UNITED STATES
|
SECURITIES AND EXCHANGE COMMISSION
|
WASHINGTON, D.C. 20549
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[X]
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
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For the quarterly period ended June 30, 2012
|
||
or
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||
[ ]
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
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For the transition period from__________ to__________
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Minnesota
(State or other jurisdiction
of incorporation or organization)
|
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95–3409686
(I.R.S. Employer
Identification No.)
|
|
||
400 North Sam Houston Parkway East
Suite 400
Houston, Texas
(Address of principal executive offices)
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77060
(Zip Code)
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Yes
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[ √ ]
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No
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[ ]
|
Yes
|
[ √ ]
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No
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[ ]
|
Large accelerated filer [√ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ]
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Smaller reporting company [ ]
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(Do not check if a smaller reporting company)
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Yes
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[ ]
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No
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[ √ ]
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PART I.
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FINANCIAL INFORMATION
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PAGE
|
||
Item 1.
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Financial Statements:
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|||
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||||
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||||
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|||
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||||
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||||
Item 2.
|
|
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Item 3.
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||||
Item 4.
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||||
PART II.
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OTHER INFORMATION
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|||
Item 1.
|
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|||
Item 2.
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||||
Item 5.
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||||
Item 6.
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||||
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June 30,
|
December 31,
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|||||||
2012
|
2011
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|||||||
(Unaudited)
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||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
649,503
|
$
|
546,465
|
||||
Accounts receivable:
|
||||||||
Trade, net of allowance for uncollectible accounts of $4,067
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187,904
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238,781
|
||||||
Unbilled revenue
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30,053
|
24,338
|
||||||
Costs in excess of billing
|
21,492
|
13,037
|
||||||
Other current assets
|
117,979
|
121,621
|
||||||
Total current assets
|
1,006,931
|
944,242
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||||||
Property and equipment
|
4,366,783
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4,391,064
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||||||
Less accumulated depreciation
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(2,007,490)
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(2,059,737)
|
||||||
Property and equipment, net
|
2,359,293
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2,331,327
|
||||||
Other assets:
|
||||||||
Equity investments
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173,543
|
175,656
|
||||||
Goodwill
|
62,252
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62,215
|
||||||
Other assets, net
|
86,786
|
68,907
|
||||||
Total assets
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$
|
3,688,805
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$
|
3,582,347
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||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
156,738
|
$
|
147,043
|
||||
Accrued liabilities
|
177,225
|
239,963
|
||||||
Income tax payable
|
3,065
|
1,293
|
||||||
Current maturities of long-term debt
|
12,997
|
7,877
|
||||||
Total current liabilities
|
350,025
|
396,176
|
||||||
Long-term debt
|
1,167,908
|
1,147,444
|
||||||
Deferred tax liabilities
|
445,817
|
417,610
|
||||||
Asset retirement obligations
|
135,235
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161,208
|
||||||
Other long-term liabilities
|
8,832
|
9,368
|
||||||
Total liabilities
|
2,107,817
|
2,131,806
|
||||||
Convertible preferred stock
|
1,000
|
1,000
|
||||||
Commitments and contingencies
|
||||||||
Shareholders' equity:
|
||||||||
Common stock, no par, 240,000 shares authorized, 105,631 and 105,530 shares issued, respectively
|
927,085
|
908,776
|
||||||
Retained Earnings
|
633,012
|
522,644
|
||||||
Accumulated other comprehensive loss
|
(9,825)
|
(10,017)
|
||||||
Total controlling interest shareholders' equity
|
1,550,272
|
1,421,403
|
||||||
Noncontrolling interest
|
29,716
|
28,138
|
||||||
Total equity
|
1,579,988
|
1,449,541
|
||||||
Total liabilities and shareholders' equity
|
$
|
3,688,805
|
$
|
3,582,347
|
Three Months Ended
|
||||||||
June 30,
|
||||||||
2012
|
2011
|
|||||||
Net revenues:
|
||||||||
Contracting services
|
$ | 197,461 | $ | 165,861 | ||||
Oil and gas
|
149,933 | 172,458 | ||||||
Total net revenues
|
347,394 | 338,319 | ||||||
Cost of sales:
|
||||||||
Contracting services
|
147,156 | 116,521 | ||||||
Contracting services impairments
|
14,590 | — | ||||||
Oil and gas
|
92,423 | 110,027 | ||||||
Oil and gas property impairments
|
— | 11,573 | ||||||
Total cost of sales
|
254,169 | 238,121 | ||||||
Gross profit
|
93,225 | 100,198 | ||||||
Loss on sale of assets, net
|
(236 | ) | (22 | ) | ||||
Ineffectiveness on oil and gas commodity derivative contracts
|
10,069 | — | ||||||
Selling and administrative expenses
|
(24,571 | ) | (23,758 | ) | ||||
Income from operations
|
78,487 | 76,418 | ||||||
Equity in earnings of investments
|
5,748 | 5,887 | ||||||
Net interest expense
|
(18,627 | ) | (25,278 | ) | ||||
Other income (expense), net
|
(1,692 | ) | 1,253 | |||||
Income before income taxes
|
63,916 | 58,280 | ||||||
Provision for income taxes
|
18,476 | 16,171 | ||||||
Net income, including noncontrolling interests
|
45,440 | 42,109 | ||||||
Less net income applicable to noncontrolling interests
|
(789 | ) | (786 | ) | ||||
Net income applicable to Helix
|
44,651 | 41,323 | ||||||
Preferred stock dividends
|
(10 | ) | (10 | ) | ||||
Net income applicable to Helix common shareholders
|
$ | 44,641 | $ | 41,313 | ||||
Earnings per share of common stock:
|
||||||||
Basic
|
$ | 0.42 | $ | 0.39 | ||||
Diluted
|
$ | 0.42 | $ | 0.39 | ||||
Weighted average common shares outstanding:
|
||||||||
Basic
|
104,563 | 104,673 | ||||||
Diluted
|
105,042 | 105,140 | ||||||
Total comprehensive income applicable to Helix common shareholders (Note 9)
|
$ | 54,483 | $ | 60,867 |
Six Months Ended
|
||||||||
June 30,
|
||||||||
2012
|
2011
|
|||||||
Net revenues:
|
||||||||
Contracting services
|
$ | 427,303 | $ | 288,609 | ||||
Oil and gas
|
328,018 | 341,317 | ||||||
Total net revenues
|
755,321 | 629,926 | ||||||
Cost of sales:
|
||||||||
Contracting services
|
304,124 | 223,428 | ||||||
Contracting services impairments
|
14,590 | — | ||||||
Oil and gas
|
181,672 | 217,651 | ||||||
Oil and gas property impairments
|
— | 11,573 | ||||||
Total cost of sales
|
500,386 | 452,652 | ||||||
Gross profit
|
254,935 | 177,274 | ||||||
Loss on sale of assets, net
|
(1,714 | ) | (6 | ) | ||||
Ineffectiveness on oil and gas commodity derivative contracts
|
7,730 | — | ||||||
Selling and administrative expenses
|
(50,267 | ) | (48,739 | ) | ||||
Income from operations
|
210,684 | 128,529 | ||||||
Equity in earnings of investments
|
6,155 | 11,537 | ||||||
Net interest expense
|
(40,387 | ) | (49,514 | ) | ||||
Loss on early extinguishment of long-term debt
|
(17,127 | ) | — | |||||
Other income (expense), net
|
(1,606 | ) | 3,913 | |||||
Income before income taxes
|
157,719 | 94,465 | ||||||
Provision for income taxes
|
45,753 | 25,721 | ||||||
Net income, including noncontrolling interests
|
111,966 | 68,744 | ||||||
Less net income applicable to noncontrolling interests
|
(1,578 | ) | (1,554 | ) | ||||
Net income applicable to Helix
|
110,388 | 67,190 | ||||||
Preferred stock dividends
|
(20 | ) | (20 | ) | ||||
Net income applicable to Helix common shareholders
|
$ | 110,368 | $ | 67,170 | ||||
Earnings per share of common stock:
|
||||||||
Basic
|
$ | 1.05 | $ | 0.63 | ||||
Diluted
|
$ | 1.04 | $ | 0.63 | ||||
Weighted average common shares outstanding:
|
||||||||
Basic
|
104,547 | 104,573 | ||||||
Diluted
|
105,012 | 105,024 | ||||||
Total comprehensive income applicable to Helix common shareholders (Note 9)
|
$ | 110,560 | $ | 78,272 |
Six Months Ended
|
||||||||
June 30,
|
||||||||
2012
|
2011
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income, including noncontrolling interests
|
$ | 111,966 | $ | 68,744 | ||||
Adjustments to reconcile net income, including noncontrolling interests to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
134,960 | 167,170 | ||||||
Asset impairment charge and dry hole expense
|
14,679 | 18,204 | ||||||
Amortization of deferred financing costs
|
3,292 | 4,777 | ||||||
Stock-based compensation expense
|
3,658 | 4,938 | ||||||
Amortization of debt discount
|
4,776 | 4,414 | ||||||
Deferred income taxes
|
21,624 | 23,864 | ||||||
Excess tax benefit from stock-based compensation
|
657 | 1,196 | ||||||
Gain on investment in Cal Dive common stock
|
— | (753 | ) | |||||
Loss on sale of assets, net
|
1,714 | 6 | ||||||
Loss on early extinguishment of debt
|
17,127 | — | ||||||
Unrealized gain and ineffectiveness on derivative contracts, net
|
(7,581 | ) | (34 | ) | ||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable, net
|
46,611 | (18,207 | ) | |||||
Other current assets
|
(5,854 | ) | 12,712 | |||||
Income tax payable
|
1,083 | (4,154 | ) | |||||
Accounts payable and accrued liabilities
|
(61,372 | ) | (27,070 | ) | ||||
Oil and gas asset retirement costs
|
(54,976 | ) | (16,073 | ) | ||||
Other noncurrent, net
|
(11,344 | ) | 10,839 | |||||
Net cash provided by operating activities
|
221,020 | 250,573 | ||||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
(150,107 | ) | (106,122 | ) | ||||
Distributions (investments) from equity investments, net
|
2,045 | (1,106 | ) | |||||
Proceeds from sale of Cal Dive common stock
|
— | 3,588 | ||||||
Decrease in restricted cash
|
2,660 | 863 | ||||||
Net cash used in investing activities
|
(145,402 | ) | (102,777 | ) | ||||
Cash flows from financing activities:
|
||||||||
Extinguishment of Senior Unsecured Notes
|
(209,500 | ) | — | |||||
Borrowings under revolving credit facility
|
100,000 | 109,400 | ||||||
Repayment of revolving credit facility
|
— | (109,400 | ) | |||||
Issuance of Convertible Senior Notes due 2032
|
200,000 | — | ||||||
Repurchase of Convertible Senior Notes due 2025
|
(143,945 | ) | — | |||||
Proceeds from Term Loan A
|
100,000 | — | ||||||
Repayment of Term Loan
|
(2,750 | ) | (111,191 | ) | ||||
Repayment of MARAD borrowings
|
(2,409 | ) | (2,294 | ) | ||||
Deferred financing costs
|
(6,485 | ) | (9,014 | ) | ||||
Repurchases of common stock
|
(7,510 | ) | (1,012 | ) | ||||
Excess tax benefit from stock-based compensation
|
(657 | ) | (1,196 | ) | ||||
Exercise of stock options, net and other
|
372 | 439 | ||||||
Net cash provided by (used in) financing activities
|
27,116 | (124,268 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents
|
304 | (424 | ) | |||||
Net increase in cash and cash equivalents
|
103,038 | 23,104 | ||||||
Cash and cash equivalents:
|
||||||||
Balance, beginning of year
|
546,465 | 391,085 | ||||||
Balance, end of period
|
$ | 649,503 | $ | 414,189 |
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Other receivables
|
$ | 2,120 | $ | 5,096 | ||||
Prepaid insurance
|
11,247 | 12,701 | ||||||
Other prepaids
|
15,937 | 13,271 | ||||||
Spare parts inventory
|
15,697 | 18,066 | ||||||
Current deferred tax assets
|
36,504 | 41,449 | ||||||
Hedging assets
|
25,696 | 21,579 | ||||||
Gas and oil imbalance
|
4,367 | 5,134 | ||||||
Other
|
6,411 | 4,325 | ||||||
Total other current assets
|
$ | 117,979 | $ | 121,621 |
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Restricted cash
|
$
|
31,081
|
$
|
33,741
|
||||
Deferred dry dock expenses, net
|
20,341
|
(1)
|
5,381
|
|||||
Deferred financing costs, net
|
26,528
|
26,483
|
||||||
Intangible assets with finite lives, net
|
483
|
531
|
||||||
Other
|
8,353
|
2,771
|
||||||
Total other assets, net
|
$
|
86,786
|
$
|
68,907
|
(1)
|
The increase subsequent to December 31, 2011 primarily reflects the costs associated with the completed regulatory dry docks for the
Q4000
and
Seawell
in the first half of 2012.
|
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Accrued payroll and related benefits
|
$ | 44,642 | $ | 49,599 | ||||
Royalties payable
|
11,943 | 19,391 | ||||||
Current asset retirement obligations
|
69,630 | 93,183 | ||||||
Unearned revenue
|
7,649 | 7,654 | ||||||
Billing in excess of cost
|
2,994 | 28,839 | ||||||
Accrued interest
|
17,509 | 24,028 | ||||||
Hedging liability
|
5,685 | 1,247 | ||||||
Gas and oil imbalance
|
3,609 | 4,177 | ||||||
Other
|
13,564 | 11,845 | ||||||
Total accrued liabilities
|
$ | 177,225 | $ | 239,963 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Delay rental and geological and geophysical costs
|
$ | 1,146 | $ | 1,299 | $ | 1,757 | $ | 1,654 | ||||||||
Impairment of unproved properties
(1)
|
— | 6,640 | 144 | 6,640 | ||||||||||||
Dry hole expense
|
(54 | ) | — | (55 | ) | (9 | ) | |||||||||
Total exploration expense
|
$ | 1,092 | $ | 7,939 | $ | 1,846 | $ | 8,285 |
(1)
|
The amount recorded in the second quarter of 2011 reflects costs associated with a deepwater lease in which the term expired.
|
Asset retirement obligations at December 31, 2011
|
$
|
254,391
|
||
Liability incurred during the period
|
115
|
|||
Liability settled during the period
|
(80,166
|
)
|
||
Other revisions in estimated cash flows
(1)
|
23,671
|
|||
Accretion expense (included in depreciation and amortization)
|
6,854
|
|||
Asset retirement obligations at June 30, 2012
|
$
|
204,865
|
(1)
|
The increased amount of these liabilities includes revisions to both non-producing and producing oil and gas properties. Increases to liabilities associated with non-producing properties include a corresponding cost of sales expense charge within our consolidated condensed statements of operations and comprehensive income while changes in estimates for producing properties are recorded as an increase to the related oil and gas properties property and equipment carrying costs included within our consolidated condensed balance sheet.
|
Six Months Ended
|
||||||||
June 30,
|
||||||||
2012
|
2011
|
|||||||
Interest paid, net of capitalized interest
|
$
|
39,259
|
$
|
40,220
|
||||
Income taxes paid
|
$
|
23,054
|
$
|
7,236
|
Term
Loan
(1)
|
Revolving Credit Facility
|
Senior Unsecured Notes
|
2025
Notes
(2)
|
MARAD Debt
|
2032
Notes
(3)
|
Total
|
||||||||||||||||||||||
Less than one year
|
$ | 8,000 | $ | — | $ | — | $ | — | $ | 4,997 | $ | — | $ | 12,997 | ||||||||||||||
One to two years
|
8,000 | — | — | — | 5,247 | — | 13,247 | |||||||||||||||||||||
Two to three years
|
8,000 | — | — | — | 5,508 | — | 13,508 | |||||||||||||||||||||
Three to four years
|
353,000 | 100,000 | 274,960 | — | 5,783 | — | 733,743 | |||||||||||||||||||||
Four to five years
|
— | — | — | — | 6,072 | — | 6,072 | |||||||||||||||||||||
Over five years
|
— | — | — | 157,830 | 80,150 | 200,000 | 437,980 | |||||||||||||||||||||
Total debt
|
377,000 | 100,000 | 274,960 | 157,830 | 107,757 | 200,000 | 1,217,547 | |||||||||||||||||||||
Current maturities
|
(8,000 | ) | — | — | — | (4,997 | ) | — | (12,997 | ) | ||||||||||||||||||
Long-term debt, less current maturities
|
$ | 369,000 | $ | 100,000 | $ | 274,960 | $ | 157,830 | $ | 102,760 | $ | 200,000 | $ | 1,204,550 | ||||||||||||||
Unamortized debt discount
(4)
|
— | — | — | (2,482 | ) | — | (34,160 | ) | (36,642 | ) | ||||||||||||||||||
Long-term debt
|
$ | 369,000 | $ | 100,000 | $ | 274,960 | $ | 155,348 | $ | 102,760 | $ | 165,840 | $ | 1,167,908 |
(1)
|
Amounts reflect both our Term Loan and Term Loan A.
|
(2)
|
Beginning in December 2012, the holders of these Convertible Senior Notes may require us to repurchase these notes or we may at our own option elect to repurchase notes. These notes will mature in March 2025.
