Helix Energy Solutions Group, Inc. (HLX) Q4 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Helix Energy Solutions Group Fourth Quarter 2014 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference is being recorded today, Tuesday, February 17, 2015. I would now like to turn the conference over to Terrence Jamerson, Director of Finance and Investor Relations. Please go ahead. Terrence Jamerson - Director-Finance & Investor Relations: Good morning, everyone, and thanks for joining us today for our conference call on our Q4 2014 earnings release. Participating on this call for Helix today is Owen Kratz, our CEO; Tony Tripodo, our CFO; Cliff Chamblee, our COO; Alisa Johnson, our General Counsel; and Erik Staffeldt, our Finance and Treasury Director. Hopefully, you all have had an opportunity to review our press release and related slide presentation materials released last night. If you do not have a copy of these materials, both can be accessed through the Investor Relations page on our website at www.helixesg.com. The press release can be accessed under the Press Releases tab and the slide presentation can be accessed by clicking on today's webcast icon. Before we begin our prepared remarks, Alisa Johnson will make a statement regarding forward-looking information. Alisa B. Johnson - Secretary, Executive VP & General Counsel: During this conference call, we anticipate making certain projections and forward-looking statements based on our current expectations. All statements in this conference call or in the associated presentation, other than statements of historical facts, are forward-looking statements that are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual future results may differ materially from our projections in forward-looking statements due to a number and variety of factors, including those set forth in our slide two and in our annual report on Form 10-K for the year ended December 31, 2013. Also, during this call, certain non-GAAP financial disclosures may be made. In accordance with SEC rules, the final slides of our presentation materials provide a reconciliation of certain non-GAAP measures to comparable GAAP financial measures. The reconciliation, along with this presentation, the earnings press release, our annual report and a replay of this broadcast are available on our website. Owen? Owen E. Kratz - President & Chief Executive Officer: Thanks, Alisa. We'll start out on slide five, which is a high-level summary of the Q4 results. As we suggested in our prior call, Q4 was anticipated to be a much different story than Q3 due to normal seasonal factors as well as the dry dockings scheduled for the Seawell and the Skandi Constructor. However, two adverse issues caused our results to fall below our expectations. As a result, Q4 EBITDA came in at $39 million versus the $137 million of EBITDA in Q3, while EPS fell to $0.08 per share versus $0.71 of EPS in Q3. Turning over to slide six, let me touch on the two events that led to the disappointing quarter. First, a supply boat accidently collided with – into the Q4000 while the vessel was in service offshore. Although, the damage proved to be somewhat minor, the vessel needed to sail to port for damage assessment, repair, and then remediation. During this period of time, the vessel went on contractually reduced rates. However, when the Q4000 went back on location, mechanical difficulties associated with the redeployment of the intervention riser system resulted in the vessel going on zero rates until we were able to get the riser system functioning properly, again. The second issue was the H534 was out of service for 59 days – or 53 days, I'm sorry; 39 of which were caused by late job cancelation by our client. We were not able to bring other work forward that could have filled the gap as the customers were still pending permits or waiting for partner approvals. As our Robotics and the rest of our Well Intervention fleet performed better than anticipated, we would have exceeded our prior forecast if it weren't for these two adverse issues. On to slide seven, from a balance sheet perspective, our cash and liquidity levels remain very strong. Cash decreased to $476 million as a result of the $126 million of capital spending during the quarter, including a progress payment on the Q5000. Cash, along with the unused portion of our credit facility, kept total liquidity at a fairly consistent level of approximately $1.1 billion. Net debt at quarter end was $75 million. I'll now turn the call over to Cliff for an in-depth