Helix Energy Solutions Group, Inc. (HLX) Q4 2018 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2018 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Tuesday, February 19, 2019. I would now like to turn it over to Mr. Erik Staffeldt, CFO. Please go ahead, Sir.

Good morning everyone and thanks for joining us today on our conference call for our Q4, 2018 earnings release. Participating on this call for Helix today is Owen Kratz, our CEO; Scotty Sparks, our COO; Alisa Johnson, our General Counsel; and myself. Hopefully, you've had an opportunity to review our press release and the related slide presentation released last night. If you 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?

During this conference call, we anticipate making certain projections and forward-looking statements based on our current expectation. All statements in this conference call or any associated presentation other than statements of historical fact are forward-looking statements and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual future results may differ materially from our projections and forward-looking statements due to a number and variety of factors, including those set forth in our slide two and in our Annual Report on Form 10-K for the year ended December 31, 2017. Also, during this call certain non-GAAP financial disclosures may be made. In accordance with SEC rules, the final slides of our presentation material 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?

Good morning, everybody. On slide 5, you'll see a high level summary of the Q4 results. As is typical, our fourth quarter financial results were down from Q3 impacted by the typical seasonal slowdown in the Northsea affecting both Well Intervention and Robotics as well as lower utilization in rates in the Gulf of Mexico for our Well Intervention services, working with the spot market. But over on slide 6, I'd like to focus on our results for the full year 2018 compared with our 2017 results. We've benefited from the full year of operating two vessels in Brazil from -- and from reduction to our cost structure in the robotic segment. Revenues in 2018 improved by $159 million to $740 million. Net income in 2018 was essentially flat to $29 million, excluding the impact of the $52 million tax benefit in Q4 of 2017, related to the U.S. tax reform, net income improved by $51 million year-over-year. EBITDA increased to $162 million in 2018 from $107 million in 2017. Operating cash flow for the year was $197 million resulting in free cash flow of $60 million. Turning to Slide 7, our utilization was impacted by weak demand in the Gulf of Mexico resulting from schedule shift as well as the typical seasonal slowdown in Q4 versus Q3 except for our production facilities in Brazilian operations, which stayed normal. On to Slide 8, from a balance sheet perspective, our cash levels at quarter end decreased as expected to $279 million from $325 million at the end of Q3. During Q4, we made a $69 million shipyard payment and invested an additional $13 million in other capital expenditures and we made $10 million of scheduled debt repayments. Our net debt at year-end was $161 million compared to $123 million in the third quarter. I'll now turn the call over to Scotty for an in-depth discussion of the operating results.