|
(3)
|
Beginning in March 2018, the holders of these Convertible Senior Notes may require us to repurchase these notes or we may at our own option elect to repurchase the notes. These notes will mature in March 2032.
|
(4)
|
The notes will increase to their principal amount through accretion of non-cash interest charges through December 2012 for the Convertible Senior Notes due 2025 and March 2018 for the Convertible Senior Notes due 2032.
|
Year
|
Redemption Price
|
|||
2012
|
104.750%
|
|||
2013
|
102.375%
|
|||
2014 and thereafter
|
100.000%
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Interest expense
|
$
|
19,947
|
$
|
26,029
|
$
|
42,756
|
$
|
50,796
|
||||||||
Interest income
|
(322
|
)
|
(499
|
)
|
(892
|
)
|
(975
|
)
|
||||||||
Capitalized interest
|
(998
|
)
|
(252
|
)
|
(1,477
|
)
|
(307
|
)
|
||||||||
Interest expense, net
|
$
|
18,627
|
$
|
25,278
|
$
|
40,387
|
$
|
49,514
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Net income, including noncontrolling interests
|
$ | 45,440 | $ | 42,109 | $ | 111,966 | $ | 68,744 | ||||||||
Other comprehensive income, net of tax
|
||||||||||||||||
Foreign currency translation gain (loss)
|
(2,838 | ) | (1,416 | ) | 1,314 | 699 | ||||||||||
Unrealized gain (loss) on hedges, net
|
12,680 | 20,970 | (1,122 | ) | 10,403 | |||||||||||
Other comprehensive income
|
9,842 | 19,554 | 192 | 11,102 | ||||||||||||
Total comprehensive income
|
55,282 | 61,663 | 112,158 | 79,846 | ||||||||||||
Less comprehensive income applicable to noncontrolling interests
|
(789 | ) | (786 | ) | (1,578 | ) | (1,554 | ) | ||||||||
Total comprehensive income applicable to Helix
|
54,493 | 60,877 | 110,580 | 78,292 | ||||||||||||
Preferred stock dividends
|
(10 | ) | (10 | ) | (20 | ) | (20 | ) | ||||||||
Total comprehensive income applicable to Helix common shareholders
|
$ | 54,483 | $ | 60,867 | $ | 110,560 | $ | 78,272 |
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
Cumulative foreign currency translation adjustment
|
$ | (21,644 | ) | $ | (22,958 | ) | ||
Unrealized gain on hedges, net
|
11,819 | 12,941 | ||||||
Accumulated other comprehensive loss
|
$ | (9,825 | ) | $ | (10,017 | ) |
Three Months Ended
|
Three Months Ended
|
|||||||||
June 30, 2012
|
June 30, 2011
|
|||||||||
Income
|
Shares
|
Income
|
Shares
|
|||||||
Basic:
|
||||||||||
Net income applicable to Helix common shareholders
|
$ | 44,641 | $ | 41,313 | ||||||
Less: Undistributed net income allocable to participating securities
|
(449 | ) | (514 | ) | ||||||
Net income applicable to Helix common shareholders
|
$ | 44,192 |
104,563
|
$ | 40,799 |
104,673
|
Three Months Ended
|
Three Months Ended
|
|||||||||||||||
June 30, 2012
|
June 30, 2011
|
|||||||||||||||
Income
|
Shares
|
Income
|
Shares
|
|||||||||||||
Diluted:
|
||||||||||||||||
Net income per common share - Basic
|
$ | 44,192 | 104,563 | $ | 40,799 | 104,673 | ||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Stock options
|
—
|
118 |
—
|
106 | ||||||||||||
Undistributed earnings reallocated to participating securities
|
2 |
—
|
3 |
—
|
||||||||||||
2025 Notes and 2032 Notes
|
—
|
—
|
—
|
—
|
||||||||||||
Convertible preferred stock
|
10 | 361 | 10 | 361 | ||||||||||||
Net income per common share - Diluted
|
$ | 44,204 | 105,042 | $ | 40,812 | 105,140 |
Six Months Ended
|
Six Months Ended
|
|||||||||
June 30, 2012
|
June 30, 2011
|
|||||||||
Income
|
Shares
|
Income
|
Shares
|
|||||||
Basic:
|
||||||||||
Net income applicable to Helix common shareholders
|
$ | 110,368 | $ | 67,170 | ||||||
Less: Undistributed net income allocable to participating securities
|
(1,111 | ) | (850 | ) | ||||||
Net income applicable to Helix common shareholders
|
$ | 109,257 |
104,547
|
$ | 66,320 |
104,573
|
Six Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30, 2012
|
June 30, 2011
|
|||||||||||||||
Income
|
Shares
|
Income
|
Shares
|
|||||||||||||
Diluted:
|
||||||||||||||||
Net income per common share - Basic
|
$ | 109,257 | 104,547 | $ | 66,320 | 104,573 | ||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Stock options
|
—
|
104 |
—
|
90 | ||||||||||||
Undistributed earnings reallocated to participating securities
|
5 |
—
|
4 |
—
|
||||||||||||
2025 Notes and 2032 Notes
|
—
|
—
|
—
|
—
|
||||||||||||
Convertible preferred stock
|
20 | 361 | 20 | 361 | ||||||||||||
Net income per common share - Diluted
|
$ | 109,282 | 105,012 | $ | 66,344 | 105,024 |
Date of Grant
|
Shares
|
Grant Date Fair Value
Per Share
|
Vesting Period
|
||||||||
January 3, 2012
|
272,153 | $ | 15.80 |
33% per year over three years
|
|||||||
January 3, 2012
(1)
|
132,910 | 23.68 |
100% on January 1, 2015
|
||||||||
January 3, 2012
|
1,958 | 15.80 |
100% on January 1, 2014
|
||||||||
April 1, 2012
|
1,879 | 17.80 |
100% on January 1, 2014
|
(1)
|
Reflects the grant of PSUs to certain of our executive officers. The estimated fair value of the PSUs on grant date was determined using a Monte Carlo simulation model. The PSUs provide for an award based on the performance of our common stock over a three-year period with the maximum award being 200% of the original awarded PSUs and the minimum amount being zero. The vested PSUs will be settled in an equivalent number of shares of our common stock unless the Compensation Committee of our Board of Directors elects to pay in cash. See Note 12 of 2011 Form 10-K.
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Revenues
–
|
||||||||||||||||
Contracting Services
|
$ | 209,557 | $ | 171,353 | $ | 454,101 | $ | 302,890 | ||||||||
Production Facilities
|
19,963 | 20,545 | 39,985 | 36,115 | ||||||||||||
Oil and Gas
|
149,933 | 172,458 | 328,018 | 341,317 | ||||||||||||
Intercompany elimination
|
(32,059 | ) | (26,037 | ) | (66,783 | ) | (50,396 | ) | ||||||||
Total
|
$ | 347,394 | $ | 338,319 | $ | 755,321 | $ | 629,926 | ||||||||
Income (loss) from operations
–
|
||||||||||||||||
Contracting Services
|
$ | 19,223 | $ | 30,565 | $ | 78,347 | $ | 33,831 | ||||||||
Production Facilities
|
9,882 | 11,920 | 19,931 | 17,876 | ||||||||||||
Oil and Gas
|
60,442 | 43,064 | 137,384 | 96,304 | ||||||||||||
Corporate
|
(11,158 | ) | (9,112 | ) | (22,056 | ) | (19,553 | ) | ||||||||
Intercompany elimination
|
98 | (19 | ) | (2,922 | ) | 71 | ||||||||||
Total
|
$ | 78,487 | $ | 76,418 | $ | 210,684 | $ | 128,529 | ||||||||
Equity in earnings of equity investments
|
$ | 5,748 | $ | 5,887 | $ | 6,155 | $ | 11,537 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Contracting Services
|
20,538 | 14,295 | 43,739 | 27,164 | ||||||||||||
Production Facilities
|
11,521 | 11,742 | 23,044 | 23,232 | ||||||||||||
Total
|
$ | 32,059 | $ | 26,037 | $ | 66,783 | $ | 50,396 |
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Contracting Services
|
$ |
2,176,796
|
$ |
2,006,065
|
||||
Production Facilities
|
534,714
|
534,776
|
||||||
Oil and Gas
|
977,295
|
1,041,506
|
||||||
Total
|
$ | 3,688,805 | $ | 3,582,347 |
•
|
Level 1. Observable inputs such as quoted prices in active markets;
|
|
•
|
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
|
•
|
Level 3. Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
(a)
|
Market Approach. Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
|
(b)
|
Cost Approach. Amount that would be required to replace the service capacity of an asset (replacement cost).
|
(c)
|
Income Approach. Techniques to convert expected future cash flows to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models).
|
Level 1
|
Level 2
(1)
|
Level 3
|
Total
|
Valuation Technique
|
|||||||||||||
Assets:
|
|||||||||||||||||
Natural gas contracts
|
$ |
—
|
$ | 10,902 | $ |
—
|
$ | 10,902 |
(c)
|
||||||||
Oil contracts
|
—
|
21,770 |
—
|
21,770 |
(c)
|
||||||||||||
Liabilities:
|
|||||||||||||||||
Oil contracts
|
—
|
6,383 |
—
|
6,383 |
(c)
|
||||||||||||
Fair value of long term debt
(2)
|
1,133,037 | 123,382 |
—
|
1,256,419 |
(a), (b)
|
||||||||||||
Interest rate swaps
|
—
|
376 |
—
|
376 |
(c)
|
||||||||||||
Foreign currency forwards
|
—
|
44 |
—
|
44 |
(c)
|
||||||||||||
Total net liability
|
$ | 1,133,037 | $ | 97,513 | $ |
—
|
$ | 1,230,550 |
(1)
|
Unless otherwise indicated, the fair value of our Level 2 derivative instruments reflects our best estimate and is based upon exchange or over-the-counter quotations whenever they are available. Quoted valuations may not be available due to location differences or terms that extend beyond the period for which quotations are available. Where quotes are not available, we utilize other valuation techniques or models to estimate market values. These modeling techniques require us to make estimations of future prices, price correlation and market volatility and liquidity. Our actual results may differ from our estimates, and these differences could be positive or negative.
|
(2)
|
See Note 7 for additional information regarding our long term debt. The fair value of our long term debt at June 30, 2012 is as follows:
|
Fair Value
|
Carrying Value
|
||||||||
Term Loans (mature July 2015)
|
$ | 376,630 | $ | 377,000 | |||||
Revolving Credit Facility (matures July 2015)
|
100,000 | 100,000 | |||||||
2025 Notes (mature March 2025)
|
158,824 | 157,830 |
(a)
|
||||||
2032 Notes (mature March 2032)
|
207,500 | 200,000 |
(b)
|
||||||
Senior Unsecured Notes (mature January 2016)
|
290,083 | 274,960 | |||||||
MARAD Debt (matures February 2027)
(c)
|
123,382 | 107,757 | |||||||
Total
|
$ | 1,256,419 | $ | 1,217,547 |
a.
|
Amount excludes the related unamortized debt discount of $2.5 million.
|
b.
|
Amount excludes the related unamortized debt discount of $34.2 million.
|
c.
|
The estimated fair value of all debt, other than the MARAD debt, was determined using Level 1 inputs using the market approach. The fair value of the MARAD debt was determined using a third party evaluation of the remaining average life and outstanding principal balance of the MARAD indebtedness as compared to other governmental obligations in the marketplace with similar terms. The fair value of the MARAD Debt was estimated using Level 2 fair value inputs using the market approach.
|
Production Period
|
Instrument Type
|
Average
Monthly Volumes
|
Weighted Average
Price
(1)
|
|||
Crude Oil:
|
(per barrel)
|
|||||
July 2012 — December 2012
|
Collar
|
75.0 MBbl
|
$ 96.67 — $118.57
(2)
|
|||
July 2012 — December 2012
|
Collar
|
99.1 MBbl
|
$ 99.67 — $118.42
|
|||
July 2012 — December 2012
|
Swap
|
96.6 MBbl
|
$92.52
|
|||
January 2013 — December 2013
|
Swap
|
88.9 MBbl
|
$95.28
|
|||
January 2013 — December 2013
|
Collar
|
133.3 MBbl
|
$ 98.44 — $115.85
|
|||
Natural Gas:
|
(per Mcf)
|
|||||
July 2012 — December 2012
|
Swap
|
777.5 Mmcf
|
$4.29
|
|||
July 2012 — December 2012
|
Collar
|
156.7 Mmcf
|
$4.75 — $5.09
|
|||
January 2013 — December 2013
|
Swap
|
500.0 Mmcf
|
$4.09
|
(1)
|
The prices quoted in the table above are NYMEX Henry Hub for natural gas. Most of our oil contracts are indexed to the Brent crude oil price.
|
(2)
|
This contract is priced using NYMEX West Texas Intermediate for crude oil.