discussion of our contracting services. Clifford V. Chamblee - Executive Vice President & Chief Operating Officer: Okay. Thanks, Owen. Good morning. As you can see detailed here on slide nine, the fourth quarter was a different story compared to Q3. We have historically expected a decline in the Robotics during the winter months, which we saw during the fourth quarter. We forecasted lower earnings from our Well Intervention business segment, primarily due to the dry dockings of our two North Sea vessels, the Skandi Constructor and the Seawell. However, the two unforeseen incidents that Owen alluded to in his opening remarks, the supply boat colliding into the Q4000 and the cancellation of work from the 534, further hampered our results during the quarter. Also, the sharp decline in oil price impacted our Production Facilities' earnings, where a portion of the processing revenues for the Helix Producer I floating production unit are tied to oil and gas prices. Although given the quarter as well as the climate for oil and gas moving into 2015, I do not want to gloss over the overall performance for the year. We had an outstanding 2014, a year that exceeded our original expectations; both our people and our assets performed exceptionally well throughout the year. So, moving on to slide 10 for the well ops review, in the Gulf of Mexico the Q4000 achieved 86% utilization for the quarter. This number may be a bit misleading, given the fact that the earnings from this asset were significantly lower given this vessel – given this level of utilization, due to the number of days we operated at reduced rates as a result of the collision and issues we had with the redeployment of the IRS after going back on to location. The 534 also had quite a drop in utilization and Q4 was actually the first quarter that the vessel had been off-hire since being placed into service back in February of 2014. The majority of the down time on the 534 was due to the late cancellation of planned work that the vessel had scheduled during the quarter. Unfortunately, given our current environment, this is a situation we will not be immune to in 2015, which Tony will get into more detail during his remarks on the outlook for the year. IRS no. 2, which is our rental intervention riser system, was on-hire for the entire quarter, predominantly at operational rates. Moving on over to the North Sea, combined utilization across all three vessels was 69%, mainly due to Skandi Constructor and the Seawell dry dockings. The Skandi completed her dry dock in December, while the Seawell was entering the dry dock. Work on the Seawell, which is a combination of dry dock plus refurbishment, is expected to run into April of this year. This estimate is a little later than previously stated due to Seawell actually entering the dry dock a bit later than expected in December. The Well Enhancer worked in the North Sea prior to departing for Spain for a Well Intervention project in the Mediterranean in December. The job completed in January and the Enhancer is currently back in the North Sea working now. Moving on to slide number 11, for this business segment vessel utilization was 79% in the fourth quarter compared to 90% in Q3. This includes 61 days of work utilizing spot vessels, which was 136 fewer days than in Q3. With revenues earned off of our vessels being the primary driver of earnings for this business unit, this pretty well tells the story of why profits in the Robotics decreased quarter-over-quarter. Also, remember that the fourth quarter, we had a lot of – we had a total of four long-term chartered vessels since we returned the Olympic Triton back to the vessel owner in September. Again, taking into account the seasonality of this business, Robotics still outperformed our internal Q4 forecast. The Olympic Canyon remains in India, where she's fully utilized during the quarter. We transited the REM Installer from the North Sea over to the Gulf of Mexico during Q4. We do not have a long-term chartered vessel in this region throughout 2014. The Grand Canyon I completed trenching projects in North Sea and then sailed to the Middle East for a cable burial project that's expected to run through at least Q2 of this year. The Deep Cygnus is also performing trenching work during the quarter, after being dockside in October for some crane repairs. And moving on to slide number 12, basically, I'll leave this slide detailing the vessel utilization for you reference. And with that, I'll turn it over to Erik for the key balance sheet metrics.