Thanks Owen. And good morning everyone. Moving on Slide 10, 2018 has been one of our best years in recent times, not only in terms of earnings, but also with regard to operational uptime and safety performance. We had strong utilization across all of our business lines in the company, with strong uptime performance across the global intervention fleet, generating revenue, efficiency in excess of 97% against contracted days. In terms of safety performance, TRI [ph] equaled lowest levels ever achieved for year. Revenue increased year-over-year from $581 million to $740 million. Our continued focus on organizational and operational efficiency resulted in EBITDA increasing from $107 million to one hundred to $162 million. Gross profit margin increased to 16% resulting in a gross profit of $122 million. In the fourth quarter, we achieved revenues of $158 million, and a gross profit margin of 9% resulting in profits of $14 million. In the North Sea intervention business, considering we entered the slower winter seasonal period, we achieved combined vessel utilization of 76% throughout the quarter, with no operational downtime. In the Gulf of Mexico, the Q5000 completed our annual commitment to BP in October, and then completed work for two additional clients. The Q4000 achieved our expected utilization of slightly over 50% and in December commenced the 12-well campaign. Performance in Brazil was strong. Both vessels performed very well, achieving high utilization of 99%. Robotics achieved very good utilization for all three of the Grand Canyon vessels, with two of the vessels working on renewables trenching projects in the North Sea. We also experienced 60 days of project works globally on Spot hired vessels. Slide 11 provides a detailed review of our operations for our Well Intervention business in the Gulf of Mexico. The Q5000 performed work for BP until early October, and then went on to complete 2 P&A projects for two additional clients, finishing the quarter with zero commercial downtime. In January of 2019, we recommenced our annual commitment to BP, which includes the provision of the Helix One subsea alliance 15K IRS system for an expected full well program. The Q4000 achieved only 53% utilization as expected. The vessel performed well with no commercial downtime, working on a stimulation project for some clients and then in early December commenced its worldwide campaign for another client. The vessel is currently contracted through the first half of 2019. Our rental IRS units, IRS 1 and 2 were sold at our facility in Houston. Moving on to slide 12, our North Sea Well Intervention business experienced a good quarter, considering we entered the seasonal winter slower period with both vessels working with zero commercial downtime. The vessels worked on 12 wells during the quarter, conducting a mix of abandonment work and production-enhancement programs. The Well Enhancer was contracted for 86% of the quarter, working for three clients on well maintenance and production enhancement products until year end. The Seawell is contracted for 66% of the quarter, working for two clients on Intervention programs. In January, both vessels commenced regulatory dry docks that's now complete and during this period, we undertook maintenance in both subsea Intervention systems. Moving to slide 13. In Brazil, our operations for Petrobras continues to go extremely well and we achieved another strong quarter. Both vessels continued to perform well and in 2018 we completed work on 32 wells for Petrobras. In the fourth quarter, the Siem Helix 1 achieved 99% utilization, working on four wells, undertaking temporally abandonment work and some subsea infrastructure replacement work. The Siem Helix 2 achieved 99% utilization, working on four wells performing production enhancements and well maintenance activity works. Throughout the year we have decreased our daily cost due to further operation on equipment enhancements on both Siem Helix vessels. Moving on to slide 14 for our Robotics review. 2018 was a much improved year for Robotics. In the fourth quarter, vessel charter fleet utilization was 78%, with two vessels utilized on renewable trenching projects in the North Sea and one vessel contracted on a number of shorter duration ROV support projects in the Gulf of Mexico. We also contracted 60 days globally with project-orientated spot market vessels taken on back-to-back with client requirements. The Grand Canyon worked in the North Sea, achieving 100% utilization on trenching projects. The Grand Canyon 2 located in the Gulf of Mexico had 42% utilization on two deepwater construction scopes. Grand Canyon 3 had 76% utilization, mostly performing works on trenching project on a short IRM scope. Our outlook for 2019 in Robotics continues to improve as we implement further cost improvements and we've already secured meaningful utilization for the fleet, working in both trenching and ROV support. Over to slide 15. I'll leave this slide detailing the vessels ROV and trenching utilization for your reference. I will now turn over the call to Erik for a discussion on balance sheet and our 2019 outlook.