|
As of June 30, 2012
|
As of December 31, 2011
|
|||||||||
Balance Sheet Location
|
Fair Value
|
Balance Sheet Location
|
Fair Value
|
|||||||
Asset Derivatives:
|
||||||||||
Natural gas contracts
|
Other current assets
|
$ | 9,663 |
Other current assets
|
$ | 12,957 | ||||
Oil contracts
|
Other current assets
|
16,033 |
Other current assets
|
8,567 | ||||||
Oil contracts
|
Other assets
|
5,737 |
Other assets
|
— | ||||||
Natural gas contracts
|
Other assets
|
1,239 |
Other assets
|
857 | ||||||
Interest rate swaps
|
Other assets
|
— |
Other assets
|
327 | ||||||
$ | 32,672 | $ | 22,708 | |||||||
As of June 30, 2012
|
As of December 31, 2011
|
|||||||||
Balance Sheet Location
|
Fair Value
|
Balance Sheet Location
|
Fair Value
|
|||||||
Liability Derivatives:
|
||||||||||
Oil contracts
|
Accrued liabilities
|
$ | 5,324 |
Accrued liabilities
|
$ | 886 | ||||
Interest rate swaps
|
Accrued liabilities
|
317 |
Accrued liabilities
|
202 | ||||||
Oil contracts
|
Other long-term liabilities
|
1,059 |
Other long-term liabilities
|
1,711 | ||||||
Interest rate swaps
|
Other long-term liabilities
|
59 |
Other long-term liabilities
|
— | ||||||
$ | 6,759 | $ | 2,799 |
As of June 30, 2012
|
As of December 31, 2011
|
|||||||||
Balance Sheet Location
|
Fair Value
|
Balance Sheet Location
|
Fair Value
|
|||||||
Asset Derivatives:
|
||||||||||
Foreign exchange forwards
|
Other current assets
|
$ | — |
Other current assets
|
$ | 55 | ||||
$ | — | $ | 55 | |||||||
As of June 30, 2012
|
As of December 31, 2011
|
|||||||||
Balance Sheet Location
|
Fair Value
|
Balance Sheet Location
|
Fair Value
|
|||||||
Liability Derivatives:
|
||||||||||
Foreign exchange forwards
|
Accrued liabilities
|
$ | 44 |
Accrued liabilities
|
$ | 159 | ||||
$ | 44 | $ | 159 |
Gain (Loss) Recognized in OCI on Derivatives
(Effective Portion)
|
||||||||||||||||
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Oil and natural gas commodity contracts
|
$
|
12,759
|
$
|
20,720
|
$
|
(796
|
)
|
$
|
9,942
|
|||||||
Interest rate swaps
|
(79
|
)
|
250
|
(326
|
)
|
461
|
||||||||||
$
|
12,680
|
$
|
20,970
|
$
|
(1,122
|
)
|
$
|
10,403
|
Gain (Loss) Reclassified from Accumulated OCI
|
||||||||||||||||||||||
into Income
|
||||||||||||||||||||||
Location of Gain (Loss)
|
(Effective Portion)
|
|||||||||||||||||||||
Reclassified from
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||||||||
Accumulated OCI into Income
|
June 30,
|
June 30,
|
||||||||||||||||||||
(Effective Portion)
|
2012
|
2011
|
2012
|
2011
|
||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||
Oil and natural gas commodity contracts
|
Oil and gas revenue
|
$
|
8,023
|
$
|
(11,860
|
)
|
$
|
8,132
|
$
|
(18,185
|
)
|
|||||||||||
Interest rate swaps
|
Net interest expense
|
(120
|
)
|
(591
|
)
|
(313
|
)
|
(1,071
|
)
|
|||||||||||||
$
|
7,903
|
$
|
(12,451
|
)
|
$
|
7,819
|
$
|
(19,256
|
)
|
|||||||||||||
Gain (Loss) Recognized in Income on Derivatives
|
||||||||||||||||||||||
Location of Gain (Loss)
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||||||||
Recognized in Income on
|
June 30,
|
June 30,
|
||||||||||||||||||||
Derivatives
|
2012
|
2011
|
2012
|
2011
|
||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||
Foreign exchange forwards
|
Other expense
|
$
|
(69
|
)
|
$
|
6
|
$
|
164
|
$
|
614
|
||||||||||||
$
|
(69
|
)
|
$
|
6
|
$
|
164
|
$
|
614
|
Three Months Ended June 30, 2012
|
||||||||||||||||||||
Helix
|
Guarantors
|
Non-Guarantors
|
Consolidating Entries
|
Consolidated
|
||||||||||||||||
Net revenues
|
$ | 19,963 | $ | 254,880 | $ | 95,632 | $ | (23,081 | ) | $ | 347,394 | |||||||||
Cost of sales
|
26,084 | 178,437 | 72,509 | (22,861 | ) | 254,169 | ||||||||||||||
Gross profit
|
(6,121 | ) | 76,443 | 23,123 | (220 | ) | 93,225 | |||||||||||||
Loss on sale or acquisition of assets
|
— | (236 | ) | — | — | (236 | ) | |||||||||||||
Ineffectiveness on oil and gas derivative contract
|
— | 10,069 | — | — | 10,069 | |||||||||||||||
Selling, general and administrative expenses
|
(11,658 | ) | (8,919 | ) | (4,257 | ) | 263 | (24,571 | ) | |||||||||||
Income (loss) from operations
|
(17,779 | ) | 77,357 | 18,866 | 43 | 78,487 | ||||||||||||||
Equity in earnings of investments
|
64,446 | 3,670 | 5,748 | (68,116 | ) | 5,748 | ||||||||||||||
Net interest expense and other
|
(9,597 | ) | (7,074 | ) | (3,648 | ) | — | (20,319 | ) | |||||||||||
Income (loss) before income taxes
|
37,070 | 73,953 | 20,966 | (68,073 | ) | 63,916 | ||||||||||||||
Provision (benefit) for income taxes
|
(7,554 | ) | 24,142 | 1,872 | 16 | 18,476 | ||||||||||||||
Net income (loss) applicable to Helix
|
44,624 | 49,811 | 19,094 | (68,089 | ) | 45,440 | ||||||||||||||
Less: net income applicable to noncontrolling interests
|
— | — | — | (789 | ) | (789 | ) | |||||||||||||
Preferred stock dividends
|
(10 | ) | — | — | — | (10 | ) | |||||||||||||
Net income (loss) applicable to Helix common shareholders
|
$ | 44,614 | $ | 49,811 | $ | 19,094 | $ | (68,878 | ) | $ | 44,641 | |||||||||
Total comprehensive income (loss) applicable to Helix common shareholders
|
$ | 44,535 | $ | 62,570 | $ | 16,254 | $ | (68,876 | ) | $ | 54,483 |
Three Months Ended June 30, 2011
|
||||||||||||||||||||
Helix
|
Guarantors
|
Non-Guarantors
|
Consolidating Entries
|
Consolidated
|
||||||||||||||||
Net revenues
|
$ | 20,545 | $ | 247,855 | $ | 92,926 | $ | (23,007 | ) | $ | 338,319 | |||||||||
Cost of sales
|
15,123 | 173,897 | 71,730 | (22,629 | ) | 238,121 | ||||||||||||||
Gross profit
|
5,422 | 73,958 | 21,196 | (378 | ) | 100,198 | ||||||||||||||
Loss on sale or acquisition of assets
|
(22 | ) | — | — | — | (22 | ) | |||||||||||||
Selling, general and administrative expenses
|
(9,574 | ) | (9,915 | ) | (4,658 | ) | 389 | (23,758 | ) | |||||||||||
Income (loss) from operations
|
(4,174 | ) | 64,043 | 16,538 | 11 | 76,418 | ||||||||||||||
Equity in earnings of investments
|
58,929 | 4,194 | 5,887 | (63,123 | ) | 5,887 | ||||||||||||||
Net interest expense and other
|
(18,243 | ) | (5,890 | ) | 108 | — | (24,025 | ) | ||||||||||||
Income (loss) before income taxes
|
36,512 | 62,347 | 22,533 | (63,112 | ) | 58,280 | ||||||||||||||
Provision (benefit) for income taxes
|
(4,790 | ) | 20,319 | 637 | 5 | 16,171 | ||||||||||||||
Net income (loss) applicable to Helix
|
41,302 | 42,028 | 21,896 | (63,117 | ) | 42,109 | ||||||||||||||
Less:net income applicable to noncontrolling interests
|
— | — | — | (786 | ) | (786 | ) | |||||||||||||
Preferred stock dividends
|
(10 | ) | — | — | — | (10 | ) | |||||||||||||
Net income (loss) applicable to Helix common shareholders
|
$ | 41,292 | $ | 42,028 | $ | 21,896 | $ | (63,903 | ) | $ | 41,313 | |||||||||
Total comprehensive income (loss) applicable to Helix common shareholders
|
$ | 41,542 | $ | 62,748 | $ | 20,485 | $ | (63,908 | ) | $ | 60,867 |
Six Months Ended June 30, 2012
|
||||||||||||||||||||
Helix
|
Guarantors
|
Non-Guarantors
|
Consolidating Entries
|
Consolidated
|
||||||||||||||||
Net revenues
|
$ | 39,985 | $ | 540,568 | $ | 221,532 | $ | (46,764 | ) | $ | 755,321 | |||||||||
Cost of sales
|
42,705 | 343,030 | 160,954 | (46,303 | ) | 500,386 | ||||||||||||||
Gross profit
|
(2,720 | ) | 197,538 | 60,578 | (461 | ) | 254,935 | |||||||||||||
Loss on sale or acquisition of assets
|
— | (1,714 | ) | — | — | (1,714 | ) | |||||||||||||
Ineffectiveness on oil and gas derivative contract
|
— | 7,730 | — | — | 7,730 | |||||||||||||||
Selling, general and administrative expenses
|
(22,930 | ) | (18,796 | ) | (9,091 | ) | 550 | (50,267 | ) | |||||||||||
Income (loss) from operations
|
(25,650 | ) | 184,758 | 51,487 | 89 | 210,684 | ||||||||||||||
Equity in earnings of investments
|
157,696 | 6,295 | 6,155 | (163,991 | ) | 6,155 | ||||||||||||||
Net interest expense and other
|
(40,144 | ) | (14,284 | ) | (4,692 | ) | — | (59,120 | ) | |||||||||||
Income (loss) before income taxes
|
91,902 | 176,769 | 52,950 | (163,902 | ) | 157,719 | ||||||||||||||
Provision (benefit) for income taxes
|
(18,428 | ) | 59,023 | 5,127 | 31 | 45,753 | ||||||||||||||
Net income (loss) applicable to Helix
|
110,330 | 117,746 | 47,823 | (163,933 | ) | 111,966 | ||||||||||||||
Less: net income applicable to noncontrolling interests
|
— | — | — | (1,578 | ) | (1,578 | ) | |||||||||||||
Preferred stock dividends
|
(20 | ) | — | — | — | (20 | ) | |||||||||||||
Net income (loss) applicable to Helix common shareholders
|
$ | 110,310 | $ | 117,746 | $ | 47,823 | $ | (165,511 | ) | $ | 110,368 | |||||||||
Total comprehensive income (loss) applicable to Helix common shareholders
|
$ | 109,985 | $ | 116,950 | $ | 49,138 | $ | (165,513 | ) | $ | 110,560 |
Six Months Ended June 30, 2011
|
||||||||||||||||||||
Helix
|
Guarantors
|
Non-Guarantors
|
Consolidating Entries
|
Consolidated
|
||||||||||||||||
Net revenues
|
$ | 36,127 | $ | 489,897 | $ | 150,802 | $ | (46,900 | ) | $ | 629,926 | |||||||||
Cost of sales
|
31,716 | 339,128 | 128,008 | (46,200 | ) | 452,652 | ||||||||||||||
Gross profit
|
4,411 | 150,769 | 22,794 | (700 | ) | 177,274 | ||||||||||||||
Loss on sale or acquisition of assets
|
(6 | ) | — | — | — | (6 | ) | |||||||||||||
Selling, general and administrative expenses
|
(20,760 | ) | (19,951 | ) | (8,812 | ) | 784 | (48,739 | ) | |||||||||||
Income (loss) from operations
|
(16,355 | ) | 130,818 | 13,982 | 84 | 128,529 | ||||||||||||||
Equity in earnings of investments
|
107,036 | (1,468 | ) | 11,537 | (105,568 | ) | 11,537 | |||||||||||||
Net interest expense and other
|
(35,527 | ) | (10,599 | ) | 525 | — | (45,601 | ) | ||||||||||||
Income (loss) before income taxes
|
55,154 | 118,751 | 26,044 | (105,484 | ) | 94,465 | ||||||||||||||
Provision (benefit) for income taxes
|
(11,963 | ) | 42,060 | (4,404 | ) | 28 | 25,721 | |||||||||||||
Net income (loss) applicable to Helix
|
67,117 | 76,691 | 30,448 | (105,512 | ) | 68,744 | ||||||||||||||
Less:net income applicable to noncontrolling interests
|
— | — | — | (1,554 | ) | (1,554 | ) | |||||||||||||
Preferred stock dividends
|
(20 | ) | — | — | — | (20 | ) | |||||||||||||
Net income (loss) applicable to Helix common shareholders
|
$ | 67,097 | $ | 76,691 | $ | 30,448 | $ | (107,066 | ) | $ | 67,170 | |||||||||
Total comprehensive income (loss) applicable to Helix common shareholders
|
$ | 67,559 | $ | 86,633 | $ | 31,157 | $ | (107,077 | ) | $ | 78,272 |
Six Months Ended June 30, 2012
|
|||||||||||||||||
Helix
|
Guarantors
|
Non-Guarantors
|
Consolidating Entries
|
Consolidated
|
|||||||||||||
Cash flow from operating activities:
|
|||||||||||||||||
Net income (loss), including noncontrolling interests
|
$
|
110,330
|
$
|
117,746
|
$
|
47,823
|
$
|
(163,933
|
)
|
$
|
111,966
|
||||||
Adjustments to reconcile net income (loss), including noncontrolling interests to net cash provided by (used in) operating activities:
|
|||||||||||||||||
Equity in earnings of affiliates
|
(157,696
|
)
|
(6,295
|
)
|
—
|
163,991
|
—
|
||||||||||
Other adjustments
|
(23,636
|
)
|
146,623
|
(11,702
|
)
|
(2,231
|
)
|
109,054
|
|||||||||
Net cash provided by (used in) operating activities
|
(71,002
|
)
|
258,074
|
36,121
|
(2,173
|
)
|
221,020
|
||||||||||
Cash flows from investing activities:
|
|||||||||||||||||
Capital expenditures
|
(1,635
|
)
|
(131,879
|
)
|
(16,593
|
)
|
—
|
(150,107
|
)
|
||||||||
Distributions from equity investments, net
|
—
|
—
|
2,045
|
—
|
2,045
|
||||||||||||
Decreases in restricted cash
|
—
|
2,660
|
—
|
—
|
2,660
|
||||||||||||
Net cash used in investing activities
|
(1,635
|
)
|
(129,219
|
)
|
(14,548
|
)
|
—
|
(145,402
|
)
|
||||||||
Cash flows from financing activities:
|
|||||||||||||||||
Borrowings of debt
|
400,000
|
—
|
—
|
—
|
400,000
|
||||||||||||
Repayments of debt
|
(356,195
|
)
|
—
|
(2,409
|
)
|
—
|
(358,604
|
)
|
|||||||||
Deferred financing costs
|
(6,485
|
)
|
—
|
—
|
—
|
(6,485
|
)
|
||||||||||
Repurchases of common stock
|
(7,510
|
)
|
—
|
—
|
—
|
(7,510
|
)
|
||||||||||
Excess tax benefit from stock-based compensation
|
(657
|
)
|
—
|
—
|
—
|
(657
|
)
|
||||||||||
Exercise of stock options, net
|
372
|
—
|
—
|
—
|
372
|
||||||||||||
Intercompany financing
|
131,741
|
(128,514
|
)
|
(5,400
|
)
|
2,173
|
—
|
||||||||||
Net cash provided by (used in) financing activities
|
161,266
|
(128,514
|
)
|
(7,809
|
)
|
2,173
|
27,116
|
||||||||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
—
|
304
|
—
|
304
|
||||||||||||
Net increase in cash and cash equivalents
|
88,629
|
341
|
14,068
|
—
|
103,038
|
||||||||||||
Cash and cash equivalents:
|
|||||||||||||||||
Balance, beginning of year
|
495,484
|
2,434
|
48,547
|
—
|
546,465
|
||||||||||||
Balance, end of year
|
$
|
584,113
|
$
|
2,775
|
$
|
62,615
|
$
|
—
|
$
|
649,503
|
Six Months Ended June 30, 2011
|
|||||||||||||||||
Helix
|
Guarantors
|
Non-Guarantors
|
Consolidating Entries
|
Consolidated
|
|||||||||||||
Cash flow from operating activities:
|
|||||||||||||||||
Net income (loss), including noncontrolling interests
|
$
|
67,117
|
$
|
76,691
|
$
|
30,448
|
$
|
(105,512
|
)
|
$
|
68,744
|
||||||
Adjustments to reconcile net income (loss), including noncontrolling interests to net cash provided by (used in) operating activities:
|
|||||||||||||||||
Equity in earnings of affiliates
|
(107,036
|
)
|
1,468
|
—
|
105,568
|
—
|
|||||||||||
Other adjustments
|
21,261
|
180,193
|
(14,149
|
)
|
(5,476
|
)
|
181,829
|
||||||||||
Net cash provided by (used in) operating activities
|
(18,658
|
)
|
258,352
|
16,299
|
(5,420
|
)
|
250,573
|
||||||||||
Cash flows from investing activities:
|
|||||||||||||||||
Capital expenditures
|
(15,699
|
)
|
(76,331
|
)
|
(14,092
|
)
|
—
|
(106,122
|
)
|
||||||||
Distributions from equity investments, net
|
—
|
—
|
(1,106
|
)
|
—
|
(1,106
|
)
|
||||||||||
Proceeds from sale of Cal Dive common stock
|
3,588
|
—
|
—
|
—
|
3,588
|
||||||||||||
Decreases in restricted cash
|
—
|
863
|
—
|
—
|
863
|
||||||||||||
Net cash used in investing activities
|
(12,111
|
)
|
(75,468
|
)
|
(15,198
|
)
|
—
|
(102,777
|
)
|
||||||||
Cash flows from financing activities:
|
|||||||||||||||||
Repayments of debt
|
(111,191
|
)
|
—
|
(2,294
|
)
|
—
|
(113,485
|
)
|
|||||||||
Deferred financing costs
|
(9,014
|
)
|
—
|
—
|
—
|
(9,014
|
)
|
||||||||||
Repurchases of common stock
|
(1,012
|
)
|
—
|
—
|
—
|
(1,012
|
)
|
||||||||||
Excess tax benefit from stock-based compensation
|
(1,196
|
)
|
—
|
—
|
—
|
(1,196
|
)
|
||||||||||
Exercise of stock options, net and other
|
1,652
|
—
|
(1,213
|
)
|
—
|
439
|
|||||||||||
Intercompany financing
|
162,868
|
(183,765
|
)
|
15,477
|
5,420
|
—
|
|||||||||||
Net cash provided by (used in) financing activities
|
42,107
|
(183,765
|
)
|
11,970
|
5,420
|
(124,268
|
)
|
||||||||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
—
|
(424
|
)
|
—
|
(424
|
)
|
||||||||||
Net increase (decrease) in cash and cash equivalents
|
11,338
|
(881
|
)
|
12,647
|
—
|
23,104
|
|||||||||||
Cash and cash equivalents:
|
|||||||||||||||||
Balance, beginning of year
|
376,434
|
3,294
|
11,357
|
—
|
391,085
|
||||||||||||
Balance, end of year
|
$
|
387,772
|
$
|
2,413
|
$
|
24,004
|
$
|
—
|
$
|
414,189
|
•
|
statements regarding our business strategy, including the potential sale of assets and/or other investments in our subsidiaries and facilities, or any other business plans, forecasts or objectives, any or all of which is subject to change;
|
||
•
|
statements regarding our anticipated production volumes, results of exploration, exploitation, development, acquisition or operations expenditures, and current or prospective reserve levels with respect to any oil and gas property or well;
|
||
•
|
statements related to commodity prices for oil and gas or with respect to the supply of and demand for oil and gas;
|
||
•
|
statements relating to our proposed exploration, development and/or production of oil and gas properties, prospects or other interests and any anticipated costs related thereto;
|
||
•
|
statements related to environmental risks, exploration and development risks, or drilling and operating risks;
|
||
•
|
statements relating to the construction or acquisition of vessels or equipment and any anticipated costs related hereto;
|
||
•
|
statements regarding projections of revenues, gross margin, expenses, earnings or losses, working capital or other financial items;
|
||
•
|
statements regarding any financing transactions or arrangements, or ability to enter into such transactions;
|
||
•
|
statements regarding anticipated legislative, governmental, regulatory, administrative or other public body actions, requirements, permits or decisions;
|
||
•
|
statements regarding the collectability of our trade receivables;
|
||
•
|
statements regarding anticipated developments, industry trends, performance or industry ranking;
|
||
•
|
statements regarding general economic or political conditions, whether international, national or in the regional and local market areas in which we do business;
|
||
•
|
statements related to our ability to retain key members of our senior management and key employees;
|
||
•
|
statements related to the underlying assumptions related to any projection or forward-looking statement; and
|
||
•
|
any other statements that relate to non-historical or future information.