Thanks, Cliff, and good morning. Please turn to slide 14. Slide 14 provides an illustration of our debt instrument maturity profile at December 31. Debt reduction during the quarter was a result of the acquired quarterly payments of our term loan. At year end, our total funded debt was $572 million. Moving on to slide 15, it provides an update on our year-end gross and net debt levels. We continue to maintain a strong liquidity position with approximately $1.1 billion of liquidity. Our net debt level was approximately $75 million, slightly lower than our year-end 2014 levels. Year-to-date operating cash flow increased to $359 million, driven by our strong operating results. We have used cash from operations to fund $335 million of capital expenditures, $20 million of debt repayments and $8 million of stock repurchases. Our year-end cash position is $476 million. I will turn the call over to Tony for a discussion on our 2015 outlook. Anthony Tripodo - Chief Financial Officer & Executive Vice President: Thanks, Erik, and moving over to slide 17 and 18, which presents our initial outlook for 2015. Let me reinforce some of the comments Cliff made earlier, to say that despite the disappointing quarter four results, 2014 was an exceptional year for Helix, as both the Well Intervention and the Robotics businesses booked record years in terms of both revenues and earnings. Furthermore, as Erik mentioned, we funded a relatively high year of CapEx mostly for growth out of internally-generated cash flow. 2015 will be a different story to say the least. The E&P community is responding to the sharp decline in oil prices, with significant budgetary reductions. All companies in the E&P services and supply chain will be impacted and Helix will not be immune. Simply put, the E&P community has taken a very aggressive approach to reducing spending in any manner possible. Our customers are aggressively seeking a cut spending wherever possible, which could involve deferring work, attempting to renegotiate rates and canceling contracts even if they will incur penalties for termination. Aside from the already announced and anticipated reductions in E&P spending, Helix will be impacted by the following issues. Our largest market continues to be the North Sea, where we conduct most of our business in local currency. The sharp increase in the U.S. dollar vis-à-vis the British pound will impact our reported earnings. Our current estimate of this impact is approximately $15 million to $20 million based on current exchange rates. As we have long planned, the Seawell is in dry dock for a major refurbishment and life extension. This is expected to keep her out of service through April. Furthermore, both the Q4 and the H534 have regulatory dry docks scheduled for an estimated 45-day duration age. The aggregate impact of these drive docks is estimated to cost an incremental $30 million of earnings as compared to 2014. Lower oil prices will also impact our tolling revenues for the HP1 floating production facilities. Although a portion of our revenues is fixed, the portion varies as well based on the oil and gas prices realized by our customer with a throughput that is processed by this vessel. Based on the current outlook for oil and gas prices, we expect an impact to earnings of $10 million compared to last year. In general, the current commodity price environment will make for a challenging year for all involved in the industry as well as making it close to impossible to forecast with any degree of certainty. Given the specific company factors mentioned above as well as the uncertainty created by the commodity price overhang, the obvious outlook for Helix is a down year for 2015 as compared to our record 2014, the magnitude of which could well be significant. Moving over to slide 19, our backlog as of December 31 remains high at $2.3 billion. The Well Intervention business by market is as follows. In the Gulf of Mexico, the Q4000 is expected to have fairly high utilization aside from our scheduled dry dock. The H534, as Cliff mentioned, had a recent customer cancellation, which has left some gap in her schedule, although she does has working prospects ahead of her dry dock this summer. The North Sea market has been softer this winter as we had previously forecasted. That being said, the Well Enhancer just completed a job in the Mediterranean and looks to stay fairly busy throughout 2015. The Seawell is in dry dock and does not expect to be available for service until late April. The Skandi has seen weak utilization in the winter months, but we expect activity for her to improve in the late spring and summer months. Robotics is affected by the same market conditions as our Well Intervention business. We expect a lot less spot market vessel utilization in 2015 due to lower activity levels as we remained focused on keeping our long-term chartered fleet busy as this fleet is scheduled to rise to six vessels upon the delivery of the Grand Canyons II and III. There is plenty of excess capacity for this type of vessels serving this market. Thus, we expect 2015 to be a very competitive year in this business. While we believe Robotics will not match 2014's record performance, results should still come in somewhere between 2013 and 2014 results; thus, from an historic perspective, a decent year in Robotics. Let me move over to slide 21 and discuss CapEx. We have budgeted full-year CapEx at approximately $400 million, however, we are looking for every opportunity cut or defer CapEx spending wherever possible and are seeking to spend less than what we have budgeted. Of the $400 million of CapEx we budgeted, $305 million represents growth capital associated with the Q5 and the Q7, the two Siem Helix vessels slated for Brazil, along with additional ROV units. Again, I want to emphasize that we're seeking to spend less than a $400 million. So, when you look at our total CapEx, a lot of it's committed to future contracts or otherwise fairly set in concrete right now. I'll skip the slides 22 through 24, and leave them for your reference and turn the call over to Owen for closing remarks. Owen E. Kratz - President & Chief Executive Officer: Thanks, Tony. Everyone, there's not – there's really not much more that can be said specific about 2014 or the 2015 outlook, we all know that the industry's in the early stages of a possibly significant down cycle. But it is just a cycle. I say significant, because it's driven not only by an oversupply of both oil and gas, but also at a time that certain segments of the oilfield service industry had built significantly more capacity than the market needed. The depth and duration of this down cycle are made more difficult to predict, because of the uncertainty about demand elasticity, given the less-than-robust nature of the global economies. Some oil and gas companies as well as service companies will struggle to survive. We're seeing oil and gas companies take this opportunity to rebase their business models for a potentially longer period of lower commodity prices. The impact to 2015 has possibly been made more acute and, therefore, more difficult to forecast, partly because of the sudden drop in the oil prices, but also in addition because they came during the 2015 budgeting period. So, that's going to be a driver for customer behavior for all of 2015. Corrections in the market like this are not entirely a bad thing, though. The industry will rebase and it will move on again. Inevitably, there will be a recovery cycle. The industry, as it always has, will renew its efforts to seek even greater efficiencies in how it produces oil and gas. Non-rig alternatives for subsea Well Intervention is a relatively new, but now accepted, step-change in efficiency versus the drilling rig. There will, of course, be near-term pressure from contracted, but now idle rigs. But longer term, there will be even more interest in efficiency gains. The growth potential for Well Intervention vessels remains. Until oil and gas companies increase their drilling budgets, again, the alternatives for adding reserves will probably be through M&A and production enhancement through Well Intervention. P&A as well is regulatory-driven and we're not seeing any indication that regulatory bodies intend to become lax on the enforcement of the requirements. Many more wells may, in fact, be found to be non-commercial and become candidates for P&A. Helix has been aggressive in building the best intervention fleet in the world. However, the growth in our fleet has been staged at a pace that was intentionally meant to be better aligned with liquidity and future cash flows. We're fortunate to have significant liquidity today. During this slow cycle, we'll refocus on a few things. As Tony said, we'll curtail capital spending wherever we can as we evaluate the potential impact of the down cycle on our business. We also will seek to rebase our costs as the oil and gas companies rebase theirs. For us, that means, among other things, that we'll shift from a period where we – of high growth, where we're looking to add a lot of people, to a more conservative one. The quality of our existing people is up to carrying the challenge of this. We will put a priority on maintaining the strength of our balance sheet during this cyclical downturn. We will position for the recovery. This means that we'll be sensitive to the efforts of our long-standing good clients as they seek to deal with the cancellation or deferment of well projects, in ways that makes sense for both of us. This also means that we'll continue with our partner, OneSubsea, to develop the means of unlocking greater efficiencies with our assets. In other words, we'll hunker down, watch our finances, but we'll also look at strengthening the relationships with our good clients, so that we'll be positioned to reap the maximum benefits as we transition towards the recovery cycle. I might just say a few words to head off a few questions. I think it is fair to assume that we are in dialog with numerous customers that we have regarding changes in our rate structure and schedule. By way of example, we've already mentioned that we had a recent customer cancellation for work on the H534. But we also really value our customers. And it's in our long-term best interest to work with them, if we can find a mutually palatable solution for addressing their near-term needs as well as our long-term needs. However, as you can probably expect, we are bound by obligations of confidentiality and, therefore, we can't – and please don't ask us specifically about every contract that we have, because we just cannot talk about it. That's the reason why we have not given guidance right now. In the event that we do enter contract amendments that are material, we'll disclose them at the appropriate time, and we'll give everybody as clear an insight as to the year ahead as we can as it unfolds. Having said that, we can't give guidance right now. But I think it is fair to say that our 2015 year will at least be similar to historic past years, where it will be a bell-shaped curve with weak quarters in Q1 and Q4. In fact, Q1 is probably going to look very similar to a continuation of Q4 here. Let me just go on to say, this is a period that we need to get through. We're well positioned to get through it. Going into 2013, if you remember, we announced a five-year growth plan. We did $270 million of EBITDA in 2013 and our aspirations were to double the EBITDA in five years, or by 2018. There is nothing that we are seeing right now that would indicate that any part of that five-year growth goal is not achievable. If you go back and look at the details of what we said about the five-year growth plan, 2015 was always going to be a flat year to 2014. Our outperformance in 2014 meant that 2015 was, even without all of this, going to be probably a slight down year compared to 2014. But in the scheme of things, it was designed to be a flat year as we're building our fleet and brining assets on; so the future growth is ahead. We're preserving our relationships with our clients. And as a result, I don't see anything that would jeopardize the long-term plan here. So, with that, I'll wind it up. And I'm sure you've got some question, so I'll turn it back over to the operator for Q&A.