Thanks, Scotty. Moving to slide 17, it outlines our debt instruments and the maturity profile. And I'll leave this slide for your reference and move on to slide 18. Slide 18 provides an update on key balance sheet metrics, including growth and net debt levels as of year-end. Our net debt in Q4 increased to $161 million from $123 million in Q3. The increase in net debt during Q4 is directly attributable to the $82 million of CapEx outflows, including the Q7000 shipyard payment. Our cash position at quarter end decreased to $279 million, reflecting the CapEx outflows and paydown of $10 million of debt, partially offset by $46 million of operating cash flow. For the year we generated $197 million of operating cash flow and free cash flow of $60 million, a significant improvement from 2017. Our year end net debt-to-book capitalization was 9%. Moving over to slide 20 for a discussion on our 2019 outlook. In January, we announced two transactions that impact our outlook as compared to 2018. The acquisition of the Droshky Assets from Marathon, and the extension of the HFRS agreement. We acquired the Droshky Assets in a non-cash transaction, which is comprised of four wells and related subsea infrastructure. Marathon will pay us a fixed price for the P&A of the assets on a per well basis. Two of the wells currently have nominal production, with one well having production enhancement upside. Two wells are shut-in with likely P&A within 6 to 12 months. We expect to benefit from this transaction by providing utilization for our Well Intervention vessels and possible upside from operating efficiencies and production income, although no production benefit is included in our guidance. As previously stated, this transaction was a nontraditional way to secure work for our vessels and is based on the merits of the secured P&A work. Also in January, we extended the HFRS agreement. The agreement is now an evergreen contract with provisions for 12-month cancellation notice. This is a strategic agreement with a significant number of our Gulf of Mexico customer base partying to the agreement. The agreement significantly reduces the retainer. The impact of both these transactions with the exception of not including production benefits, are included in our 2019 guidance. Moving to slide 21 for a discussion of our forecast. We're forecasting 2019 EBITDA in a range of $165 million to $190 million. This range includes some key assumptions and estimates. We are assuming full year benefit for the Siem Helix 1 and Siem Helix 2 in Brazil. We expect that 2019 North Sea Well Intervention markets will maintain a high-level of activity. We expect the Q4000 to have good utilization and benefit from the Droshky agreement. The Q5000 is forecasted for 270 days with BP with opportunity during the 95-day gap. In Robotics, we expect to continue to benefit from reductions in our cost structure for vessel charter cost and foreign currency hedges. We expect marginal improvement in ROV utilization and a trenching market similar to 2018. Production facilities is negatively impacted by the new HFRS agreement. And finally, consistent with last year, our EBITDA guidance also includes an approximate $20 million reduction related to the mobilization costs for the Brazil contracts, paid previously but expensed over the term of the contracts. To achieve the higher end of our range, the Q7000 would be working in the second half of 2019. And as previously mentioned, the 2019 range does not include any benefit for oil & gas production related to the Droshky acquisition. Any significant variation from these key assumptions could cause our EBITDA to fall outside of the range provided. Moving to slide 22. We entered 2019 with $1.1 billion of backlog of which $470 million was currently scheduled and estimated to be completed in 2019. Our backlog is heavily weighted to our BP contract, the two Petrobras contracts and the HP1 contract. In the Gulf of Mexico Well Intervention market, the Q4000 has worked into Q2 with identified opportunities thereafter. The vessel is currently sourcing the spot market and we expect the vessel utilization to be driven by near-term opportunities and aided by internal work on the Droshky Assets. The Q5000 has its 270-day program with BP from Q1 through Q3. The IRS 15K system is currently on a day rate contract with the expected utilization similar to 2018. In the North Sea Well Intervention market, we're assuming a continued base level of activity for our two vessels. Last year, the market provided a strong support for the utilization of our vessels. We expect 2019 to be similar. Both vessels completed their regulatory dry-dock in 2019. The Seawell mobilized in mid-February and the Well Enhancer is expected to start work in early March. We expect typical seasonal weakness during the winter months. In Brazil, we expect full year of operations of both Siem Helix 1 and Siem Helix 2. Both vessels will have downtime for scheduled maintenance. Siem Helix 2 between 4 and 14 days in Q3 and Siem Helix 1 between 7 and 12 days in Q4. However, their schedule all -- and timing of the shipyard maintenance may change. Over to slide 23. The Robotics business segment is expected to benefit from continued improvements in its cost structure, both charter vessel costs and hedge reductions and marginal improvements in the market. We expect improvements in the segment over 2018 performance due to the return of the Grand Canyon to its owner in Q4, lower charter cost on the Grand Canyon 2 due to its hedge rolling off midyear and lower charter costs associated -- in Q1, associated with the return of the Deep Cygnus in 2018. We expect the trenching market to be similar to 2018 and once again marginal improvement in the ROV rental market. Over to slide 24. The CapEx for the year is forecasted at approximately $140 million, with most of this capital for completing the Q7000, including the forecasted shipyard payment at delivery. Maintenance CapEx includes dry-docks of the HP1, Seawell and Well Enhancer in Q1. The dry-docks are not expected to impact EBITDA. Our debt payments for the year approximate $47 million. We expect to continue to generate strong operating cash flows, which are expected to trend higher than our EBITDA due to the impact of the non-cash expense of our deferred cost in Brazil of approximately $20 million per year. I'll skip slide 26 and leave it for your reference. At this time, I'll turn the call back to Owen for closing comments.