|
•
|
impact of the weak economic conditions and the future impact of such conditions on the oil and gas industry and the demand for our services;
|
||
•
|
uncertainties inherent in the development and production of oil and gas and in estimating reserves;
|
||
•
|
the geographic concentration of our oil and gas operations;
|
||
•
|
the effect of regulations on the offshore Gulf of Mexico oil and gas operations;
|
||
•
|
uncertainties regarding our ability to replace depletion;
|
||
•
|
unexpected future capital expenditures (including the amount and nature thereof);
|
||
|
•
|
impact of oil and gas price fluctuations and the cyclical nature of the oil and gas industry;
|
|
|
•
|
the effects of indebtedness, which could adversely restrict our ability to operate, could make us
|
|
|
vulnerable to general adverse economic and industry conditions, could place us at a competitive disadvantage compared to our competitors that have less debt and could have other adverse consequences to us;
|
|
|
•
|
the effectiveness of our hedging activities;
|
|
|
•
|
the results of our continuing efforts to control costs, and improve performance;
|
|
|
•
|
the success of our risk management activities;
|
|
|
•
|
the effects of competition;
|
|
|
•
|
the availability (or lack thereof) of capital (including any financing) to fund our business strategy and/or operations and the terms of any such financing;
|
|
|
•
|
the impact of current and future laws and governmental regulations, including tax and accounting developments;
|
|
|
•
|
the effect of adverse weather conditions and/or other risks associated with marine operations, including exposure of our oil and gas operations to tropical storm activity in the Gulf of Mexico;
|
|
•
|
the impact of operational disruptions affecting the
Helix Producer I
vessel which is crucial to producing oil and natural gas from our Phoenix field;
|
||
|
•
|
the effect of environmental liabilities that are not covered by an effective indemnity or insurance;
|
|
|
•
|
the potential impact of a loss of one or more key employees; and
|
|
|
•
|
the impact of general, market, industry or business conditions.
|
•
|
worldwide economic activity, including available access to global capital and equity markets;
|
||
•
|
demand for oil and natural gas, especially in the United States, Europe, China and India;
|
||
•
|
economic and political conditions in the Middle East and other oil-producing regions;
|
||
•
|
the effect of regulations on offshore Gulf of Mexico oil and gas operations;
|
||
•
|
actions taken by OPEC;
|
||
•
|
the availability and discovery rate of new oil and natural gas reserves in offshore areas;
|
||
•
|
the cost of offshore exploration for and production and transportation of oil and gas;
|
||
•
|
the ability of oil and natural gas companies to generate funds or otherwise obtain external capital for exploration, development and production operations;
|
||
•
|
the sale and expiration dates of offshore leases in the United States and overseas;
|
||
•
|
technological advances affecting energy exploration production transportation and consumption;
|
||
•
|
weather conditions;
|
||
•
|
environmental and other governmental regulations; and
|
||
•
|
tax policies.
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Net income, including noncontrolling interests
|
$ | 45,440 | $ | 42,109 | $ | 111,966 | $ | 68,744 | ||||||||
Adjustments:
|
||||||||||||||||
Income tax provision
|
18,476 | 16,171 | 45,753 | 25,721 | ||||||||||||
Net interest expense and other
|
20,319 | 24,025 | 41,993 | 45,601 | ||||||||||||
Loss on extinguishment of long term debt
|
—
|
—
|
17,127 |
—
|
||||||||||||
Depreciation and amortization
|
62,468 | 75,027 | 134,960 | 167,170 | ||||||||||||
Asset impairment charges
|
14,590 | 11,573 | 14,590 | 11,573 | ||||||||||||
Exploration expenses
|
1,092 | 7,939 | 1,846 | 8,285 | ||||||||||||
EBITDAX
|
162,385 | 176,844 | 368,235 | 327,094 | ||||||||||||
Adjustments:
|
||||||||||||||||
Noncontrolling interest Kommandor LLC
|
(1,026 | ) | (1,026 | ) | (2,052 | ) | (2,041 | ) | ||||||||
Unrealized gain on oil and gas commodity contracts
|
(10,069 | ) |
—
|
(7,730 | ) |
—
|
||||||||||
Loss on sales of assets
|
236 | 22 | 1,714 | 6 | ||||||||||||
ADJUSTED EBITDAX
|
$ | 151,526 | $ | 175,840 | $ | 360,167 | $ | 325,059 |
Three Months Ended
|
||||||||||||
June 30,
|
Increase/
|
|||||||||||
2012
|
2011
|
(Decrease)
|
||||||||||
Revenues (in thousands)
–
|
||||||||||||
Contracting Services
|
$ | 209,557 | $ | 171,353 | $ | 38,204 | ||||||
Production Facilities
|
19,963 | 20,545 | (582 | ) | ||||||||
Oil and Gas
|
149,933 | 172,458 | (22,525 | ) | ||||||||
Intercompany elimination
|
(32,059 | ) | (26,037 | ) | (6,022 | ) | ||||||
$ | 347,394 | $ | 338,319 | $ | 9,075 | |||||||
Gross profit (in thousands)
–
|
||||||||||||
Contracting Services
|
$ | 26,338 | $ | 38,049 | $ | (11,711 | ) | |||||
Production Facilities
|
10,017 | 12,070 | (2,053 | ) | ||||||||
Oil and Gas
|
57,510 | 50,858 | 6,652 | |||||||||
Corporate
|
(738 | ) | (760 | ) | 22 | |||||||
Intercompany elimination
|
98 | (19 | ) | 117 | ||||||||
$ | 93,225 | $ | 100,198 | $ | (6,973 | ) | ||||||
Gross Margin
–
|
||||||||||||
Contracting Services
|
13 | % | 22 | % | ||||||||
Production Facilities
|
50 | % | 59 | % | ||||||||
Oil and Gas
|
38 | % | 29 | % | ||||||||
Total company
|
27 | % | 30 | % | ||||||||
Number of vessels
(1)
/ Utilization
(2)
|
||||||||||||
Contracting Services:
|
||||||||||||
Construction vessels
|
9/84 | % | 8/71 | % | ||||||||
Well operations
|
3/67 | % | 3/89 | % | ||||||||
ROVs
|
51/65 | % | 46/54 | % |
(1)
|
Represents number of vessels as of the end of the period excluding acquired vessels prior to their in-service dates, vessels taken out of service prior to their disposition and vessels jointly owned with a third party.
|
(2)
|
Average vessel utilization rate is calculated by dividing the total number of days the vessels in this category generated revenues by the total number of calendar days in the applicable period.
|
Three Months Ended
|
||||||||||||
March 31,
|
Increase/
|
|||||||||||
2012
|
2011
|
(Decrease)
|
||||||||||
Contracting Services
|
$ | 20,538 | $ | 14,295 | $ | 6,243 | ||||||
Production Facilities
|
11,521 | 11,742 | (221 | ) | ||||||||
$ | 32,059 | $ | 26,037 | $ | 6,022 |
Three Months Ended
|
||||||||||||
June 30,
|
Increase/
|
|||||||||||
2012
|
2011
|
(Decrease)
|
||||||||||
Contracting Services
|
$ | (55 | ) | $ | 63 | $ | (118 | ) | ||||
Production Facilities
|
(43 | ) | (44 | ) | 1 | |||||||
$ | (98 | ) | $ | 19 | $ | (117 | ) |
Three Months Ended
|
||||||||||||
June 30,
|
Increase/
|
|||||||||||
2012
|
2011
|
(Decrease)
|
||||||||||
Oil and Gas information
–
|
||||||||||||
Oil production volume (MBbls)
|
1,232 | 1,430 | (198 | ) | ||||||||
Oil sales revenue (in thousands)
|
$ | 132,425 | $ | 145,074 | $ | (12,649 | ) | |||||
Average oil sales price per Bbl (excluding hedges)
|
$ | 106.95 | $ | 111.23 | $ | (4.28 | ) | |||||
Average realized oil price per Bbl (including hedges)
|
$ | 107.51 | $ | 101.43 | $ | 6.08 | ||||||
Increase (decrease) in oil sales revenue due to:
|
||||||||||||
Change in prices (in thousands)
|
$ | 8,701 | ||||||||||
Change in production volume (in thousands)
|
(21,350 | ) | ||||||||||
Total decrease in oil sales revenue (in thousands)
|
$ | (12,649 | ) | |||||||||
Gas production volume (MMcf)
|
2,735 | 4,075 | (1,340 | ) | ||||||||
Gas sales revenue (in thousands)
|
$ | 15,762 | $ | 25,121 | $ | (9,359 | ) | |||||
Average gas sales price per mcf (excluding hedges)
|
$ | 3.49 | $ | 5.63 | $ | (2.14 | ) | |||||
Average realized gas price per mcf (including hedges)
|
$ | 5.76 | $ | 6.17 | $ | (0.41 | ) | |||||
Decrease in gas sales revenue due to:
|
||||||||||||
Change in prices (in thousands)
|
$ | (1,641 | ) | |||||||||
Change in production volume (in thousands)
|
(7,718 | ) | ||||||||||
Total decrease in gas sales revenue (in thousands)
|
$ | (9,359 | ) | |||||||||
Total production (MBOE)
|
1,687 | 2,109 | (422 | ) | ||||||||
Price per BOE
|
$ | 87.82 | $ | 80.68 | $ | 7.14 | ||||||
Oil and Gas revenue information (in thousands)
–
|
||||||||||||
Oil and gas sales revenue
|
$ | 148,186 | $ | 170,195 | $ | (22,009 | ) | |||||
Other revenues
(1)
|
1,747 | 2,263 | (516 | ) | ||||||||
$ | 149,933 | $ | 172,458 | $ | (22,525 | ) | ||||||
(1)
|
Other revenues include fees earned under our process handling agreements.
|
Three Months Ended June 30,
|
||||||||||||||||
2012
|
2011
|
|||||||||||||||
Total
|
Per barrel
|
Total
|
Per barrel
|
|||||||||||||
Oil and gas operating expenses
(1)
:
|
||||||||||||||||
Direct operating expenses
(2)
|
$ | 27,311 | $ | 16.19 | $ | 29,390 | $ | 13.94 | ||||||||
Workover
|
6,150 | 3.65 | 2,236 | 1.06 | ||||||||||||
Transportation
|
1,976 | 1.17 | 1,391 | 0.66 | ||||||||||||
Repairs and maintenance
|
2,114 | 1.25 | 2,980 | 1.41 | ||||||||||||
Overhead and company labor
|
2,943 | 1.74 | 3,296 | 1.56 | ||||||||||||
|
$ | 40,494 | $ | 24.00 | $ | 39,293 | $ | 18.63 | ||||||||
Depletion expense
|
$ | 36,315 | $ | 21.52 | $ | 48,526 | $ | 23.00 | ||||||||
Abandonment
|
11,019 | 6.53 | 11,375 | 5.39 | ||||||||||||
Accretion expense
|
3,415 | 2.02 | 3,844 | 1.82 | ||||||||||||
Net hurricane (reimbursements) costs
|
88 | 0.05 | (950 | ) | (0.45 | ) | ||||||||||
Impairment
|
—
|
—
|
11,573 | 5.49 | ||||||||||||
50,837 | 30.12 | 74,368 | 35.25 | |||||||||||||
Total
|
$ | 91,331 | $ | 54.12 | $ | 113,661 | $ | 53.88 |
(1)
|
Excludes exploration expense of $1.1 million and $7.9 million for the three-month periods ended June 30, 2012 and 2011, respectively. Exploration expense is not a component of lease operating expense.
|
(2)
|
Includes production taxes
.
|
Six Months Ended
|
||||||||||||
June 30,
|
Increase/
|
|||||||||||
2012
|
2011
|
(Decrease)
|
||||||||||
Revenues (in thousands)
–
|
||||||||||||
Contracting Services
|
$ | 454,101 | $ | 302,890 | $ | 151,211 | ||||||
Production Facilities
|
39,985 | 36,115 | 3,870 | |||||||||
Oil and Gas
|
328,018 | 341,317 | (13,299 | ) | ||||||||
Intercompany elimination
|
(66,783 | ) | (50,396 | ) | (16,387 | ) | ||||||
$ | 755,321 | $ | 629,926 | $ | 125,395 | |||||||
Gross profit (in thousands)
–
|
||||||||||||
Contracting Services
|
$ | 92,850 | $ | 48,561 | $ | 44,289 | ||||||
Production Facilities
|
20,207 | 18,206 | 2,001 | |||||||||
Oil and Gas
|
146,346 | 112,093 | 34,253 | |||||||||
Corporate
|
(1,546 | ) | (1,657 | ) | 111 | |||||||
Intercompany elimination
|
(2,922 | ) | 71 | (2,993 | ) | |||||||
$ | 254,935 | $ | 177,274 | $ | 77,661 | |||||||
Gross Margin
–
|
||||||||||||
Contracting Services
|
20 | % | 16 | % | ||||||||
Production Facilities
|
51 | % | 50 | % | ||||||||
Oil and Gas
|
45 | % | 33 | % | ||||||||
Total company
|
34 | % | 28 | % | ||||||||
Number of vessels
(1)
/ Utilization
(2)
|
||||||||||||
Contracting Services:
|
||||||||||||
Construction vessels
|
9/89 | % | 8/61 | % | ||||||||
Well operations
|
3/76 | % | 3/83 | % | ||||||||
ROVs
|
51/67 | % | 46/52 | % |
(1)
|
Represents number of vessels as of the end of the period excluding acquired vessels prior to their in-service dates, vessels taken out of service prior to their disposition and vessels jointly owned with a third party.
|
(2)
|
Average vessel utilization rate is calculated by dividing the total number of days the vessels in this category generated revenues by the total number of calendar days in the applicable period.
|
Six Months Ended
|
||||||||||||
June 30,
|
Increase/
|
|||||||||||
2012
|
2011
|
(Decrease)
|
||||||||||
Contracting Services
|
$ | 43,739 | $ | 27,164 | $ | 16,575 | ||||||
Production Facilities
|
23,044 | 23,232 | (188 | ) | ||||||||
$ | 66,783 | $ | 50,396 | $ | 16,387 |
Six Months Ended
|
||||||||||||
June 30,
|
Increase/
|
|||||||||||
2012
|
2011
|
(Decrease)
|
||||||||||
Contracting Services
|
$ | 3,009 | $ | 39 | $ | 2,970 | ||||||
Production Facilities
|
(87 | ) | (110 | ) | 23 | |||||||
$ | 2,922 | $ | (71 | ) | $ | 2,993 |
Six Months Ended
|
||||||||||||
June 30,
|
Increase/
|
|||||||||||
2012
|
2011
|
(Decrease)
|
||||||||||
Oil and Gas information
–
|
||||||||||||
Oil production volume (MBbls)
|
2,658 | 2,931 | (273 | ) | ||||||||
Oil sales revenue (in thousands)
|
$ | 288,169 | $ | 280,910 | $ | 7,259 | ||||||
Average oil sales price per Bbl (excluding hedges)
|
$ | 109.45 | $ | 103.92 | $ | 5.53 | ||||||
Average realized oil price per Bbl (including hedges)
|
$ | 108.41 | $ | 95.83 | $ | 12.58 | ||||||
Increase (decrease) in oil sales revenue due to:
|
||||||||||||
Change in prices (in thousands)
|
$ | 36,881 | ||||||||||
Change in production volume (in thousands)
|
(29,622 | ) | ||||||||||
Total increase in oil sales revenue (in thousands)
|
$ | 7,259 | ||||||||||
Gas production volume (MMcf)
|
6,303 | 9,477 | (3,174 | ) | ||||||||
Gas sales revenue (in thousands)
|
$ | 36,518 | $ | 56,282 | $ | (19,764 | ) | |||||
Average gas sales price per mcf (excluding hedges)
|
$ | 4.06 | $ | 5.35 | $ | (1.29 | ) | |||||
Average realized gas price per mcf (including hedges)
|
$ | 5.79 | $ | 5.94 | $ | (0.15 | ) | |||||
Decrease in gas sales revenue due to:
|
||||||||||||
Change in prices (in thousands)
|
$ | (1,376 | ) | |||||||||
Change in production volume (in thousands)
|
(18,388 | ) | ||||||||||
Total decrease in gas sales revenue (in thousands)
|
$ | (19,764 | ) | |||||||||
Total production (MBOE)
|
3,709 | 4,511 | (802 | ) | ||||||||
Price per BOE
|
$ | 87.55 | $ | 74.75 | $ | 12.80 | ||||||
Oil and Gas revenue information (in thousands)
–
|
||||||||||||
Oil and gas sales revenue
|
$ | 324,687 | $ | 337,192 | $ | (12,505 | ) | |||||
Other revenues
(1)
|
3,331 | 4,125 | (794 | ) | ||||||||
$ | 328,018 | $ | 341,317 | $ | (13,299 | ) | ||||||
(1)
|
Other revenues include fees earned under our process handling agreements.