Thank you. Our first question comes from the line of Marshall Adkins. Please go ahead. J. Marshall Adkins - Raymond James & Associates, Inc.: Good morning, gentlemen. Thanks for the color. Owen, I don't want to get into obviously specifics, as you mentioned, on these contracts. But can you speak generically about how these discussions are evolving? And let me just kind of set the stage here, the land drillers, they have contracts and when people want to get at them, they basically charge the profit they would have made and so each one gives a little give and take. Is that the type of discussions you're having? Or I guess, more – how much of the – are there any penalties or anything associated generically with these contracts? Owen E. Kratz - President & Chief Executive Officer: It's a very good question, Marshall. I think you have to realize that, first, the Well Intervention market was evolving. So, the contract styles are sort of diverse. We have – the vast majority of our contracts are short duration, but many of them are multi-year in nature. In order to fit that kind of a schedule together, we require flexibility on the scheduling of the work in our contracts. And therefore, the contracts reciprocate that and the return for the producers. So, our contracts are, as I mentioned, diverse. Some of them are a matter of clients that have an obligation, but they do have the flexibility of deferring work into the future. That – those discussions are being had. The majority of our contracts that are considered take or pay do have termination for convenience clauses in them. There is a wide range of cancellation fee arrangement. Some contracts are better protected than others. And therefore, some of the producers are looking at availing themselves of the termination fees in the near term here. And then we've got the longer-term contracts, where the producers are seeking a longer-term solution. So, we have the gauntlet of the discussions going on. And as soon as we – it's early in the process. This all happen so suddenly. It would be irresponsible for us to sort of predict the outcome of the discussions before we go to the end of them. J. Marshall Adkins - Raymond James & Associates, Inc.: But it sounds like we shouldn't assume that penalties are going to bring a lot of revenues forward that if there are consequences, which there probably will be, there are not going to be meaningful compensation brought forward, is that a fair characterization? Owen E. Kratz - President & Chief Executive Officer: Yeah. I think it would be a very rare case, where we have termination fees that would keep us hold on the economics. It's always better to do the work. J. Marshall Adkins - Raymond James & Associates, Inc.: Right. All right. Anthony Tripodo - Chief Financial Officer & Executive Vice President: Marshall, also it varies by region too, Marshall. In the UK, it's more a take or pay. So, we are better protected in Gulf of Mexico, which is more penalty-driven. So, it's a little different by region. J. Marshall Adkins - Raymond James & Associates, Inc.: Got it. Thanks. All right. Just one quick follow-up here, Owen. In the past, you've given us really good detail on why these low-end floating rigs second, third generation, don't really compete head to head with your assets. But we're now starting to see some higher-end, some fifth-gen rigs come down and prices decline. Do you expect to see any competition emerge in your space from those higher-end rigs that everyone thought would be working, but may not be working in the next couple of years? Owen E. Kratz - President & Chief Executive Officer: I think you have to look producer by producer. I think the variable there is producers that maintain rig pools. And of course, they'll be looking at do they need a rig pool plus an intervention vessel. It would be a very insightful producer that recognizes that with an intervention vessel, they could actually do with one less rig in the big pool. But there are some that do recognize that. I guess I would just refocus again on the five-year plan. The older rigs being out there, the third and fourth-gen, were a source of major consternation among the investors over the last year or 18 months that I'm aware of. One positive out of what's going on right now is we're seeing a big shift from wanting to work those old rigs to going ahead and scrapping them. So, longer term, I think that's a real positive to relieve the investors of the worry about us competing against the older rigs. As far as the newer rigs coming down in the price point, day rate is only part of the question and efficiency is the other part. In the near term, pure day rate may drive the day for producers looking at near-term 2015 results. But producers that are seeking to rebase for the longer term are going to be more biased towards the efficiency gain. So, it's probably a little too early to see where it all shakes out for 2015, but I think any impact to us from fifth-gen rigs coming down to our price point would be short-lived. J. Marshall Adkins - Raymond James & Associates, Inc.: Perfect. Thanks, Owen. See you.