Thanks, Erik. While we had a good year, full year results outperformed the top end of our guidance provided for the full year. Operationally, Helix is performing well, controlling costs and achieving utilization. We have reduced downtime and still have greater improvement ahead. We've demonstrated creativity in contracting that so far resulted in adding work not included in the normal budgeting process. Deals like this such as the recent Droshky award allow Helix to control scheduling and improve our margins. We have performed well all year, but we consistently pointed to uncertainties in Q4. This occurred as a result of BP rescheduling their work with the Q5000 originally to be done in Q4 and doing it in Q3. This led to a stronger than expected Q3 with the Q4000 and Q5000 left to achieve their utilization from spot work in Q4. While Q4 was slower, with it being the seasonal slowest quarter and given the utilization challenges of the Q4000 and Q5000, we did achieve better utilization than we expected and we ended up exceeding the full year guidance. Going into 2019 we have better visibility on work than we did at this time going into 2018. We feel that we can provide a narrower range of guidance for 2019 at $165 million to $190 million EBITDA. The components of our guidance have been provided throughout this presentation, but there are components we've not fully quantified in detail. There are a number of potential positives that could occur in 2019 that we've not fully captured in our guidance, other than include on a risk-weighted bias. These include variables such as work execution on Droshky; continued reduction in asset downtime, Q7000 contribution, other creative terms for work proposed, but still outstanding; and Droshky production. While we've not included production upside in the guidance, we are a production enhancement service company and we'll look to apply our services to that end. While we consider these potential positives on a risk-weighted probability, we'll seek to keep investors informed as actual results occur. By way of an update on the Q7000, it's still our intention to deploy the vessel into the market in 2019. We do not yet have a contract signed and therefore cannot announce details. Until the contract is signed, we cannot be certain of the timing of the vessel and therefore the contribution impact in 2019. Color on our expectations by regions has been given in the presentation. In general, we see the macro picture as stabilizing, but not yet in a full recovery mode. The North Sea should continue to be steady, transfer producing assets to new energy producers could generate added workforce in the future, as in our view, these players will likely be more aggressive toward production enhancement. The Gulf of Mexico is steady but still not showing recovery to the point of absorbing supply overhang. West Africa is slowly improving volumes and could start to be meaningful. Brazil is doing well and indications are for Petrobras and other new entrants to the market to become more active. While we don't see an immediate pickup in activity, it does bode well for the future. While Helix is not in Norway, Norway is expected to be a very active market and we can consider exploring our options there for future growth. 2019 certainly is looking better than 2018 at this time and we hope to see further improvements beyond 2019. We’ve now completed adding major assets to our base and we have the availability to benefit from improving market conditions without major capital expenditures. CapEx for 2019 is expected to be approximately $140 million and we’ll conclude our heavy CapEx-build program. Beyond 2019, we expect to be strongly free cash flow positive. Keep in mind that our reported EBITDA is a proxy for cash flow, understates cash flow by roughly $20 million as a result of the deferred non-cash charge to the Brazil results. This will continue until the end of the initial term of the contracts on the SH1 and SH2, at which time the EBITDA will no longer be negatively affected. Our objective is to continue our debt reduction with the goal of nearing net debt zero by the end of 2020. Just a brief word on the Droshky deal. The objective of this deal is to build the backlog of work for our assets, which we have control of the scheduling on. Consistent utilization and avoidance of short-term idle asset time is a significant driver of operating margins. The economic justification for this type of deal is not based on a production enhancement upside. Having said that, we are a production-enhancement services company and it would be misleading to say there's no upside potential from the production enhancement and we'll analyze any opportunity we see. It is more economic for us to execute production enhancements than is typical for our producer. If we see the opportunity, we may execute the work required, but this will be an opportunistic upside and we can't quantify it without proper analysis. Therefore, we do not include it in our guidance. We'll give quarterly updates should it occur. Throughout 2019 and beyond, we'll keep an eye on the market for opportunity and/or consider all options for increasing free cash flow. And with that, I'll turn it back over to Erik.

Operator, at this time, we'll take questions.

[Operator Instructions] And the first question is from the line of Ian Macpherson. Please go ahead.

Hi. Thanks. Good morning, everybody. Owen, can you speak to recent reference points of well production that could kind of help us color in between the lines of what the production upside from Droshky could be?

No, I can't. There's just no -- we just acquired the field. You have to look at the reservoir. And if that's your options, then that takes a lot of analysis. And we're just not at a point of being able to do that.

Okay, fair enough. Switching over to the North Sea, rig rates continue to outperform the broader market there. There were more, I think, stronger leading edge rig rates discussed this morning on Transocean's call. And I wonder if you could speak to what -- how the pricing dynamics for the Seawell and the Well Enhancer are looking for 2019 compared to 2018?

Okay. I'll take that one. Since 2017, we’ve increased our rates significantly in the North Sea. Last year, we increased rates and this year, we expect to slightly increase rates as well. However, we are seeing a more fragmented set of projects. We've got a very good outlook of the work for the North Sea and -- but we're not seeing long-term 90, 120 day projects. So there may be one or two idle days, but we are seeing a slight increase in rates and we will continue to keep pushing rates in that region.

Would you say Scotty that you're more committed in terms of how much of your backlog is firmly priced today versus the past year or two? Or is it similar with open pricing exposure for the back half of the year?

Slightly less than previous years. And look, so, that should give us some opportunity to materialize on the rates there.

Very good. I have some more, but maybe I'll requeue. Thank you.

Okay. Thank you.

The next question is from the line of Marshall Adkins. Please go ahead.