|
Six Months Ended June 30,
|
||||||||||||||||
2012
|
2011
|
|||||||||||||||
Total
|
Per barrel
|
Total
|
Per barrel
|
|||||||||||||
Oil and gas operating expenses
(1)
:
|
||||||||||||||||
Direct operating expenses
(2)
|
$ | 55,877 | $ | 15.07 | $ | 60,050 | $ | 13.32 | ||||||||
Workover
|
8,231 | 2.22 | 4,804 | 1.06 | ||||||||||||
Transportation
|
3,833 | 1.03 | 3,802 | 0.84 | ||||||||||||
Repairs and maintenance
|
3,984 | 1.08 | 5,247 | 1.16 | ||||||||||||
Overhead and company labor
|
5,984 | 1.61 | 6,613 | 1.47 | ||||||||||||
|
$ | 77,909 | $ | 21.01 | $ | 80,516 | $ | 17.85 | ||||||||
Depletion expense
|
$ | 80,718 | $ | 21.77 | $ | 114,239 | $ | 25.32 | ||||||||
Abandonment
|
14,259 | 3.84 | 11,533 | 2.56 | ||||||||||||
Accretion expense
|
6,854 | 1.85 | 7,630 | 1.69 | ||||||||||||
Net hurricane (reimbursements) costs
|
86 | 0.02 | (4,552 | ) | (1.01 | ) | ||||||||||
Impairment
|
—
|
—
|
11,573 | 2.57 | ||||||||||||
101,917 | 27.48 | 140,423 | 31.13 | |||||||||||||
Total
|
$ | 179,826 | $ | 48.49 | $ | 220,939 | $ | 48.98 |
(1)
|
Excludes exploration expense of $1.8 million and $8.3 million for the six-month periods ended June 30, 2012 and 2011, respectively. Exploration expense is not a component of lease operating expense.
|
(2)
|
Includes production taxes
.
|
June 30,
2012
|
December 31, 2011
|
|||||||
(in thousands)
|
||||||||
Net working capital
|
$ | 656,906 | $ | 548,066 | ||||
Long-term debt
(1)
|
1,167,908 | 1,147,444 | ||||||
Liquidity
(2)
|
1,103,191 | 1,105,065 |
(1)
|
Long-term debt does not include the current maturities portion of the long-term debt as such amount is included in net working capital. It is also net of unamortized debt discount on our 2025 Notes and 2032 Notes (Note 7).
|
(2)
|
Liquidity, as defined by us, is equal to cash and cash equivalents plus available capacity under our revolving credit facility, which capacity is reduced by current letters of credit drawn against the facility. During the second half of 2012, we anticipate a significant reduction in our liquidity reflecting capital expenditures to expand our well intervention fleet as well as expected cash outlays to pay down our existing debt and to fund other capital expenditures (see “Outlook” below).
|
June 30,
|
December 31,
|
|||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Term Loans (mature July 2015)
(1)
|
$ | 377,000 | $ | 279,750 | ||||
Revolving Credit Facility (matures July 2015)
(1)
|
100,000 |
─
|
||||||
2025 Notes (mature March 2025)
(2)
|
155,348 | 290,445 | ||||||
2032 Notes (mature March 2032)
(3)
|
165,840 |
─
|
||||||
Senior Unsecured Notes (mature January 2016)
|
274,960 | 474,960 | ||||||
MARAD Debt (matures February 2027)
|
107,757 | 110,166 | ||||||
Total
|
$ | 1,180,905 | $ | 1,155,321 | ||||
(1)
|
Represents earliest date debt would mature; see Note 7 for conditions that would extend the maturity date.
|
(2)
|
These amounts are net of the unamortized debt discount of $2.5 million and $9.6 million, respectively. The notes will increase to $157.8 million face amount through accretion of non-cash interest charges through 2012. Notes may be redeemed by the holders beginning in December 2012 (Note 7).
|
(3)
|
This amount is net of the unamortized debt discount of $34.2 million. The notes will increase to the $200 million face amount through accretion of non-cash interest charges through March 2018, which is the period in which the holders of the notes may first require us to redeem the notes.
|
Six Months Ended
|
||||||||
June 30,
|
||||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Net cash provided by (used in):
|
||||||||
Operating activities
|
$ | 221,020 | $ | 250,573 | ||||
Investing activities
|
$ | (145,402 | ) | $ | (102,777 | ) | ||
Financing activities
|
$ | 27,116 | $ | (124,268 | ) |
Six Months Ended
|
||||||||
June 30,
|
||||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Capital expenditures:
|
||||||||
Contracting Services
|
$ | (115,006 | ) | $ | (30,840 | ) | ||
Production Facilities
|
(773 | ) | (14,688 | ) | ||||
Oil and Gas
|
(34,328 | ) | (60,594 | ) | ||||
Distributions (investments) from equity investments, net
(1)
|
2,045 | (1,106 | ) | |||||
Proceeds from sale of Cal Dive common stock
|
—
|
3,588 | ||||||
Decrease in restricted cash
|
2,660 | 863 | ||||||
Cash used in investing activities
|
$ | (145,402 | ) | $ | (102,777 | ) |
(1)
|
Distributions from equity investments are net of undistributed equity earnings from our equity investments. Gross distributions from our equity investments are detailed in “Equity Investments” below.
|
Six Months Ended
|
||||||||
June 30,
|
||||||||
2012
|
2011
|
|||||||
(in thousands)
|
||||||||
Deepwater Gateway.
|
$
|
3,400
|
$
|
3,550
|
||||
Independence Hub
|
4,800
|
9,580
|
||||||
Total
|
$
|
8,200
|
$
|
13,130
|
Total
(1)
|
Less Than 1 year
|
1-3 Years
|
3-5 Years
|
More Than 5 Years
|
||||||||||||||||
2025 Notes
(2)
|
$
|
157,830
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
157,830
|
||||||||||
2032 Notes
(3)
|
200,000
|
—
|
—
|
—
|
200,000
|
|||||||||||||||
Senior Unsecured Notes
|
274,960
|
—
|
—
|
274,960
|
—
|
|||||||||||||||
Term Loans
(4)
|
377,000
|
8,000
|
16,000
|
353,000
|
—
|
|||||||||||||||
MARAD debt
|
107,757
|
4,997
|
10,755
|
11,855
|
80,150
|
|||||||||||||||
Revolving Credit Facility
(5)
|
100,000
|
—
|
—
|
100,000
|
—
|
|||||||||||||||
Interest related to debt
|
327,253
|
60,000
|
111,937
|
35,978
|
119,338
|
|||||||||||||||
Drilling and development costs
|
87,275
|
87,275
|
—
|
—
|
—
|
|||||||||||||||
Property and equipment
(6,7)
|
358,488
|
143,188
|
215,300
|
—
|
—
|
|||||||||||||||
Operating leases
(8)
|
345,717
|
55,875
|
116,859
|
121,502
|
51,481
|
|||||||||||||||
Total cash obligations
|
$
|
2,336,280
|
$
|
359,335
|
$
|
470,851
|
$
|
897,295
|
$
|
608,799
|
(1)
|
Excludes unsecured letters of credit outstanding at June 30, 2012 totaling $46.3 million. These letters of credit primarily guarantee asset retirement obligations as well as various contract bidding, insurance activities and shipyard commitments.
|
(2)
|
Contractual maturity in 2025 (2025 Notes can be redeemed by us or we may be required to purchase them beginning in December 2012). Notes can be converted prior to stated maturity if closing sale price of Helix’s common stock for at least 20 days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter exceeds 120% of the closing price on that 30
th
trading day (i.e., $38.57 per share) and under certain triggering events as specified in the indenture governing the 2025 Notes. Upon the occurrence of a triggering event, to the extent we do not have alternative long-term financing secured to cover the conversion, the 2025 Notes would be classified as a current liability in the accompanying balance sheet. At June 30, 2012, the conversion trigger was not met.
|
(3)
|
Contractual maturity in 2032. The 2032 Notes have the same triggering mechanisms as noted in the 2025 Notes in (2) above except its issuance price is $25.02 per share and the stock price would have to exceed 130% of its issuance price on that 30
th
trading day (i.e., $32.53 per share). At June 30, 2012, the conversion trigger was not met. The first date that the holders of these notes may require us to redeem the notes is in March 2018. See Note 7 for additional information regarding these 2032 Notes.
|
(4)
|
Our Term Loans will mature on July 1, 2015 but may extend to July 1, 2016 (January 1, 2016 with regards to Term Loan A) if our Senior Unsecured Notes are either refinanced or repaid in full by July 1, 2015 (Note 7).
|
(5)
|
Our Revolving Credit Facility will mature on July 1, 2015 but may extend to January 1, 2016 if our Senior Unsecured Notes are either refinanced or repaid in full by July 1, 2015 (Note 7).
|
(6)
|
Primarily reflects the costs related to construction of our new semi-submersible well intervention vessel (Note 14).
|
(7)
|
Amount does not include the approximately $180 million of costs associated with the acquisition and subsequent conversion of the drillship,
Discoverer 534,
into a well intervention vessel (see “Investing Activities” above).
|
(8)
|
Operating leases included facility leases and vessel charter leases. Vessel charter lease commitments at June 30, 2012 were approximately $335.2 million.
|
Fair Value
|
Carrying Value
|
||||||||
Term Loans (mature July 2015)
(a)
|
$ | 376,630 | $ | 377,000 | |||||
2025 Notes (mature March 2025)
(a)
|
158,824 | 157,830 |
(b)
|
||||||
2032 Notes (mature March 2032)
(a)
|
207,500 | 200,000 |
(c)
|
||||||
Senior Unsecured Notes (mature January 2016)
(a)
|
290,083 | 274,960 | |||||||
MARAD Debt (matures February 2027)
(d)
|
123,382 | 107,757 | |||||||
Total
|
$ | 1,156,419 | $ | 1,117,547 |
a.
|
The fair values of these instruments were based on quoted market prices as of June 30, 2012.
|
b.
|
Amount excludes the related unamortized debt discount of $2.5 million.
|
c.
|
Amount excludes the related unamortized debt discount of $34.2 million.
|
d.
|
The fair value of the MARAD debt was determined using a third party evaluation of the remaining average life and outstanding principal balance of the MARAD indebtedness as compared to other governmental obligations in the marketplace with similar terms.
|
Production Period
|
Instrument Type
|
Average
Monthly Volumes
|
Weighted Average
Price
(a)
|
|||
Crude Oil:
|
(per barrel)
|
|||||
July 2012 — December 2012
|
Collar
|
75.0 MBbl
|
$ 96.67 — $118.57
(b)
|
|||
July 2012 — December 2012
|
Collar
|
99.1 MBbl
|
$ 99.67 — $118.42
|
|||
July 2012 — December 2012
|
Swap
|
96.6 MBbl
|
$92.52
|
|||
January 2013 — December 2013
|
Swap
|
88.9 MBbl
|
$95.28
|
|||
January 2013 — December 2013
|
Collar
|
133.3 MBbl
|
$ 98.44 — $115.85
|
|||
Natural Gas:
|
(per Mcf)
|
|||||
July 2012 — December 2012
|
Swap
|
777.5 Mmcf
|
$4.29
|
|||
July 2012 — December 2012
|
Collar
|
156.7 Mmcf
|
$4.75 — $5.09
|
|||
January 2013 — December 2013
|
Swap
|
500.0 Mmcf
|
$4.09
|
a.
|
The prices quoted in the table above are NYMEX Henry Hub for natural gas. Most of our oil contracts are indexed to the Brent crude oil price.
|
b.
|
This contract is priced using NYMEX West Texas Intermediate for crude oil.
|
(a)
|
Evaluation of disclosure controls and procedures. Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of the end of the fiscal quarter ended June 30, 2012. Based on this evaluation, the principal executive officer and the principal financial officer have concluded that our disclosure controls and procedures were effective as of the end of the fiscal quarter ended June 30, 2012 to ensure that information that is required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure.
|
(b)
|
Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act, in the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Resulting impacts on internal controls over financial reporting were evaluated and determined not to be significant for the fiscal quarter ended June 30, 2012.
|
Period
|
(a) Total number
of shares
purchased
|
(b) Average
price paid
per share
|
(c) Total number
of shares
purchased as
part of publicly
announced
program (2)
|
(d) Maximum
number of shares
that may yet be
purchased under
the program
(2)
|
||||||
April 1 to April 30, 2012
(1)
|
61
|
$
|
16.86
|
─
|
405,063
|
|||||
May 1 to May 31, 2012
(1)
|
1,143
|
19.67
|
─
|
405,063
|
||||||
June 1 to June 30, 2012
(1)
|
410,203
|
15.82
|
405,063
|
─
|
||||||
411,407
|
$
|
15.83
|
405,063
|
(1)
|
Represents shares withheld to satisfy tax obligations arising upon the vesting of restricted shares.
|
(2)
|
Represents amounts of restricted shares issued to certain of our employees in 2012 (Note 11). Under the terms of our stock repurchase program, these grants increase the amount of shares available for repurchase. In June 2012, we repurchased 405,063 shares in open market transactions totaling $6.4 million for an average of $15.82 per share. For additional information regarding our stock repurchase program, see Note 14 of the 2011 Form 10-K.
|
|
HELIX ENERGY SOLUTIONS GROUP, INC.
(Registrant)
|
|
Date: July 25, 2012
|
By:
|
/s/ Owen Kratz
|
Owen Kratz
President and Chief Executive Officer
(Principal Executive Officer)
|
||
|
||
Date: July 25, 2012
|
By:
|
/s/ Anthony Tripodo
|
|
Anthony Tripodo
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
|
3.1
|
2005 Amended and Restated Articles of Incorporation, as amended, of registrant, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by registrant with the Securities and Exchange Commission on March 1, 2006.
|
|
3.2
|
Second Amended and Restated By-Laws of Helix, as amended, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed by the registrant with the Securities and Exchange Commission on September 28, 2006.
|
|
4.1
|
Amendment No. 5 to Credit Agreement dated November 11, 2011 by and among Helix Energy Solutions Group, Inc., as borrower, Bank of America, N.A., as administrative agent, and the lenders named thereto, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by registrant with the Securities and Exchange Commission on March 7, 2012.
|
|
4.2
|
Indenture dated as of March 12, 2012 between Helix Energy Solutions Group, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by registrant with Securities and Exchange Commission on March 12, 2012.
|
|
10.1
|
Construction contract dated as of March 12, 2012 between Helix Energy Solutions Group, Inc. and Jurong Shipyard Pte Ltd., incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the registrant with the Securities and Exchange Commission on March 15, 2012.
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10.2
|
The MODU Sale Agreement between Helix Energy Solutions Group, Inc. and Transocean Discoverer 534 LLC dated July 23, 2012.
(1)
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10.3
|
Amended and Restated 2005 Long-Term Incentive Plan of Helix Energy Solutions Group, Inc. dated May 9, 2012.
(1)
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10.4
|
Employee Stock Purchase Plan of Helix Energy Solutions Group, Inc. dated May 9, 2012.
(1)
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15.1
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Independent Registered Public Accounting Firm’s Acknowledgement Letter
(1)
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31.1
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Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 by Owen Kratz, Chief Executive Officer
(1)
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31.2
|
Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 by Anthony Tripodo, Chief Financial Officer
(1)
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32.1
|
Certification of Helix’s Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes – Oxley Act of 2002
(2)
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99.1
|
Report of Independent Registered Public Accounting Firm
(1)
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101.INS
|
XBRL Instance Document
(2)
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101.SCH
|
XBRL Schema Document
(2)
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101.CAL
|
XBRL Calculation Linkbase Document
(2)
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101.PRE
|
XBRL Presentation Linkbase Document
(2)
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101.DEF
|
XBRL Definition Linkbase Document
(2)
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101.LAB
|
XBRL Label Linkbase Document
(2)
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(1) Filed herewith
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||
(2) Furnished herewith
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(1)
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TRANSOCEAN DISCOVERER 534 LLC
, a company organized and existing under and by virtue of the laws of the State of Delaware (“
Seller
”); and
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(2)
|
HELIX ENERGY SOLUTIONS GROUP, INC.
, a company organized and existing and by virtue of the laws of the State of Minnesota (“
Buyer
”)
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1.
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DEFINITIONS AND INTERPRETATION
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1.1.
|
Definitions
.
In this Agreement, unless the context otherwise requires:
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(a)
|
“
ABS
” means the American Bureau of Shipping.
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(b)
|
“
Affiliate
” means, with respect to one of the Parties hereto, any other company or legal entity which (i) is owned or controlled by such Party, (ii) owns or controls such Party, or (iii) is under common ownership or control as such Party. As used in the preceding sentence, “
control
” shall mean the right or ability to control more than fifty percent (50%) of the voting rights of a company or entity.
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(c)
|
“
Business Day
” means a day on which banks are open for business in New York City, USA, London, UK, and Singapore.
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(d)
|
“
Certificate of Acceptance
” means the Certificate of Acceptance of Delivery in the form of Schedule 2 to be delivered at the Closing in respect of the Unit.
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(e)
|
“
Closing
” means the consummation of the purchase and sale of the Unit.
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(f)
|
“
Closing Date
” means the date of the Closing with respect to the Unit in accordance with Article 7.1
.
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(g)
|
“
Closing Time
” means the date and time stated on the Certificate of Acceptance of Delivery.
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(h)
|
“
Damages
” has the meaning given in Article 10.1
.
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(i)
|
“
Delivery Location
” means the entrance to the Port of Singapore.