Our next question comes from the line of Jeffrey Campbell. Please go ahead.

Good morning. First thing I want to ask you, you mentioned that the balance sheet was going to be a priority going forward. Your balance sheet looks pretty strong right now. So, I'm just wondering what metrics or balance sheet items you're going to prioritize in the downturn? Anthony Tripodo - Chief Financial Officer & Executive Vice President: Jeffrey, I would say, retaining as much liquidity as possible, I think we look at 2015 is going to be a down year and there are factors outside of our control. So, the one thing we will try to control is maintaining that strong balance sheet and coming out of this downturn positioned where the strong balance sheet will set us up well for the future. So, again, no rocket science here. We're going to try to cut back on CapEx. We're going to try to manage cash and, again, come out of this down cycle in good shape.

Okay. Thank you. The press release noted that the IRS no. 2 was on-hire all of the fourth quarter 2014. I was wondering if you could provide a little color as to the typical customers that are renting the system at this time. And I know the visibility is tough in 2015. Do you have any current expectations with respect to the continued utilization of the IRS 2 going into 2015? Clifford V. Chamblee - Executive Vice President & Chief Operating Officer: Yeah, it's on paid standby right now for a particular client, but there's other clients that are looking at it to take it out and do some actual work, and when we get permission from the client that's got it on standby to take it out and perform some work that we'll probably do here next month or so. And it will be on paid standby right now through – I think through majority of this second quarter, if not all of it.

And is there any kind of – I'm just trying to understand it better. Is there any kind of pattern to the work that is being rented for or the customers that are renting the system? Owen E. Kratz - President & Chief Executive Officer: No, I don't think there is a pattern. I think it runs the gauntlet. But I think what this down cycle mean, if the rigs – if the producers do opt to use the rigs in their pools for doing the work-over work, they need the intervention system. So, I'd say that the softer market here is actually a positive for the likelihood of keeping the intervention system busy, because of course it's rented out specifically for use off of rigs.

Okay. And if I could sneak one last one in real quick, the Well Enhancers in Spain for Mediterranean intervention project, could you just add a little color on the project? And do you hope that the Well Enhancer is going to stay in that region or would it return to the North Sea or is that even answerable at this point? Clifford V. Chamblee - Executive Vice President & Chief Operating Officer: Yes, it's answerable. It was in Spain. I don't recall exactly how long, but about a month or so, I guess, it was off of Spain, and it's back in the North Sea, now working in the North Sea. And it did two things down in Spain. It unplugged a clogged production line on a subsea well and then did some well enhancement.

Okay. Great. Thank you.

Our next question comes from the line of Martin Malloy. Please go ahead. Martin W. Malloy - Johnson Rice & Co. LLC: Good morning. Owen E. Kratz - President & Chief Executive Officer: Good morning, Marty. Martin W. Malloy - Johnson Rice & Co. LLC: I was wondering on the – if you could give us the timing of when the H534 and the Q4000 are heading into dry docking this year? Clifford V. Chamblee - Executive Vice President & Chief Operating Officer: April and August. Martin W. Malloy - Johnson Rice & Co. LLC: Okay. And then – and maybe there is just too much uncertainty out there in the market, but even just a range, is there any help you can give us on the gross profit margins that we might be looking at for this year for Well Intervention and Robotics? Anthony Tripodo - Chief Financial Officer & Executive Vice President: I think any – Marty, any guidance we give you will probably be obsolete in a week, and then absolutely again in another week. So, I think we're hesitant to do so. Lower utilization in total will, inevitably, lead to lower margins. Martin W. Malloy - Johnson Rice & Co. LLC: Okay. Yeah. And I just thought, is there any update you can give us on discussions regarding the Q7000 contracts? Owen E. Kratz - President & Chief Executive Officer: No further update. I think the last time we talked with everyone we said that we weren't actually seeking a contract for it right now, because of the opportunities that have become available in the world. That really hasn't changed. We're still in the same discussions. How 2015 will impact those discussions I'm really not sure at this point, but right now the discussions are ongoing. Martin W. Malloy - Johnson Rice & Co. LLC: Okay. Thank you.

Our next question comes from the line of Matthew Marietta. Please go ahead.

Good morning, guys. Owen E. Kratz - President & Chief Executive Officer: Good morning.

