Helix Reports Fourth Quarter and Full Year 2010 Results

* * * * *

Summary of Results (1) (2)

(in thousands, except per share amounts and percentages, unaudited)

Quarter Ended

Twelve Months Ended

December 31

September 30

December 31

2010

2009

2010

2010

2009

Revenues

$306,337

$180,048

$392,669

$1,199,838

$1,461,687

Gross Profit (Loss):

 Operating (3)

$31,790

$21,039

$87,891

$223,031

$388,095

10%

12%

22%

19%

27%

 Oil and Gas    

   Impairments (4),(5)

(9,212)

(55,940)

(897)

(181,083)

(120,550)

 Exploration

  Expense (6)

(6,496)

(21,520)

(442)

(8,276)

(24,383)

Total

$16,082

$(56,421)

$86,552

$33,672

$243,162

Net Income (Loss) Applicable to Common Shareholders (7)

$(49,821)

$(55,697)

$26,161

$(127,102)

$101,867

Diluted Earnings (Loss) Per Share

$(0.48)

$(0.53)

$0.25

$(1.22)

$0.96

Adjusted EBITDAX (8)

$95,310

$58,572

$143,072

$430,326

$490,092

Note: Footnotes listed at end of press release.

Segment Information, Operational and Financial Highlights (1)

(in thousands, unaudited)

Three Months Ended

December 31,

September 30,

2010

2009

2010

Revenues:

 Contracting Services

$185,291

$150,736

$238,531

 Production Facilities

20,131

1,134

74,458

 Oil and Gas

136,502

71,450

95,566

 Intercompany Eliminations

(35,587)

(43,272)

(15,886)

   Total

$306,337

$180,048

$392,669

Income (Loss) from Operations:

 Contracting Services

$(8,148)

$21,593

$31,015

 Goodwill Impairment (2)

(16,743)

-

-

 Production Facilities

6,403

(1,378)

44,520

 Oil and Gas (3)

17,048

(3,715)

(3,206)

 Gain (Loss) on Oil and Gas Derivative         Commodity Contracts

(1,555)

6,157

161

 Oil and Gas Impairments (4)

(9,212)

(55,940)

(897)

 Exploration Expense (5)

(6,496)

(21,520)

(442)

 Corporate

(10,367)

(13,895)

(10,767)

 Intercompany Eliminations

(390)

(9,562)

(286)

   Total

$(29,460)

$(78,260)

$60,098

Equity in Earnings of Equity Investments

$6,537

$5,177

$6,221

Note: Footnotes listed at end of press release.

Footnotes to "Summary of Results":

(1)

Results of Helix RDS Limited, our former reservoir consulting business, were included as discontinued operations for all periods presented in our comparative condensed consolidated statements of operations.

(2)

Results of Cal Dive, our former Shelf Contracting business, were consolidated through June 10, 2009, at which time our ownership interest dropped below 50%. Our remaining interest was accounted for under the equity method of accounting through September 23, 2009. Subsequent to September 23, 2009, our investment in Cal Dive was accounted for as an available for sale security.

(3)

Fourth quarter 2010 included $2.3 million of expense related to a weather derivative contract and $0.1 million of hurricane-related costs.  Third quarter 2010 included $9.4 million of expense related to a weather derivative contract and $0.9 million of hurricane-related costs.  Fourth quarter 2009 included $2.5 million of expense related to a weather derivative contract and $0.6 million of hurricane-related costs.  

(4)

Fourth quarter 2010 oil and gas impairments of $9.2 million were primarily related to a reduction in carrying value of certain oil and gas properties.  Fourth quarter 2009 oil and gas impairments were attributable to a revision in estimated reserves associated with twelve fields resulting from mechanical and/or production related issues.

(5)

Full year 2010 impairments were comprised of the impairments described in item (4) above, $7.0 million in the first quarter of 2010 primarily resulting from a decline in natural gas prices, $4.1 million in the first quarter of 2010 for our non-domestic oil and gas property, $159.9 million in the second quarter of 2010 resulting from a significant reduction in our estimates of proved reserves, and $0.9 million in the third quarter of 2010 associated with a revised estimated asset reclamation obligation of one non-producing field.  Full year 2009 impairments were comprised of the impairments described in item (4) above, $51.5 million of additional asset retirement and impairment costs resulting from Hurricane Ike recorded in the second quarter of 2009 and $11.5 million of additional oil and gas property revisions following estimated reserve reductions at June 30, 2009.

(6)

Fourth quarter 2010 included $6.4 million of exploration costs associated with offshore lease expirations.  Fourth quarter 2009 included $20.1 million of exploration costs associated with offshore lease expirations.