Good morning, gentlemen. Couple of quick ones, I guess, that we’re a little bit surprising to me. Let's start with the CM vessel. It looks like you're going to send those in for some maintenance this year, which seems awfully quick, since you just kind of brought those online. What -- is this just an oil change or what's going on with those?

Hey, in some respects, Marshall, it is like an oil change. We've got a few small maintenance periods there that we're going to undertake and a good portion of that time's offset with our contracts from Petrobras. So there's one or two topside changes that we need to make sure that doesn't lead to downtime, which is preventative.

So in terms of modeling and obviously, you'll add tremendous utilization this last quarter for the full year, we just obviously need to take that down somewhat particularly in the latter half of 2019, fair?

Yes, yes.

Okay. The other surprise, Owen, it seemed your Q4000 and Q5000 outlook was just more bullish than I would have thought. It seems like you've got pretty good visibility on work. Just give us a little more color or commentary on what you're seeing there? Or am I reading that right, it just seems like you're more confident in the outlook for those in the Gulf this year?

I'll let Scotty speak to that, but I'll start and say yes, we are more confident. We have much better visibility on the work at this point going into 2019 than we did last year. We see more work. We have a greater number of projects that are already signed up than we did at this time last year. And we do have the Droshky project and that -- what that does is it allows us to fill any gaps in our schedule and therefore de-risk our utilization assumptions.

Okay. All right. Well, just one quick follow-up on the Droshky. This is kind of back to, I've been covering you long enough to know that 15 years ago, you guys were really good at doing stuff like the Droshky that you've gotten away from. Is this a pointed effort at returning to what may draw successful 15 plus years ago when you all were doing things like this or am I misreading that?

Yes and no. I think what we did 15, 20 years ago, actually, it started in 1992, it was a method of creating backlog for our assets at better margins coming out of the 80's slump. Fast forward, we're in a very similar situation. So to that extent, it's similar. We're looking to build backlog that's in our control to help de-risk our utilization. What's dissimilar is when we started that in 1992, it took hold very quickly. You had a high expectation from producers to their liability. You had producers -- major producers who were exiting the shows and therefore motivated sellers. So therefore, the amount of production deals we did probably grew faster even than our expectations, it was a well-received model. This year, we're a little -- this time around, we're a little more tempered. We're not seeking to grow production contracting as a major component of our business, but we are seeking to book backlog. To that end, I think we we'll continue, plus another difference right now is that you have a lot of new producers entering the market. So you probably have more buyers than sellers right now. The expectation of the liabilities are because of the extent of this downturn are not as intense as they were in the 1990s. And therefore, I'm not sure that the same criteria exists for this kind of a deal. But there are enough deals out there for us to continue looking and being very selective and adding at a volume at which we feel comfortable that it de-risks our utilization model.

Well, if I remember currently, you guys had phenomenal returns on that business back in the 1990s. I know, you don't want us to put that in the model, but it sounds like there is a possibility of those type of returns in this, I guess, resurgent model. Is that accurate?

There is a possibility. I think we just have to be patient and see what the market brings to us. But I don't want to get ahead of the cards and state that it's our intention to be very aggressive from the [Indiscernible]. We're just looking to de-risk our model at this point.

Got it. Thanks, guys.

[Operator Instructions]. We have a question from the line of Ian Macpherson. Please go ahead.

Thank you for the follow-up. I wanted to ask on the new HFRS extension. Your guidance has revenues for production facilities down from $64 million in 2018 to $50 million to $55 million. Is that -- is there something with the Helix Producer that is also in that revenue degradation? Or is that all on the HFRS? And are the detrimental margins on the new HFRS essentially at a 100% since we think of this as a retainer contract without really significant -- material operating costs?

There's no impact from the HP1. That contract is continuing status quo. The entire impact is from the HFRS and basically a reduction of the retainer.

Yes. And so -- and I would assume that the detrimentals there are close to 100% on the EBITDA side?

Yes.

Got it. Well, I would say favorable to overall EBITDA guidance in light of that. So I'd like to note that and thanks again for the follow-up.

Thank you.

Thank you.

The next question is from the line of Marshall Adkins. Please go ahead.

Yes. We'll just keep this the Marshall and Ian hour. I got a few more here. On the Q7000, you mentioned that it should be ready second half. Just give me a little more color on that? And when your best guess is to when you think that actually starts generating revenue?

It's hard to say, Marshall. We're not going to commit to spending the mobilization money, which is pretty significant to get it from Singapore to West Africa, but having said that, we require about four to six months from being given the go on the contracts to being on site, ready to work. So pending when the green light is given, that will determine the start of the contract. So, we need four to six months and then you'll see it working.