Wanted to clarify on the H534, the cancellation there for work. Was that a job that was altogether cancelled? Was it deferred? Is that job being done with another rig or another asset? And maybe get into what sort of job or operations was it for that was cancelled, deferred, et cetera? Clifford V. Chamblee - Executive Vice President & Chief Operating Officer: There were two separate ones started up in the fourth quarter of last year, and both of them were cancelled. And both of them had cancellation fees associated with them. And I'm not sure, I think one of them was cancelled altogether and the other they may do with – may or may not do with one of the rigs that they have – that they've already got on hire and have to pay. Owen E. Kratz - President & Chief Executive Officer: And just to add a little color beyond those two, the pattern that I'm seeing is that producers are either – every well usually has partners. And what the producers are going through right now is that all the partners may or may not elect to go forward. And when a partner cancels or goes non-consent, then it's up to the other partners to pick that up into their budgets. And of course, they don't have the budget. So, that's causing a lot of problems for the producers with their drilling plans. And then, the second thing that's happening that I think creates a pattern is, as projects are cancelled, all of a sudden rigs that are currently contracted are becoming idle. And therefore, they're looking at sunk costs versus our costs and weighing those costs against their termination rights. And that's what's going on right now. That will probably take a while to shake out and then it will be a little bit longer until rig contracts start rolling over. And then, we'll have to see where the market shakes out.

That's helpful color. I appreciate it. And then, switching over to the ROVs, I think the count shifted from 56 to 50, sequentially, quarter-over-quarter. Can you maybe help us get an idea on what the long-term count or next 12 month to 18 month count will look like and kind of what the strategy is there from an ROV unit count? Are you looking to add, subtract or what can we expect over that time horizon? Clifford V. Chamblee - Executive Vice President & Chief Operating Officer: Well, as Tony said, we had looked at our capital budget, and so we're acquiring all of these to the new vessels that are coming out on the Well Intervention side and on the Canyon side, such as the – I mean, the Grand Canyon II and III. And as far as the count – and I'll just finish on there. So, we're watching our CapEx there, what we have in our fleet, that we can use for some of those vessels and maybe not buy some new vessels, but use some existing ROVs in the fleet for those vessels. And the difference in the count, I believe, is we retired some of the older ROVs that we had in the fleet that were 10 years, 15 years old or plus, especially down in Asia, I believe. Anthony Tripodo - Chief Financial Officer & Executive Vice President: And they really weren't generating any revenues anyway. Clifford V. Chamblee - Executive Vice President & Chief Operating Officer: Correct.

Okay. Great. That's helpful. Thanks, guys.

Our next question comes from the line of Joe Gibney. Please go ahead.

Thanks. Good morning, guys. Tony, just a quick clarification. I think we can all kind of take a stab at where utilization rates go. It's obviously a pretty swiftly-moving market. But I'm just trying to understand what you're intimating about, what base of EBITDA off of 2014 to be sort of working down from. So, you call out some of Skandi's high-margin work in the year. I mean, is $350 million the appropriate level to begin factoring in some of the factors you call out along with whatever sort of rate utilization assumptions we want to make on the well upside? Anthony Tripodo - Chief Financial Officer & Executive Vice President: I would agree, $350 million is a good number, because if you start out the full year at $378 million, you take out the extraordinary margins we made with the Skandi last year in West Africa and Canada, and then we have a one-time insurance recovery about $8 million as well, you're about $350 million. So, that's a proper starting point, I believe, to compare with your assumptions for 2015. And then, we mentioned a specific company items such as the dry docks, the currency and lower oil prices as to how it impacts the Production Facilities business. So, that is the proper way. In terms of utilization, I'll tell you that I think the Well Enhancer, the Q4000, will be fairly well utilized in 2015. Of course, Seawell's dry dock, so it really doesn't count today. And we expect weaker utilization year-over-year for both the H534 and the Skandi Constructor.

Okay. Anthony Tripodo - Chief Financial Officer & Executive Vice President: But there's a lot of unknowns. There's a lot of prospects and there is a lot of unknowns on the downside as well. So, which – again it makes it – the current environment makes it very difficult to give guidance.

Understood. It's a fluid situation. Just on the – one more on the cost side. You referenced obviously trying to rein in things on the CapEx front, understood there. But how about G&A as another lever to pull? I mean, what are your expectations there on maybe trimming up G&A a little bit into 2015? Owen E. Kratz - President & Chief Executive Officer: I think there is some opportunity, Joe. But when we were reorganizing the company and divesting non-core assets, I think we did a pretty efficient job of shrinking the G&A at that same time. Over the last year, we actually were moving into an expansionary role in anticipation of these new vessels coming into the fleet. So, we were actually hiring pretty aggressively. I think what we can do is become a little less aggressive on that and rely more on our existing personnel. But I'm not sure – I think there is some trimming that can be done. But to expect more than 10% cut in SG&A would be unreasonable, I think.