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(j)
|
“
De Minimis Losses
” means Partial Losses that would not reasonably be expected to cost more than two per cent (2%) of the Sale Price in the aggregate to repair, replace or rectify.
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(k)
|
“
Gross Negligence
” means conduct which a reasonable person would perceive to entail a high degree of risk of loss or physical injury to others coupled with heedlessness or indifference to
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|
or disregard of the consequences; provided that such heedlessness, indifference or disregard need not be conscious.
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(l)
|
“
Group
” means, in relation to a Party, (i) that Party and its Affiliates, (ii) contractors and sub-contractors of that Party and/or its Affiliates and (iii) the respective officers, directors, agents and employees of any person within (i) or (ii) above, provided that members of the Seller’s Group shall never be deemed to be members of the Buyer’s Group.
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(m)
|
“
GST
” means tax on goods and services chargeable on the transaction, and any similar replacement or additional tax such as Value Added Tax (VAT) and Sales Tax.
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(n)
|
“
Lien
” means a lien, mortgage, security interest, pledge or other charge or encumbrance.
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(o)
|
“
Onboard Unit Equipment
” means any machinery, engines, equipment, anchors, cable, pumps, tools, furniture, electrical, mechanical, or chemical, hydraulic and other systems, actually located onboard the Unit as listed in Part B of Schedule 1, incorporated into the Unit or attached to the Unit in each case at the date of the Inspection (as defined in Article 5.1(a)).
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(p)
|
“
Onshore Unit Equipment
” means the equipment belonging to the Unit which is not located thereon, but is designated together with its current location in Part A of Schedule 1.
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(q)
|
“
Outside Date
” means 31 August 2012, as may be postponed in accordance with Article 7.3 (or such later date as may be either (i) agreed between the Parties or (ii) if a Partial Loss occurs, required to allow Closing to occur pursuant to Article 9.2
).
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(r)
|
“
Partial Loss
” means:
|
(i)
|
any matter in respect of which the Unit is not in the Inspection Condition (as defined in Article 5.1(b)
whether by reason of physical loss or damage to the Unit (or any part thereof) or otherwise; and/or
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(ii)
|
the inability of the Seller to deliver any Onboard Unit Equipment or Onshore Unit Equipment which the Seller is required to deliver at Closing pursuant to this Agreement, which damage is covered under Seller’s hull and machinery policies (irrespective of deductibles), but excludes a Total Loss.
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(s)
|
“
Services Agreement
” means the transition services agreement related to, and constituting a continuation of, the arrangement for the sale of the Unit, a form of which transition services agreement is attached hereto as
Annex A
, to be entered into between the Seller (or one of its Affiliates) and the Buyer on the Closing Date pursuant to which the Seller (or one of its Affiliates) shall, after Closing, arrange for certain services to be performed in order to to assist the Buyer in the overhaul of the Unit’s top drive and two gear boxes. Notwithstanding any stipulation to the contrary wherever contained, the Services Agreement will be solely goverened by the terms and conditions contained in such agreement.
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(t)
|
“
Tax
” means any tax, fee, levy, duty or charge, including income, export, capital gains, sales, value added, transfer, customs, stamp, registration tax, fee, levy, duty or charge, that is assessed by any country or any other governmental authority and any fines, penalties or interest with respect to the foregoing.
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(u)
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“
Total Loss
” has the meaning given in Article 9.1
.
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(v)
|
“
Unit
” means the deepwater floater “
Discoverer 534
”, of Sonat Offshore Discoverer Class Design, originally built in 1975 by Mitsui Engineering & Shipbuilding, Japan, registered in Panama, Official No. 7240-76-H , IMO Number 7403469, with a gross tonnage of 17,284 T (registered). The Unit shall also include:
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(i)
|
all non-proprietary equipment operating manuals that the Seller has in its possession;
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(ii)
|
all non-proprietary software pertaining to the Unit except that specifically excluded below;
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(iii)
|
all other non-proprietary technical and regulatory documents pertaining to the Unit that the Seller has in its possession;
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(iv)
|
the Onshore Unit Equipment; and
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(v)
|
the Onboard Unit Equipment.
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(1)
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any item of any kind which is not actually located on, incorporated in or attached to the Unit except as is designated above or in Schedule 1; or
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(2)
|
any form of business management and preventive maintenance software or any other software the license to which does not allow transfer without the licensor’s consent, provided that Seller shall provide its reasonable assistance to Buyer upon Buyer’s written request to obtain such consent; or
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(3)
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any equipment or material belonging to a third party and listed on Part C of Schedule 1.
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(w)
|
“
United States Dollars
” (or “
US$
”) means the legal currency of the United States of America.
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(x)
|
“
Wilful Misconduct
” means any intentional wrongful act (or intentional wrongful failure to act) with knowledge that such act (or failure to act) is wrongful and which is intended to cause injury to a person or loss of or damage to property.
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(y)
|
“
VAT
” means value added tax chargeable under VATA 1994 and any similar replacement or additional tax.
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(z)
|
“
VATA 1994
” means the Value Added Tax Act 1994 (as amended).
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1.2.
|
Interpretation
.
In this Agreement, unless the context otherwise requires:
|
(a)
|
Article headings are inserted for convenience of reference only and shall be ignored in the construction of this Agreement;
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(b)
|
References to Articles and Schedules are to be construed as references to Articles of, and Schedules to, this Agreement and references to this Agreement include its Schedules;
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(c)
|
The words “include”, “includes” and “including” shall be deemed to be followed by the words “without limitation”;
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(d)
|
A reference to “law” or “regulation” includes any present or future regulation, rule, directive, requirement, request, or guideline (whether or not having the force of law) of any government entity, central bank or any self-regulatory or other supra-national authority;
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(e)
|
The words “hereof,” “herein,” “hereto,” and “hereunder” and words of similar import shall, unless otherwise expressly specified, refer to this Agreement as a whole and not to any particular portion or provision of this Agreement;
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(f)
|
Words denoting the singular only shall include the plural and vice versa and words denoting a gender include every gender;
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(g)
|
All references in this Agreement to contracts, agreements, and other documents shall be deemed to refer to such contracts, agreements and other documents as amended, modified and supplemented from time to time;
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(h)
|
The exclusions and limitations of liability in Articles 4.1 of this Agreement shall be given a wide interpretation in favour of the Seller and the
contra proferentem
rule shall not in any case apply to the disadvantage of the Seller. Where general words are used in any exclusion or limitation provision in favour of the Seller, such words shall not be limited by the nature of this Agreement, or by the character or effect of any breach of contract, breach of duty or any other act or omission (including negligence) alleged by the Buyer; and
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(i)
|
References to any statute or other legislative provision are to be construed as references to any such statute or other legislative provision as the same may be re-enacted or amended or substituted by any subsequent statute or legislative provision (whether before or after the date hereof) and shall include any regulations, orders, instruments or other subordinate legislation issued or made under such statute or legislative provision.
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2.
|
SALE AND PURCHASE
|
3.
|
CONSIDERATION
|
3.1.
|
Sale Price
.
Subject to the terms hereof, the aggregate purchase price (the “
Sale Price
”) to be paid by the Buyer to the Seller for the Unit is EIGHTY-FIVE MILLION UNITED STATES DOLLARS (US$ 85,000,000). The Buyer and the Seller hereby agree that the Sale Price represents a purchase of the Unit as a unit and not a sale of the separate components. The Onshore Unit Equipment together with the Onboard Unit Equipment are included in the Sale Price and have no value separate and apart from the Unit.
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3.2.
|
Deposit
. As security for the fulfilment of this Agreement, the Buyer shall within five (5) calendar days of signing of this Agreement by both Parties, pay to the Seller a deposit equal to FOUR MILLION TWO HUNDRED FIFTY THOUSAND UNITED STATES DOLLARS (US$ 4,250,000), representing five percent (5%) of the Sale Price (the “Deposit”), in immediately available funds by wiring the same to the Seller’s Bank Account on terms that the Seller undertakes to refund the Deposit to the Buyer when obligated to do so pursuant to this Agreement. The Deposit (together with any interest accrued thereon) shall be refunded to the Buyer only:
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(a)
|
If the Unit suffers a Total Loss prior to Closing;
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(b)
|
If the condition precedent set forth in Article 6.2(a)
is not satisfied; and/or
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(c)
|
If required pursuant to Articles 7.3(c)
and 9.2(g)
.
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3.3.
|
Closing Payment
.
At Closing and subject to the provisions of this Agreement (including Articles 6
and 7
below), the Buyer shall pay to the Seller an amount (the “
Closing Payment
”) equal to the Sale Price less the Deposit.
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3.4.
|
Wire Instructions
.
All payments to the Seller under this Agreement, including the Closing Payment, are to be made in United States Dollars in immediately available funds, in full, without any set-off or counterclaim whatsoever, free and clear of any deductions or withholdings, to the following bank account (the “
Seller’s Bank Account
”):
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3.5.
|
If the Closing Payment is not paid in accordance with this Agreement and Seller is not in material breach of this Agreement, the Seller shall have the right to terminate this Agreement, in which case the Deposit (together with any interest accrued thereon) shall automatically be deemed to have been forfeited by the Buyer to the Seller, after which (save for any claims under Articles 10.1(a), 10.1(b)
and/or 10.2(b)
) neither Party shall have any claim of whatever nature against the other. The Seller and the Buyer agree that the Deposit (together with any interest accrued thereon) represents a genuine and reasonable pre-estimate of the loss that the Seller would suffer in the event the Buyer fails to pay the Closing Payment in accordance with this Agreement. Such Deposit is not a penalty but liquidated damages for the Seller’s loss of bargain.
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4.
|
REPRESENTATIONS AND WARRANTIES
|
4.1.
|
Disclaimer of Warranties
.
The Parties agree that at the Closing Time, the Unit will be delivered to the Buyer subject to laid up status from ABS and the Seller makes no representations or warranties as to what surveys, inspections or works may be required upon, or prior to reactivation of the Unit. The Buyer hereby represents and warrants to the Seller that the Buyer has inspected the Unit and its associated classification records and is fully satisfied with the condition and status thereof. The Parties agree that there is to be no dry-docking or diver’s inspection of the Unit prior to delivery or at the Closing Time. Except only as may be otherwise expressly stated in Article 4.3 below
, the Buyer hereby acknowledges that the sale, purchase and delivery of the Unit is on an “AS IS, WHERE IS” basis, with all faults (whether or not reasonably discoverable by the Buyer or its surveyors on or before Closing) accepted by the Buyer, and that this Agreement and the sale and purchase of the Unit are WITHOUT ANY REPRESENTATION, WARRANTY, GUARANTY OR CONDITION, EXPRESSED OR IMPLIED, BY THE SELLER, AND THAT THE SELLER DOES NOT MAKE ANY WARRANTY, GUARANTY, OR REPRESENTATION OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, WITH REGARD TO THE UNIT, INCLUDING AS TO SEAWORTHINESS, VALUE, DESIGN, OPERATION, MERCHANTABILITY, FITNESS FOR USE OR PARTICULAR PURPOSE OF THE UNIT OR AS TO THE ELIGIBILITY OF THE UNIT FOR ANY PARTICULAR TRADE, AND NOTWITHSTANDING ANYTHING ELSE CONTAINED IN THIS AGREEMENT THE BUYER HEREBY WAIVES AS AGAINST THE SELLER AND ITS AFFILIATES ALL WARRANTIES, REMEDIES AND LIABILITIES ARISING BY LAW OR OTHERWISE (INCLUDING ON THE BASIS OF NEGLIGENCE OF ANY DEGREE) WITH RESPECT TO THE UNIT. As between the Seller and the Buyer, the execution by the Buyer of the Certificate of Acceptance shall be conclusive proof that the Unit is in full and complete compliance with all requirements of this Agreement other than as stated in Article 4.3
.
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4.2.
|
Buyer’s Representations.
The Buyer hereby represents, covenants and warrants to the Seller the following:
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(a)
|
The Buyer is duly incorporated and validly existing under the laws of its country of incorporation and has full legal right, power and authority to enter into this Agreement and any other documents to which it is, or may become, a party which are referred to in this Agreement
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and to perform its obligations hereunder and thereunder. The Buyer has power and authority to enter into and perform this Agreement and those documents and the execution and delivery of this Agreement and those documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorised and no other corporate proceeding on the part of the Buyer is necessary to authorise the execution and delivery of this Agreement and any other documents relating thereto or to consummate the transactions contemplated hereby or thereby;
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(b)
|
The execution or delivery of this Agreement and the other documents to which the Buyer is, or may become, a party which are referred to in this Agreement, and completion of all transactions contemplated hereby, will not either now, or after notice or lapse of time, or both:
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1.
|
conflict with, violate, result in a breach or right of termination or acceleration under or require any consent or authorization under any of the terms, conditions or provisions of any mortgage, indenture, agreement, loan, guarantee, note, bond, permit, license, lease, grant, patent, or other undertaking or authorisation, written or oral, to or by which the Buyer is a party or is bound;
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2.
|
conflict with, result in a breach of or require any consent under any of the terms, conditions or provisions of the Buyer’s certificate of incorporation, by-laws or equivalent governing instruments; or
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3.
|
result in a violation by the Buyer of any judgment, decree, order (including an executive order), award, writ, injunction or decree applicable to, or binding upon, the Buyer.
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(c)
|
This Agreement will be conducted in accordance with: (i) all applicable United States export and re-export controls and economic sanctions, including the International Emergency Economic Powers Act, the Export Administration Regulations and all other applicable economic sanctions laws and regulations, including the regulations set forth in 31 CFR Chapter V; and (ii) other applicable economic sanctions and export control laws in other countries in which the Buyer does business. The Buyer warrants and covenants that it will not transfer, export or re-export the items that are subject of this Agreement to: Iran, Sudan, Cuba, Syria or North Korea; entities owned or controlled by the governments of Iran or Sudan; any Cuban national, wherever located; or any individual or entity included on the List of Specially Designated Nationals and Blocked Persons maintained by the US Treasury Department’s Office of Foreign Assets Control, except to the extent appropriate licenses are first obtained by Buyer any such purpose.
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4.3.
|
Seller’s Representations.
The Seller hereby represents, covenants and warrants to the Buyer the following:
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(a)
|
The Seller is the legal and beneficial owner of the Unit, the Onshore Unit Equipment and the Onboard Unit Equipment, and there are no employees, operations or business that will attach to the Unit and that the Buyer will assume;
|
(b)
|
On Closing, the Unit, the Onshore Unit Equipment and the Onboard Unit Equipment will be free of any and all Liens;
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(c)
|
The Seller is duly formed and validly existing under the laws of its country of formation and has full legal right, power and authority to enter into this Agreement, and to perform its obligations hereunder. The Seller has power and authority to enter into and perform this Agreement and the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorised and no other corporate proceeding on the part of the Seller is necessary to authorise the execution and delivery of this Agreement or to consummate the transactions contemplated hereby;
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(d)
|
The execution or delivery of this Agreement and completion of all transactions contemplated hereby, will not either now, or after notice or lapse of time, or both:
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1.
|
conflict with, violate, result in a breach or right of termination or acceleration under or require any consent or authorization under any of the terms, conditions or provisions of any mortgage, indenture, agreement, loan, guarantee, note, bond, permit, license, lease, grant, patent, or other undertaking or authorization, written or oral, to or by which the Seller is a party or is bound;
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2.
|
conflict with, result in a breach of or require any consent under any of the terms, conditions or provisions of Seller’s certificate of formation, by-laws or equivalent governing instruments; or
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3.
|
result in a violation by the Seller of any judgment, decree, order (including an executive order), award, writ, injunction or decree applicable to, or binding upon, the Seller.
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(e)
|
There are to Seller’s knowledge no claims pending or threatened against Seller or the Unit that could reasonably be anticipated to result in a Lien on the Unit.
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(f)
|
The Seller has not executed a contract that obligates the Unit to perform any drilling or other services.
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5.
|
CERTAIN COVENANTS
|
5.1.
|
Condition of Unit for Purposes of Closing
.
|
(a)
|
The Buyer hereby represents and warrants to the Seller that the Buyer (or its appointed representative) inspected the Unit (including its equipment on board and onshore) and its associated ABS classification records in the period from 30 May 2012 to 7 June 2012 (the “
Inspection
”) and accepts and is fully satisfied with the condition and status thereof. The Parties agree that there is to be no dry-docking or diver’s inspection of the Unit prior to delivery.
The Seller further agrees, subject to the Buyer’s payment of the Deposit,
to make the captain, chief engineer, ETO, and drilling superintendent of the Unit available for a period of five (5) consecutive calendar days to perform a walk through of the Unit with the Buyer’s project team and provide responses to Buyer’s reasonable inquiries regarding the status of the Unit.
