Im talking about. You can see four TCF of
unrisked potential and on the right you can see some values added to that.
Nineteen deep water projects ... it gives us about a five to seven year drilling program,
which gives us more than a sufficient hedge to bringing the Q4000 out. In fact, if the Q4000 comes
out as successful in drilling the first couple of wells, we expect the demand in the market
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Raymond James 27th Annual Institutional Investors Conference
March 7, 2006
to
really increase for the Q4000 to do it for other people. And then that would be the trigger for us
to build the next Q.
And if you remember back when we came out with the Q, our original aspiration was to build at
least three of these. So you know, nothing has changed. Its just the timing of how fast we can
evolve the model.
Another value in the deal is that Remington does have three rigs. One of them is a deep water
rig from Transocean. We have it for a two well program at $102,000 a day which is a very valuable
commodity to have right now. We do plan on drilling two wells with it in 06, and then that gets
us to 07 when the Q4000 is available.
You can see we have a diverse set of properties between ourselves and Remington now in the
deep water portfolio. Its a hedge on hurricanes, but the deep water is not the big impact spot
for those. They are grouped nicely, so operating is good and we can take advantage of common
infrastructures on a lot of it.
This basically sums up why we were interested in Remington. Our production will go from about
a hundred to 110 a day to 220 combined. Proven reserves will also nearly double. We have 30 deep
water fields now, which is one of the nicer portfolios in the industry. Risk reserves of 1.4 BCF
and the big one, a billion and a half backlog pretty much makes us immune to cyclical downturns in
the service side.
So having said that, Ill just tell you, were in a good position. Our future goal is
basically to be proven. You know, were at a point now where its all about execution. We have to
execute some of the projects that we have right now. We have to get the Q drilling up and running,
the floating production systems on line. Its all about execution.
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HELIX ENERGY SOLUTIONS GROUP, INC.
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March 7, 2006
We can be prudent as far as buying opportunities in the market ... well wait now ... having
this portfolio, we can be patient and pick off the higher quality opportunities going forward.
Having said that, Ill turn it over to Wade here. Hell walk you through the hedges and give you
an update and then get into some of the financials.
Wade Pursell: Thank you, Owen. You know, as Owen said, we like to hedge our exposure to
commodity prices. This slide shows you our current positions. We like to use the costless
collars. All of our positions are costless collars right now. We also like to look out about a
year and hedge up to 50 percent of our PDP. Thats pretty much what weve done right now. This
equates to pretty close to pretty close to 50 percent of our PDP. Obviously as we bring on PUDS
during the year and other exploitation successes, well be layering in some more hedges.
Its important to note this doesnt include any Remington hedges. You might have heard us say
it was important to us in that acquisition to get ... Remington is completely unhedged, and it was
important for us to get them to agree that they would put some positions in place before closing to
help us lock in some more acquisition economics. I can tell you, theyve been fulfilling their
obligation.
I cant tell you anymore than that. If youre interested in more specifics, you can feel free
to question them. I think their conference call is tomorrow for their earnings. Some financial
slides.
Everyone knows the energy business is a very cyclical business. But what weve been able to
accomplish through our business model that Owen took you through is steady growth for well over a
decade now. And you can see they split between the two services ... or the two lines
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HELIX ENERGY SOLUTIONS GROUP, INC.
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March 7, 2006
between oil and gas and marine contracting. Thirty-six percent compounded annual growth. Its a
nice linear growth line from 95 to 02, and then more of an exponential growth line from 02
through 06.
A couple of items of note. You know, back in 2001, we were all pretty proud that we topped
200 million of revenue, and if you listened to our conference call last week, for the fourth
quarter of 06, just the marine contracting side topped 200 million for the quarter.
More important, the bottom line ... you see a similar growth line. This shows the last five
years. In 2004, we were around 80 million of net income, and looking ahead to 2006, this shaded
area represents our earnings guidance. We will easily double that number and more likely triple
that number.
Looking at it another way, we generate a lot of cash flow. This shows EBITDA. Again, looking
at ... starting in 2004, we generated 240 million of EBITDA, and we reported last week that for
2005, we generated over 350 million of EBITDA. And for 06, we should be you know, in excess of
half a billion dollars.
Probably our most important metric return on capital invested ... we set as a corporate target
ten to 15 percent. Look back at 02, 03, we fell below that goal. That was on the heels of our
850 million dollar capital investment program as the Q4000 and other investments ... we were early
to the party. And you can see by 2004, that the party caught up with us and we were back above our
hurdle.
And for 05, with the fourth quarter cranking in 22 percent, you know, were ending the year
at 17 percent return for 05. And I look for that number to be at least that for 2006. This is an
interesting slide. A lot of people have probably thought we sold our soul to E&P. Hopefully,
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HELIX ENERGY SOLUTIONS GROUP, INC.
Raymond James 27th Annual Institutional Investors Conference
March 7, 2006
through the presentation this morning you see thats not the case, and I think this shows it even
better.
Looking in the middle of 2006, what Ive basically done is just shown the split between oil
and gas production and contracting services, cap-X. Obviously, its a big oil and gas production
year because that includes the cash portion of the Remington acquisition. But if you look back
four years before and then look at our projected ... 07 through 09, you see more of a balance
capital between the oil and gas side and the contracting services side, and the 07 through 09,
just includes things that we know about currently.
And we ended 2005 with about 443 million of total debt, and thats a 40 percent debt to book
cap, and with the EBITDA in 05, that represents 1.3 times coverage. Nearly all of the debt is two
facilities. One the maroon, the 300 million of convertible notes, 20 year maturity. And then the
green box being our MARAD facility which is a 25 year maturity. Both of those carry fixed interest
rates. I think the blended rate between the two is 3.75 percent.
Adding in the Remington acquisition, once it closes, well be adding for the cash component,
813 million. Thatll be reflected in a senior secured term B facility. We already have that
committed, underwritten. It will need to be syndicated once we close. You see the total debt with
that in as of 05 would have been just on a pro forma basis nearly a billion three. That would be
50 percent debt to book cap.
A couple of statistics: Once we close, you know, which should be May/June time frame, I think
at that point our ... that level of debt compared to trailing pro forma EBITDA would be around two
to one. That debt would be one percent amortization per year with a bullet due at the end of seven
years. So that combined with our other facilities, if you look at you know, debt
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Raymond James 27th Annual Institutional Investors Conference
March 7, 2006
service, its pretty low amortization such that you know, our debt service coverage with all of
this debt would be nearly ten to one.
As a management team, we set objectives for ourselves every year. This is our 2006
objectives, obviously excluding anything to do with Remington. On the contracting services side,
our goal is revenues of 6.50 to 7.50. That would be an increase over about 5.50 for 05. Margins,
25 to 35 percent.
You might recall last year, our target I think was ten to 15, and we ended up around 25.
Equity and earnings ... and this is just for Marco Polo. Its 27 to 32 million. That would be an
increase over 11 million in 05. Were targeting mechanical completion of independence hub by the
end of the year, and we want to begin construction on another facility before the end of the year.
On the production side, our goal is 44 to 47 BCF of production. That would be an increase
over 33 for 05 and 33 was lower than we expected because of the hurricane shut-ins. We want to
begin production from at least one of the acquired PUDs on that slide that Owen showed you earlier.
And we want to make our first North Sea acquisitions.
On the earnings side, our guidance is 2.30 to 3.30 per share. That would be an increase over
$1.86 for 05. And the last but certainly not least, we have an objective of getting our incident
rate for safety below 1.8 times. That concludes our presentation...