Okay. Fair enough. Owen E. Kratz - President & Chief Executive Officer: We just don't have it. We're a pretty lean operator.

Sure. Okay. I appreciate it. I'll turn it back.

Our next question comes from the line of George O'Leary. Please go ahead. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: Good morning, guys. Anthony Tripodo - Chief Financial Officer & Executive Vice President: Good morning, George. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: Maybe following on to the prior question. So, SG&A is not an area where there is a lot of room to cut costs. But looking forward this year, what levers do you have to pull on the cost-cutting side? Is there an opportunity to reduce backup crews, just given there is going to be lower utilization or anything maybe that I'm not thinking of that you could do to reduce costs? Owen E. Kratz - President & Chief Executive Officer: I don't know that you're going to move the needle a great deal with the labor questions. I think the bigger issue for us is to look at possible softening of utilization to the point where we could actually idle a vessel. I don't see that happening. That's not in our plans right now. But that would probably be the single largest opportunity for us to reduce costs. But right now, we're just not seeing the need. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: Okay. That's helpful color. And then, on the CapEx front, if I look at slide 21 in your presentation, you've kind of chopped things up by grouping on what you're spending from a CapEx perspective. Where would you say the lowest-hanging fruit is for you guys to reduce CapEx, if you look across those buckets? Owen E. Kratz - President & Chief Executive Officer: The single greatest area is, I think, Tony mentioned, $305 million for growth capital for the build project included in that number. We've always reported that number inclusive of a fairly large contingency number. And the way that our builds are going – are going extremely well and smooth and I wouldn't expect us to spend that contingency amount. And that's probably the single largest piece of capital. So, if we really focus on executing well here, then there should be some big savings there. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: Great. Thanks very much for the color, guys.

Our next question comes from the line of Chase Mulvehill. Please go ahead.

Hey. Thanks for squeezing me in. Few follow-up questions here. I guess as we look at fourth quarter, we had some issues with Q4000 and some dry docks. If we were to normalize margins, where do you think 4Q normalized margins were, if we were to adjust for those two items? Anthony Tripodo - Chief Financial Officer & Executive Vice President: Well, I mean I think the job cancellation had a significant impact on our margins, to start with. So, the question back to you, Chase, is do you want to normalize for that as well? I mean, we had a extraordinary...

Yes. Anthony Tripodo - Chief Financial Officer & Executive Vice President: Yeah, we had extraordinary margins in Well Intervention business all of 2014, including 41% in Q3. And at that time, we believe we said, don't expect 41% as kind of a go-forward range that closer to historical levels of 30% is a better indicator. Now, can we achieve 30% in 2015? I doubt it, because, again, utilization is the driving factor. If we went back to fourth quarter, I think we would have been at 30% sans the items we mentioned. But go forward, I think it will be difficult even to achieve 30%.

Okay. All right. If we were to look at leading-edge spot day rates for Well Intervention vessels, where does these stand right now and how does this compare to kind of cash OpEx on these vessels? Anthony Tripodo - Chief Financial Officer & Executive Vice President: In terms of – first of all, I would say that what we have in our backlog and expect to work out in 2015, our rates will be in excess of our cash operating costs, for sure. So, that's not an issue for us, per se.

Okay. All right. And then, last one for me. Just any updates on the Brazil newbuilds, any discussions you have ongoing there? Owen E. Kratz - President & Chief Executive Officer: Well, without – if I start talking about one, I have to start talking about all of them by omission.

Okay. Owen E. Kratz - President & Chief Executive Officer: So, I think I'd rather just stay away from all of the contract – specific contract questions for right now.

Okay. Owen E. Kratz - President & Chief Executive Officer: I wouldn't read anything onerous into that, but it's...

Understood. Understood. All right. That's all I have. Thanks, Tony. Thanks, Owen.

And I'm showing we have no further questions registered at this time. Terrence Jamerson - Director-Finance & Investor Relations: Okay. Well, everyone, thanks for joining us today. We very much appreciate your interest and participation and look forward to having you our first quarter 2015 call coming up in April. Thank you.

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