Is there a shakedown time? Or when I guess technically would be available, Q3? Is that right?

Yes, I mean, we could -- the vessel, we could sail and go do a job. But you have continuous employment criteria on the vessel, so you have to have the cruise on board, both ships of the crew on board for a period of time. We don't want the vessel to come out with any problems; shaking down, while we are working. So there is a period of training and then we do intend to run some expensive sea trials and testing on the way. So that's what's really taking the time between, given the green light and the start-up, we just want to make sure that once the vessel is working, it's a positive contribution and there are no issues.

Yes, that four to six months includes the shakedown period. And when we leave Singapore, we'll be fully crewed up. We will be fully crewed up for about two months prior to that. So as we make our transit around to certain areas, we will be shaking down the vessel and undertaking sea trials as we get.

Got it. Another couple here. Any update on the Schlumberger alliance? And any activity things we should be aware of going on there?

No new updates. It's the same as before. We continue to jointly contract on the Q4000 and offer the one contract service to the clients. 15K system is currently on the Q5000. That's our jointly owned asset and we expect four wells of work there and possibly more. So we continue to work well together. Their marketing and sales effort allows us to access areas that we don't have sales capability. And then we're still looking more and more into sort of multi-skill in cruise to bring down the overall cost of their services on our vessel cost on Q4000. And Q7000 will be designed and ready to go in that mode as well. So...

I think just to add, we've spent some time talking with the OneSubsea management about how we can improve this and we have a proposal in, between us that we're still finalizing, but we do plan on making some changes moving forward in order to enhance the impact a little bit.

Right. So it sounds like there has been some modest pull-through due to the deal, but it's not a meaningful difference maker so far?

I mean, I'd say for the last two years, it really helped with the utilization on Q4000 and it should help, as we get the Q7000 online and in to other regions to allow, like we said previously, shorter mobilization periods and multi-skill on the cruise on most of the assets as we go forward. So it helps us greatly through the really hard times on Q4000. We can see the benefit, we believe we can further enhance that benefit and then open it up to other regions and that's the plan.

Perfect. And last one for me. It seems like where Brazil seems to be opening up for a lot more operators other than Petrobras. Any change in the outlook for Brazil, given that trend? In other words, is there opportunity for a lot more work as we get other operators in there?

The other operators are coming. A lot of them are already there. I think it's going to take a little while, gestation period for them to absorb what they required and to get their plans in order. We're very bullish on Brazil. I think Brazil is one of the near-term spots that I would expect a strong recovery in and we're watching it closely and we're in dialog with a lot of the new producers.

So that's looking out to more like a 2021, 2022 type demand scenario, fair?

Certainly not 2019. And beyond that, I think it's a little early to predict the timing.

Owen, any other areas to keep our eye on, just offshore international markets you think may be a little better than we've seen in the last three or four years?

Well, I think the North Sea continues to show improvement. There's been a lot of property changes in the North Sea and as I said, the new producers should be more aggressive. So I think the North Sea, you'll see some modest improvement. Gulf of Mexico, it's still bouncing on the bottom. I think it's yet to really come back to the point where the work that we see that should be done is getting done. So, I think there is modest improvement. It's hard to predict the timing on that. But to me, the big new hotspot, of course, everyone knows that Norway is really active right now. We're not there, but that's the region we can look at. West Africa, we've been looking at for a long time. It's a region that has a great deal of potential, but it needs to mature and there is some pitfalls in really making the most out of West Africa, because you're not allowed to just park an asset in West Africa and work and then you've got a lot of regulatory country-by-country approvals that are required. So that takes a little time to start, but I think the work backlog is certainly more visible today than it has been in recent years. Then, I mentioned Brazil. And then Asia Pacific, that's an area where, Marshall, we had a presence in Asia-Pacific, it's a very difficult region to work in. It's not actually one region, it's about four and the transit times between locations is extremely long. You have a lot of local content requirements that makes it very expensive to work there. So I'd say that's the one region where we're probably not as focused on exploring our options as we are on the other regions.

Very helpful. Thanks again, guys.

Thank you.

There are no other questions.

Thanks for joining us today. We very much appreciate your interest and participation and look forward to having you on our first quarter 2019 call in April. Thank you.

Ladies and gentlemen, that will conclude the conference call for today. We thank you for your participation and you can now disconnect your lines.