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(b)
|
The Seller agrees that, solely for the purpose of determining whether the Buyer shall have the obligation to close, the Unit is to be in, at the Closing Date, the same overall condition, irrespective of any class conditions or recommendations, as at the time of the Inspection, fair wear and tear excepted and subject to De Minimis Losses and the provisions of Article 9.2
(“
Inspection Condition
”); PROVIDED THAT if the Buyer fails to notify the Seller prior to the Closing Date that the Unit is not in such Inspection Condition, the Unit will be conclusively presumed to be in such Inspection Condition at the Closing Date for all purposes of this Agreement and the Buyer shall have no further rights hereunder in connection with the actual condition or composition of the Unit. The Buyer shall provide written notice to the Seller prior to the Closing in the event that the Buyer believes that the Unit is not in the Inspection Condition, and/or that the composition of the Unit is not as required by this Agreement. Any such notice shall specifically list the deficiencies claimed by the Buyer and must be subject to reasonable verification by the Seller (with any actual deficiencies referred to herein as “
Deficiencies
”). In the event the Buyer notifies the Seller of Deficiencies, such Deficiencies shall be subject to the provisions of Article 9.2
. Under no circumstances shall the Seller be liable or obligated after the Closing Date to the Buyer with regard to the physical condition or composition of the Unit, the Onshore Unit Equipment or the Onboard Unit Equipment unless otherwise stated in Article 4.3 above, and the Buyer hereby agrees that all rights it may otherwise have in connection therewith shall be automatically and irrevocably waived from and after Closing without any further act of the Buyer or the Seller.
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(c)
|
Subject to (i) the payment of the Deposit by the Buyer pursuant to Article 3.2 hereto, (ii) the Buyer signing the Seller’s letters of indemnity in the form set out in Schedule 3 to this Agreement, and (iii) the Buyer providing the Seller with written evidence that the Buyer has procured suitable insurance (including waiver of subrogation in favour of the Seller’s group) to adequately cover the risk of injury to, illness or death of such representatives, the Buyer shall
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|
have the right to put three (3) representatives on board the Unit at the Buyer’s own cost, risk and liability up to two (2) weeks prior to the Closing to confirm that the Unit is in the Inspection Condition; PROVIDED, HOWEVER, that any such attendance shall not be conducted in such a way as to interfere in any material respect with the operation of the Unit. In the event the Closing of the sale and purchase of the Unit does not take place for any reason, the Buyer shall immediately remove, at the Buyer’s expense, any person the Buyer has placed on the Unit. For the avoidance of doubt, Buyer’s representatives shall be forbidden from soliciting any employees of the Seller or its Affiliates without the prior written consent of the Seller pursuant to Article 16.1 below
. Seller shall have the right to remove Buyer’s representatives for any reason and Buyer shall have the right to replace such representatives at Buyer’s cost.
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(d)
|
For the avoidance of doubt, the Buyer agrees that no re-activation of any part of the Unit from its warm stacked status shall be required on the part of the Seller in order for the Unit to be in the Inspection Condition. There shall be no testing of the functionality of any part of the Unit or its equipment prior to delivery. For the avoidance of doubt, any deterioration of the Unit due to normal corrosion after the date of the Inspection for the time and place of the Unit’s location shall be treated as fair wear and tear.
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6.
|
CONDITIONS PRECEDENT
|
6.1.
|
Buyer’s Conditions Precedent
.
The obligations of the Buyer to consummate the transactions to be performed by it in connection with the Closing are, in all respects, subject to satisfaction or waiver by the Buyer of the below-listed conditions precedent:
|
(a)
|
The Unit shall be in the Inspection Condition; and
|
(b)
|
The representations and warranties of the Seller set forth in Article 4.3
shall be true and correct in all material respects as of the Closing Date with the same force and effect as if such representations and warranties had been made at and as of the Closing Date.
|
6.2.
|
Seller’s Conditions Precedent
.
The obligations of the Seller to consummate the transactions to be performed by it in connection with the Closing are, in all respects, subject to satisfaction (or waiver by the Seller) of the below-listed conditions precedent:
|
(a)
|
Issuance of any required authorization, sanction, licence or approval for the transactions contemplated by this Agreement, under relevant laws or agreements, including those required by all relevant customs laws and notifications and by flagging and registry authorities for transfer of the Unit to the Delivery Location. The Seller shall use its reasonable endeavors to obtain such approvals as soon as reasonably practicable; and
|
(b)
|
The representations and warranties of the Buyer set forth in Article 4.2
shall be true and correct in all material respects as of the Closing Date with the same force and effect as if such representations and warranties had been made at and as of the Closing Date.
|
7.
|
CLOSING
|
7.1.
|
Closing
.
Subject to the other terms and conditions of this Agreement, the Seller shall sell and the Buyer shall purchase the Unit, and the Closing shall be held in London at the offices of Ince & Co at International House, 1 St Katharine’s Way, London E1W 1AY. The Closing shall take place on a Business Day nominated in writing by the Seller (the “
Closing Date
”), which shall be a date between July 23, 2012 and on or before the Outside Date, but as soon as reasonably practicable. The Seller shall provide the Buyer with eighteen (18) and five (5) calendar days’ approximate notice and three (3) days’ definite notice of when the Seller intends to deliver the Unit.
|
7.2.
|
Documents to be Delivered by Seller and Buyer
.
On the Closing Date, representatives of the Seller and the Buyer shall meet as contemplated above for the purpose of completing the sale and purchase of the Unit.
|
(a)
|
Seller’s Deliveries
.
Simultaneously with the Seller’s receipt of Sale Price and delivery of the items listed in Article 7.2(b)
, the Seller shall deliver to the Buyer the following in respect of the Unit:
|
1.
|
An executed (and, if necessary, notarized and/or apostilled) Bill of Sale for the Unit in a form acceptable for recording at the country in which the Buyers are to register the Unit (the “
Bill of Sale
”), and any other documents reasonably required for Buyer to change the registry of the Unit. The Seller must be informed at least 10 Business Days prior to the Closing Date of the Country or the Country shall be presumed to be the Republic of Panama;
|
2.
|
A certified copy of a resolution of the board of directors of the Seller approving the terms of this Agreement and the transactions contemplated herein;
|
3.
|
A Certificate of Good Standing of the Seller (or the equivalent document in the country of incorporation of the Seller);
|
4.
|
A certified copy of a Certificate of Incumbency for the Seller (or the equivalent document in the country of incorporation of the Seller) showing a list of the current directors and officers of the Seller;
|
5.
|
A certificate in English stating that the Seller’s representations, covenants and warranties made in Article 4.3 are true and correct as of the Closing Date.
|
6.
|
(If separate from the resolution referred to in Article 7.2(a)2 above
) an original Power of Attorney of the Seller, duly notarised and apostilled, authorising the Seller’s appointed representatives to execute all necessary documents and take all necessary action in order to sell the Unit to the Buyer;
|
7.
|
Any non-proprietary technical or regulatory documentation pertaining to the Unit which the Seller may have in its possession or, to the Seller’s knowledge, the possession of any of its Affiliates and which is not already aboard the Unit, including applicable class certificates, class attestations, loadline certificates, operating manuals, radio licenses, and engineering drawings; PROVIDED, HOWEVER that the Seller does not represent that (a) it has in its possession (or shall have in its possession at Closing) any such documentation, (b) any documentation that it does have (or may have at Closing) is (or shall be) current, valid or correct, and (c) the Unit is (or shall be) capable of obtaining any needed documentation; PROVIDED further that the Seller shall have no obligation to seek, obtain or deliver to the Buyer any documentation which is not in its possession or control at Closing. The Buyer shall also be entitled to retain a hard copy of the Unit’s preventive maintenance records, PROVIDED that this documentation may be provided to the Buyer’s representatives either onboard the Unit or at the onshore location of the documentation; and
|
8.
|
A certified copy of a Transcript of Register for the Unit dated no more than five (5) Business Days prior to the Closing Date reflecting that there are no mortgages, liens or other encumbrances recorded on the Unit.
|
(b)
|
Buyer’s Deliveries
.
Simultaneously with delivery of the Unit as contemplated herein and the items set forth in Article 7.2(a)
, the Buyer shall pay the Sale Price to the Seller in full and free of bank charges in accordance with Article 3.3
and 3.4, and shall deliver to the Seller the following in respect of the Unit:
|
1.
|
A receipt from the bank of the Buyer evidencing the irrevocable and unconditional transfer of the Closing Payment to the Seller's Bank Account (provided that, for the avoidance of doubt, Closing shall not take place until the Closing Payment has been received into the Seller’s Bank Account);
|
2.
|
A certified copy in English of a resolution of the board of directors of the Buyer approving the terms of this Agreement and the transactions contemplated herein;
|
3.
|
A Certificate of Good Standing of the Buyer in English (or the equivalent documents in the country of incorporation of the Buyer);
|
4.
|
Certified copies of Certificate of Incumbency for the Buyer (or the equivalent documents in the country of incorporation of the Buyer) showing a list of the current directors and officers of the Buyer with a certified translation in English;
|
5.
|
Original Power of Attorney in English of the Buyer, duly notarised and apostilled, authorising the Buyer’s appointed representatives to execute all necessary documents and take all necessary action in order to purchase the Unit from the Seller; and
|
6.
|
A certificate in English stating that the Buyer’s representations, covenants and warranties made in Article 4.2 are true and correct as of the Closing Date.
|
7.3.
|
Outside Date.
|
(a)
|
In the event that the Closing does not occur on or before the Outside Date or Extended Outside Date (as applicable), for whatever reason (save as provided in Article 3.2
), either Party may terminate this Agreement by providing written notice to the other, in which case the Deposit (together with any interest accrued thereon) shall be retained by the Seller and neither Party shall have any further obligation hereunder to the other Party.
|
(b)
|
In the event that the Closing does not occur on or before the Outside Date by reason of a breach of this Agreement by the Seller, the Parties hereby agree that the Closing Date shall be extended by a period of 10 (ten) Business Days (the “Extended Outside Date”) in order to allow the Seller time to cure such breach and proceed to Closing.
|
(c)
|
In the event that the Closing does not occur on or before the Extended Outside Date by reason of a breach of this Agreement by the Seller, the Buyer may terminate this Agreement by providing written notice to the Seller, in which case the Deposit together with any interest accrued thereon shall be returned to the Buyer within 5 days of termination thereafter, after which (save for any claims under Articles 10.1(a), 10.1(b) and/or 10.2(b)) neither Party shall have any claim of whatever nature against the other.
|
8.
|
DELIVERY
AND POST-CLOSING MATTERS
|
8.1.
|
The Unit shall be delivered to the Buyer free from all Liens. Concurrently with the delivery of the Bill of Sale, (i) the Seller shall deliver to the Buyer, and the Buyer shall accept from the Seller, the Unit, and (ii) each Party shall acknowledge such delivery and acceptance by executing and delivering the Certificate of Acceptance. The risk of loss, and title to the Unit, shall pass to the Buyer as of the Closing Time.
|
8.2.
|
The Unit with the Onboard Unit Equipment shall be delivered to the Delivery Location. Seller shall at its cost and expense prepare the Unit to be transferred from its current location to the Delivery Location and secure all licenses and permits relating thereto.
|
8.3.
|
Buyer shall take control of the Unit after Seller confirms that the Sale Payment has been received into the Seller’s Bank Account, at which time Buyer may move the Unit from the Delivery Location.
|
8.4.
|
Upon delivery of the Unit pursuant to Article 8.1 above
, the Buyer shall change the name of the Unit and within thirty (30) days alter all markings on the Unit accordingly.
|
8.5.
|
The Buyer shall be responsible for obtaining any licenses, permits and other similar governmental or other authorizations as well as for filing appropriate documentation as required by the laws of the country in which the Unit is delivered, in relation to the movement of the Unit from and after the Closing. This includes but is not limited to customs declarations, authorizations, permits and licenses.
|
8.6.
|
The Buyer shall, no later than thirty (30) calendar days after the Closing and at its sole cost and expense remove all equipment specified in Schedule 1 Part A which is located onshore at the yard(s). If the Buyer has not removed such equipment after the said period of thirty (30) days, the Buyer
|
|
acknowledges and agrees that the Seller has the right to dispose of the said equipment in any manner it sees fit. Such disposal and the cost of storage and or demurrage until such time that the equipment is suitably disposed shall be at the Buyer’s cost.
|
8.7.
|
Upon Closing, the Buyer and Seller shall enter into the Services Agreement.
|
8.8.
|
The Buyer agrees to provide to the Seller and the Seller agrees to provide to the Buyer, all requisite documentation and assistance as may be required for completion of any customs procedures and formalities associated with this sale.
|
8.9.
|
The Buyer warrants that, for a period of two (2) years following the Closing, the Unit shall not be used for conventional drilling purposes, except for top hole drilling services provided as ancillary services with respect to the plugging and abandoning of a well.
|
9.
|
TOTAL LOSS; PARTIAL LOSS
|
9.1.
|
Total Loss
.
If during the period between the date of this Agreement and the Closing Time, there is an actual total casualty loss, constructive total casualty loss or compromised total casualty loss (collectively, a “
Total Loss
”) of the Unit, this Agreement shall terminate and neither Party shall have any further claim of whatsoever nature against the other.
|
9.2.
|
Partial Loss
.
|
(a)
|
If during the period between the date of this Agreement and the Closing Time, the Unit suffers a Partial Loss, then the terms of this Article 9.2
shall apply and the Seller shall provide written notice to the Buyer of such Partial Loss.
|
(b)
|
The Parties agree that the Seller shall not be required to remedy De Minimis Losses, whether pursuant to Articles 5.1
or 9
or otherwise. In respect of Partial Losses other than De Minimis Losses, the following provisions of this Article 9.2
shall apply.
|
(c)
|
At the time of giving the notice referred to in paragraph (a) above
, the Seller shall either (i) notify the Buyer that the Seller will perform the work necessary to cause the Unit to meet the requirements specified herein (“
Repair Work
”), or (ii) notify the Buyer that the Seller does not intend to perform the Repair Work, in which case the provisions of Articles 9.2(d)
and 9.2(e) shall apply.
|
(d)
|
If the Seller notifies the Buyer that it does not intend to perform the Repair Work, and the Parties are able to agree in writing on the costs of such Repair Work or other acceptable Sale Price reduction within ten (10) Business Days of the Buyer’s receipt of notice under paragraph (a) above
, the Sale Price shall be reduced by such agreed amount and the sale shall be completed as soon as reasonably practicable.
|
(e)
|
If the Seller notifies the Buyer that it does not intend to perform such Repair Work, and the Parties are unable to agree in writing on the costs of the Repair Work or other acceptable Sale Price reduction within the time period specified in Article 9.2(d)
, then the Parties shall mandate Noble Denton to assess the reasonable cost of carrying out such Repair Work. Noble Denton shall provide an assessment of such cost with reasons and the Parties agree that such amount shall constitute the amount for the Repair Work in question and such assessment shall be final and binding upon both Parties and the Sale Price shall be reduced by such amount and the sale shall be completed as soon as reasonably practicable.
|
(f)
|
If, under Article 9.2(e)
, Noble Denton is required to assess any damage to the Unit and quantify the cost of any Repair Work, Noble Denton shall be instructed jointly by the Parties to carry out such assessment and quantification, such appointment expressly to require Noble Denton to act impartially when carrying out such assessment and quantification. The cost of any such appointment is to be shared equally between the Parties.
|
(g)
|
If the Repair Work in the reasonable opinion of Noble Denton is likely to last more than ninety (90) calendar days the Buyer shall have the right to terminate this Agreement by notice to the
|
|
Seller. In such case, the Deposit shall be refunded to the Buyer within five (5) Business Days of the Seller’s receipt of such notice.
|
10.
|
INDEMNITY AND LIABILITY
|
10.1.
|
Buyer’s Indemnities
.
The Buyer shall defend, release, indemnify and hold harmless the Seller’s Group from and against all liens, claims, demands, causes of action, liability, damages, costs, expenses and losses (including attorneys’ fees) (collectively, “
Damages
”) which arise out of or in connection with:
|
(a)
|
injury to, illness or death of any member of the Buyer’s Group; and/or
|
(b)
|
loss of or damage to the property of any member of the Buyer’s Group (including the Unit on or after the Closing Time); and/or
|
(c)
|
the presence of employees, subcontractors, invitees, customers and/or agents of the Buyer or its Group on the Unit; and/or
|
(d)
|
the Unit or the operation of the Unit to the extent the alleged event giving rise to such claim occurred on or after the Closing Time; and/or
|
(e)
|
any breach of any of the representations or warranties made by the Buyer in Article 4.2
or any breach by the Buyer of any of the representations, warranties, covenants or agreements set forth in this Agreement.
|
10.2.
|
Seller’s Indemnities
.
Subject to Article 10.1
above and the other provisions of this Agreement, including Articles 4.1
and 11
, the Seller shall release, indemnify, defend and hold the Buyer harmless from and against any Damages arising out of or in connection with:
|
(a)
|
claims made against the Unit which have been incurred prior to the Closing Time; and/or
|
(b)
|
any breach of any of the representations or warranties made by the Seller in Article 4.3
or any breach by the Seller of any of the representations, warranties, covenants or agreements set forth in this Agreement.
|
10.3.
|
General Indemnity and Liability Provisions
.
|
(a)
|
Application of Indemnities
.
|
|
(i)
|
No person shall be entitled to rely on or enforce any indemnity or any exclusion or limitation of liability contained in this Agreement to recover (or exclude or limit that person’s liability in respect of) any losses caused by that person’s Gross Negligence or Wilful Misconduct, or by the Gross Negligence or Wilful Misconduct of any other person within the same Group.
|
|
(ii)
|
Subject only to paragraph (i) above, all of the indemnities, allocations of risk, limitations and exclusions of liability and other agreements contained in this Article 10
or elsewhere in this Agreement shall apply (to the extent permitted by law) notwithstanding the negligence of any person or party, strict liability, liability imposed by statute, or any other breach of obligation of any person or any other event or condition. Indemnified Parties (as defined in paragraph (c) below
) shall be entitled to reasonable attorneys’ fees incurred in asserting or enforcing the indemnities granted herein.
|
(b)
|
Consequential Damages
.