(7)

Twelve months ended December 31, 2010 included a payment of $17.5 million to settle litigation related to the termination of a 2007 international construction contract.

(8)

Non-GAAP measure.  See reconciliation attached hereto.

Footnotes to "Segment Information, Operational and Financial Highlights":

(1)

Results of Helix RDS Limited, our former reservoir consulting business, were included as discontinued operations for all periods presented in our comparative condensed consolidated statements of operations.

(2)

Fourth quarter 2010 included a non-cash impairment charge of $16.7 million to reduce the carrying value of goodwill attributable to our Southeast Asia well operations subsidiary.

(3)

Fourth quarter 2010 included $2.3 million of expense related to a weather derivative contract and $0.1 million of hurricane-related costs.  Fourth quarter 2009 included $2.5 million of expense related to a weather derivative contract and $0.6 million of hurricane-related costs.  Third quarter 2010 included $9.4 million of expense related to a weather derivative contract and $0.9 million of hurricane-related costs.

(4)

Fourth quarter 2010 oil and gas impairments of $9.2 million were primarily related to a reduction in carrying value of certain oil and gas properties.  Fourth quarter 2009 oil and gas impairments were attributable to a revision in estimated reserves associated with twelve fields resulting from mechanical and/or production related issues.

(5)

Fourth quarter 2010 included $6.4 million of exploration costs associated with offshore lease expirations.  Fourth quarter 2009 included $20.1 million of exploration costs associated with offshore lease expirations.

HELIX ENERGY SOLUTIONS GROUP, INC.

Comparative Condensed Consolidated Statements of Operations

Three Months Ended Dec. 31,

Twelve Months Ended Dec. 31,

(in thousands, except per share data)

2010

2009

2010

2009

(unaudited)

(unaudited)

Net revenues:

Contracting services

$           169,835

$           108,598

$            774,469

$          1,076,349

Oil and gas

136,502

71,450

425,369

385,338

306,337

180,048

1,199,838

1,461,687

Cost of sales:

Contracting services

162,075

89,373

600,083

854,975

Oil and gas

112,472

69,636

376,724

218,617

Oil and gas impairments

9,212

55,940

181,083

120,550

Exploration expense

6,496

21,520

8,276

24,383

290,255

236,469

1,166,166

1,218,525

Gross profit (loss)

16,082

(56,421)

33,672

243,162

Goodwill impairment

(16,743)

-

(16,743)

-

Gain (loss) on oil and gas derivative commodity contracts

(1,555)

6,157

1,088

89,485

Gain on sale of assets, net

3,159

246

9,405

2,019

Selling, general, and administrative expenses

(30,403)

(28,242)

(122,078)

(130,851)

Income (loss) from operations

(29,460)

(78,260)

(94,656)

203,815

Equity in earnings of equity investments

6,537

5,177

19,469

32,329

Gain (loss) on subsidiary equity transaction

(2,240)

-

(2,240)

77,343

Net interest expense and other

(21,498)

(11,526)

(86,280)

(51,495)

Income (loss) before income taxes

(46,661)

(84,609)

(163,707)

261,992

Provision for (benefit of) income taxes

2,364

(30,374)

(39,598)

95,822

Income (loss) from continuing operations

(49,025)

(54,235)

(124,109)

166,170

Discontinued operations, net of tax

-

(722)

(44)

9,581

Net income (loss), including noncontrolling interests

(49,025)

(54,957)

(124,153)

175,751

Less: net income applicable to noncontrolling interests

(786)

(680)

(2,835)

(19,697)

Net income (loss) applicable to Helix

(49,811)

(55,637)

(126,988)

156,054

Preferred stock dividends

(10)

(60)

(114)

(748)

Preferred stock beneficial conversion charges

-

-

-

(53,439)

Net income (loss) applicable to Helix common shareholders

$            (49,821)

$            (55,697)

$          (127,102)

$             101,867

Weighted Avg. Common Shares Outstanding:

Basic

104,111

103,007

103,857

99,136

Diluted

104,111

103,007

103,857

105,720

Basic earnings (loss) per share of common stock:

Continuing operations

$                (0.48)

$                (0.52)

$                (1.22)

$                   0.92

Discontinued operations

-

(0.01)

-

0.09

Net income (loss) per share of common stock

$                (0.48)

$                (0.53)

$                (1.22)

$                   1.01

Diluted earnings (loss) per share of common stock:

Continuing operations

$                (0.48)

$                (0.52)

$                (1.22)

$                   0.87

Discontinued operations

-

(0.01)

-

0.09

Net income (loss) per share of common stock

$                (0.48)

$                (0.53)

$                (1.22)

$                   0.96

Comparative Condensed Consolidated Balance Sheets

ASSETS

LIABILITIES & SHAREHOLDERS' EQUITY

(in thousands)

Dec. 31, 2010

Dec. 31, 2009

(in thousands)

Dec. 31, 2010

Dec. 31, 2009

(unaudited)

(unaudited)

Current Assets:

Current Liabilities:

Cash and equivalents

$             391,085

$                270,673

       Accounts payable

$            159,381

$             155,457

Accounts receivable

226,704

172,678

       Accrued liabilities

198,237

200,607

Other current assets

123,065

122,209

       Current mat of L-T debt (1)

10,179

12,424

Total Current Assets

740,854

565,560

Total Current Liabilities

367,797

368,488

Net Property & Equipment:

Long-term debt (1)

1,347,753

1,348,315

Contracting Services

1,452,837

1,470,582

Deferred income taxes

413,639

442,607

Oil and Gas

1,074,243

1,393,124

Asset retirement obligations

170,410

182,399

Equity investments

187,031

189,411

Other long-term liabilities

5,777

4,262

Goodwill

62,494

78,643

Convertible preferred stock (1)

1,000

6,000

Other assets, net

74,561

82,213

Shareholders' equity (1)

1,285,644

1,427,462

Total Assets

$          3,592,020

$             3,779,533

Total Liabilities & Equity

$         3,592,020

$          3,779,533

(1)  Net debt to book capitalization - 43% at December 31, 2010. Calculated as total debt less cash and equivalents ($966,847)  

 divided by sum of total net debt, convertible preferred stock and shareholders' equity ($2,253,491).  

Helix Energy Solutions Group, Inc.

Reconciliation of Non GAAP Measures

Three and Twelve Months Ended December 31, 2010

Earnings Release:

Reconciliation From Net Income to Adjusted EBITDAX:

4Q10

4Q09

3Q10

2010

2009

(in thousands)

Net income (loss) applicable to common shareholders

$            (49,821)

$            (55,697)

$             26,161

$          (127,102)

$           101,867

Non-cash impairment

21,549

52,578

897

193,420

72,372

(Gain) loss on asset sales

(919)

198

(13)

(7,138)

(87,694)

Preferred stock dividends

10

60

10

114

54,187

Income tax provision (benefit)

2,364

(30,246)

17,965

(39,600)

86,035

Net interest expense and other

21,484

11,300

21,385

86,192

47,861

Depreciation and amortization

94,147

58,859

76,225

316,164

247,372

Exploration expense

6,496

21,520

442

8,276

24,383

Adjusted EBITDAX (including Cal Dive)

$             95,310

$             58,572

$           143,072

$           430,326

$           546,383

Less: Previously reported contribution from Cal Dive

$                     -

$                     -

$                     -

$                     -

$            (56,291)

Adjusted EBITDAX

$             95,310

$             58,572

$           143,072

$           430,326

$           490,092

 We calculate adjusted EBITDAX as earnings before net interest expense, taxes, depreciation and amortization, and exploration  

 expense. Further, we do not include earnings from our interest in Cal Dive in any periods presented in our adjusted EBITDAX calculation.  

 These non-GAAP measures are useful to investors and other internal and external users of our financial statements in evaluating  

 our operating performance because they are widely used by investors in our industry to measure a company's operating performance  

 without regard to items which can vary substantially from company to company and help investors meaningfully  

 compare our results from period to period.  Adjusted EBITDAX should not be considered in isolation or as a substitute  

 for, but instead is supplemental to,  income from operations, net income or other income data prepared in    

 accordance with GAAP.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative    

 to our reported results prepared in accordance with GAAP.  Users of this financial information should consider    

 the types of events and transactions which are excluded.  

Helix Energy Solutions Group, Inc.

Reconciliation of Non GAAP Measures

Three Months Ended December 31, 2010

Earnings Release:

Reconciliation of significant items:

4Q10

4Q09

(in thousands, except earnings per share data)

Property impairments and other charges:

    Property impairments

$                    9,212

$                  55,940

    Exploration expenses

6,394

20,606

    Goodwill impairment

16,743

-

    Lufeng loss

21,431

-

    Asset impairments and inventory charges

-

2,006

 Tax provision (benefit) associated with above

2,755

(27,493)

Property impairments and other charges, net:

$                  56,535

$                  51,059

Diluted shares

104,111

103,007

Net after income tax effect per share

$                      0.54

$                      0.49