Without prejudice to any provisions of this Agreement, in no event shall either the Seller, on the one hand, or the Buyer, on the other, be liable to the other (or to any other party claiming indemnification hereunder) for any loss of use, loss of revenue, profit or anticipated profit, delay, business interruption and other similar losses, whether direct or indirect, and any indirect or consequential losses whatsoever.
|
(c)
|
Recouped Amount
.
If, after an indemnity payment (an “
Indemnity Payment
”) is made under this Article 10
by a Party owing a duty of indemnification hereunder (an “
Indemnifying Party
”) to a party claiming indemnification (an “
Indemnified Party
”), any Indemnified Party receives, directly or indirectly, any refund, rebate, credit, settlement or other payment or amount from any person relating to such Indemnity Payment (a “
Recouped Amount
”) which was not included in the Indemnifying Party’s favour when calculating the Indemnity Payment, the Indemnified Party shall promptly inform the Indemnifying Party and pay an amount equal to the Recouped Amount to the Indemnifying Party. In addition, if any Indemnified Party becomes aware of circumstances that could reasonably give rise to a Recouped Amount, the Indemnified Party shall promptly so notify the Indemnifying Party and shall use commercially reasonable efforts to collect and obtain such potential Recouped Amount.
|
(d)
|
Indemnification Notices for Claims.
If any Indemnified Party is seeking indemnification under this Agreement from an Indemnified Party, the Indemnified Party shall give prompt written notice of the claim to the Indemnifying Party describing in reasonable detail the nature of the claim, an estimate of the loss or damages attributable to the claim (which estimate will not be conclusive or binding) and the basis for the Indemnified Party’s request for indemnification hereunder.
|
11.
|
TAXES AND FEES
|
11.1.
|
Apportionment of Tax Liabilities
.
|
(a)
|
The Seller shall solely bear all corporate income tax and/or, capital gains tax assessed on account of this sale. The Seller shall bear all Taxes and customs charges resulting from the move of the Unit to the Delivery Location.
|
(b)
|
If any GST or any indirect taxes of similar nature are chargeable on the Sale Price of the Unit, the Seller shall submit to the Buyer an invoice containing the GST amount (or an invoice containing any indirect tax of similar nature) and the Buyer shall pay the Seller the amount of such GST (or any indirect tax of similar nature) on presentation to the Buyer of such GST invoice.
|
(c)
|
Except as otherwise stated in paragraph (a) above, the Buyer shall bear all other Taxes including all transfer, registration, customs duties, stamp duties, fees, import, excise and any other type of Taxes, fees and charges which are assessed on account of or in connection with the sale or a deemed importation of the Unit as a result of or in connection with the sale, whether or not levied directly upon the Buyer or an Affiliate of the Buyer, and the Sale Price shall be net of such amounts. As used herein, the expression “Taxes, fees and charges” shall include fines, penalties and any interest with respect to Taxes, fees and charges.
|
11.2.
|
Seller’s Tax Indemnity to Buyer etc
.
The Seller shall be liable for and shall indemnify the Buyer and the Buyer’s Affiliates against any and all Damages arising out of or relating to any Tax for which the Seller is responsible under Article 11.1
.
|
11.3.
|
Buyer’s Tax Indemnity to Seller etc
.
The Buyer shall be liable for and shall indemnify the Seller and the Seller’s Affiliates against any and all Damages arising out of or relating to any Tax for which the Buyer is responsible under Article 11.1
.
|
11.4.
|
Registry Fees
.
Any fees and expenses in connection with the registration under Buyer’s flag shall be for Buyer’s account, whereas similar charges in connection with the closing of the Seller’s registry shall be for Seller’s account.
|
12.
|
CHOICE OF LAW AND VENUE
|
12.1.
|
Choice of Law and Jurisdiction
.
This Agreement shall be governed by and construed in accordance with English law, without regard to its rules of conflict of laws that would require the application of laws of a different jurisdiction. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS AND SUBMITS TO THE EXCLUSIVE JURISDICTION OF
|
|
THE COURTS OF ENGLAND IN LONDON (THE “
CHOSEN COURTS
”), FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT AND AGREES NOT TO COMMENCE ANY SUCH PROCEEDINGS EXCEPT IN THE CHOSEN COURTS. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN THE CHOSEN COURTS AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN THE CHOSEN COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
|
12.2.
|
Seller’s Agent for Service of Process
.
The Seller hereby irrevocably appoints Ince Process Agents Limited at its registered office (presently being at 5th floor, International House, 1 St Katharine’s Way, London E1W 1AY) as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts in connection with this Agreement.
|
12.3.
|
Buyer’s Agent for Service of Process
.
The Buyer hereby irrevocably appoints EC3 Services Limited at its registered office in England (presently being at St Botolph Building, 138 Houndsditch, London EC3A 7AR) (or such other person being a firm of solicitors resident in England as it may substitute by notice) as its agents to receive and accept on its behalf any process or other document relating to any proceedings in the English courts in connection with this Agreement.
|
13.
|
COST OF THE TRANSACTION; AGENCY FEES
|
13.1.
|
Whether or not the transactions contemplated hereby shall be consummated, the Parties agree that each Party will pay the fees, expenses and disbursements of such Party and its agents, representatives, and counsel incurred in connection with the subject matter of this Agreement. In particular the Buyer shall be fully responsible for the costs incurred by it in carrying out the inspection of the Unit, inclusive of logistical requirements such as helicopter flights. The Seller shall be responsible for any payment of the brokerage fees to Pareto Offshore AS.
|
14.
|
NOTICES
|
14.1.
|
All notices and other communications (“
Notices
”) under this Agreement shall be in writing and shall be marked for the attention of the person, and sent to the address, or fax number, given in this Article (or such other address, fax number or person as the recipient may notify the other party in accordance with the provisions of this Article) and shall be delivered personally, or sent by fax, or by international courier service.
|
14.2.
|
A Notice shall be deemed to have been given:
|
(a)
|
if delivered personally, at the time of delivery; or
|
(b)
|
in the case of fax, at the time of transmission; or
|
(c)
|
in the case of delivery by international courier service, two (2) Business Days after being delivered into the custody of such service; and
|
14.3.
|
The addresses for service of Notice are:
|
15.
|
ENTIRE AGREEMENT
|
15.1.
|
This Agreement, and any documents referred to in it, constitute the entire agreement between the Parties and supersede any arrangement, understanding or previous agreement between them relating to the subject matter they cover. Each Party acknowledges that in entering into this Agreement, and any documents referred to in it, does not rely on, and shall have no remedy in respect of, any statement, representation, assurance or warranty of any person other than as expressly set out in this Agreement or those documents. Nothing in this Article 15
operates to limit or exclude any liability for fraud.
|
16.
|
EMPLOYEES
|
16.1.
|
The Buyer undertakes that neither it nor any of its Affiliates shall solicit any employees of the Seller or its Affiliates without the prior written consent of the Seller; provided that Seller shall cooperate reasonably with the Buyer with regard to the employment by Buyer of Seller’s personnel currently
|
|
assigned to the Unit.
|
16.2.
|
Solicitation by the Buyer or any Affiliate thereof by way of a general newspaper advertisement or other general solicitation that does not specifically target an employee or group of employees of the Seller or an Affiliate thereof shall not be considered a violation of Article 16.1 above
.
|
17.
|
PUBLICITY
|
17.1.
|
Unless a Party has obtained the prior written consent of the other Party or has already publicly disclosed the information that the other Party intends to disclose, each Party agrees to treat as confidential all documents and other information which it may obtain in connection with this Agreement and neither party shall make any broadcast, press release, advertisement, public disclosure or other public announcement or statement with respect to this Agreement, including the Sale Price, the Unit or any of the terms or conditions hereof, unless required by law or the rules of any stock exchange. However, the Seller or its Affiliates may disclose such information without the Buyer’s prior written consent in the Fleet Status Reports or Fleet Status Update Summaries of Transocean Ltd. to the extent the Seller or its Affiliates believe that it is necessary or prudent to do so.
|
18.
|
GENERAL
|
18.1.
|
The invalidity, illegality or unenforceability of any provision or any part of any provision of this Agreement shall not affect the continuation in force of such other part or the remainder of this Agreement.
|
18.2.
|
Save as provided in Articles 10
and 11,
this Agreement and the documents referred to in it are made for the benefit of the Parties and their successors and permitted assigns, and are not intended to benefit, or be enforceable by, anyone else. Notwithstanding the foregoing the Buyer may transfer the rights hereunder to any of its Affiliates, which are organized and existing under and by virtue of the laws of any OECD country, without the prior consent of the Seller provided that the Buyer remains responsible for the payment of the Sale Price.
|
18.3.
|
No amendment or addition to this Agreement shall be valid unless agreed in writing by each of the Parties hereto.
|
18.4.
|
This Agreement may be executed in any number of counterparts by the Parties hereto on separate counterparts, each of which when executed and delivered shall constitute an original, but all of which shall together constitute one and the same instrument.
|
18.5.
|
The provisions of Articles 10, 11, 12, 13, 14, 15, 16, 17
and this Article 18.5
and any other provisions which, due to their nature should reasonably be expected to survive, shall survive any termination of this Agreement.
|
TRANSOCEAN DISCOVERER
534 LLC
By:
/s/ Larry McMahan
Name:
Larry McMahan
Title:
President
|
HELIX ENERGY SOLUTIONS GROUP, INC.
By:
/s/ Anthony Tripodo
Name:
Anthony Tripodo
Title:
Executive Vice President
and Chief Financial Officer
|
(a)
|
Indemnity by the Buyer
. The Buyer shall be solely responsible for and shall defend, release, indemnify and hold harmless the Seller’s Group from and against any and all Claims howsoever arising from or in connection with:
|
(i)
|
death, illness of or injury to any Person within the Buyer’s Group; and/or
|
(ii)
|
loss of or damage to any property owned by any member of the Buyer’s Group including the Unit,
|
(iii)
|
personal injury including death or disease or loss of or damage to the property of any Third Party, and
|
(iv)
|
Consequential Loss suffered by the Buyer’s Group or any Third Party,
|
(b)
|
Indemnity by the Seller.
The Seller shall be solely responsible for and shall defend, release, indemnify and hold harmless the Buyer’s Group from and against any and all Claims howsoever arising from or in connection with:
|
(i)
|
death, illness of or injury to any Person within the Seller’s Group; and/or
|
(ii)
|
loss of or damage to any property owned by any member of the Seller’s Group,
|
(iii)
|
Consequential Loss suffered by the Seller’s Group,
|
(1)
|
accelerate the time at which some or all of the Awards then outstanding may be exercised so that such Awards may be exercised in full for a limited period of time on or before a specified date (before or after such Corporate Change) fixed by the Committee, after which specified date all such Awards that remain unexercised and all rights of Holders thereunder shall terminate;
|
(2)
|
require the mandatory surrender to the Company by all or selected Holders of some or all of the then outstanding Awards held by such Holders (irrespective of whether such Awards are then exercisable under the provisions of the Plan or the applicable Award Agreement evidencing such Award) as of a date, before or after such Corporate Change, specified by the Committee, in which event the Committee shall thereupon cancel such Award and the Company shall pay to each such Holder an amount of cash per share equal to the excess, if any, of the per share price
|
|
offered to stockholders of the Company in connection with such Corporate Change over the exercise prices under such Award for such shares;
|
(3)
|
with respect to all or selected Holders, have some or all of their then outstanding Awards (whether vested or unvested) assumed or have a new award of a similar nature substituted for some or all of their then outstanding Awards under the Plan (whether vested or unvested) by an entity which is a party to the transaction resulting in such Corporate Change and which is then employing such Holder or which is affiliated or associated with such Holder in the same or a substantially similar manner as the Company prior to the Corporate Change, or a parent or subsidiary of such entity, provided that (A) such assumption or substitution is on a basis where the excess of the aggregate fair market value of the Stock subject to the Award immediately after the assumption or substitution over the aggregate exercise price of such Stock is equal to the excess of the aggregate fair market value of all
Stock subject to the Award immediately before such assumption or substitution over the aggregate exercise price of such Stock, and (В) the assumed rights under such existing Award or the substituted rights under such new Award as the case may be will have
the same terms and conditions as the rights under the existing Award assumed or substituted for, as the case may be;
|
(4)
|
provide that the number and class or series of Stock covered by an Award (whether vested or unvested) theretofore granted shall be adjusted so that such Award when exercised shall thereafter cover the number and class or series of Stock or other securities or property (including, without limitation, cash) to which the Holder would have been entitled pursuant to the terms of the agreement or plan relating to such Corporate Change if, immediately prior to such Corporate Change, the Holder had been the holder of record of the number of shares of Stock then covered by such Award; or
|
(5)
|
make such adjustments to Awards then outstanding as the Committee deems appropriate to reflect such Corporate Change (provided, however, that the Committee may determine in its sole and absolute discretion that no such adjustment is necessary).
|
1.
|
Purpose
|
2.
|
Administration of the Plan
|
3.
|
Nature and Number of Shares
|
4.
|
Eligibility Requirements
|
(i)
|
Employees who would, immediately upon enrollment in the Plan, own directly or indirectly, or hold options or rights to acquire, an aggregate of five percent (5%) or more of the total combined voting power or value of all outstanding shares of all classes of Helix or any Subsidiary (in determining stock ownership of an individual, the rules of Section 424(d) of the Code shall be applied, and the Administrator may rely on representations of fact made to it by the employee and believed by it to be true);
|
(ii)
|
Employees who are customarily employed by the Company less than twenty (20) hours per week or less than five (5) months in any calendar year; and
|
(iii)
|
Employees who are prohibited by the laws and regulations of the nation of their residence or employment from participating in the Plan as determined by the Administrator.
|
5.
|
Enrollment
|
6.
|
Method of Payment
|
7.
|
Crediting of Contributions; Dividends.
|
8.
|
Grant of Right to Purchase Shares on Enrollment
|
(i)
|
the right to purchase shares of Common Stock during a particular Purchase Period shall expire on the earlier of: (A) the completion of the purchase of shares on the Purchase Date occurring in the Purchase Period, or (B) the date on which participation of such Participant in the Plan terminates for any reason;
|
(ii)
|
payment for shares purchased will be made only through payroll withholding and the crediting of other amounts, if applicable, in accordance with Sections 6 and 7;
|
(iii)
|
purchase of shares will be accomplished only in accordance with Section 9;
|
(iv)
|
the price per share will be determined as provided in Section 9;
|
(v)
|
the right to purchase shares (taken together with all other such rights then outstanding under this Plan and under all other similar employee stock purchase plans of Helix or any Subsidiary) will in no event give the Participant the right to purchase a number of shares during a calendar year in excess of the number of shares of Common Stock derived by dividing $25,000 by the fair market value of the Common Stock (the “Maximum Share Limitation”) on the applicable Grant Date determined in accordance with Section 9;
|
(vi)
|
the right to purchase shares will in all respects be subject to the terms and conditions of the Plan, as interpreted by the Administrator from time to time;
|
(vii)
|
Helix and the Custodian can agree to limitations on the transfer, gift, or margin of shares held with the Custodian. Such limitations, if any, shall apply to such shares; and
|
(viii)
|
the maximum number of shares of Common Stock that may be purchased by a Participant during any Purchase Period shall not exceed 10,000 shares.
|
9.
|
Purchase of Shares
|
(i)
|
eighty-five percent (85%) of the Fair Market Value of Common Stock on the Grant Date; or
|
(ii)
|
eighty-five percent (85%) of the Fair Market Value of Common Stock on the Purchase Date.
|
10.
|
Withdrawal of Shares and Sale of Shares
|
11.
|
Termination of Participation
|
12.
|
Unpaid Leave of Absence
|
13.
|
Designation of Beneficiary
|
14.
|
Assignment
|
15.
|
Costs
|
16.
|
Reports
|
17.
|
Equal Rights and Privileges
|
18.
|
Rights as Shareholders
|
19.
|
Modification and Termination
|
(i)
|
if and to the extent such amendment is required to be approved by shareholders to continue the exemption provided for in Rule 16b-3 (or any successor provision); or
|
(ii)
|
if and to the extent such amendment is required to be approved by shareholders in order to cause the rights
granted under the Plan to purchase shares of Common Stock to meet the requirements of Section 423 of the Code (or any successor provision).
|
20.
|
Effective Date
|
21.
|
Governmental Approvals or Consents
|
22.
|
Listing of Shares and Related Matters
|
23.
|
Employment Rights
|
24.
|
Withholding of Taxes
|
25.
|
Governing Law
|
26.
|
Other Provisions
|
HELIX ENERGY SOLUTIONS GROUP, INC. | |||
|
By:
|
/s/ Alisa Johnson | |
Name: | Alisa Johnson | ||
Title: |
Executive Vice President,
General Counsel and Corporate Secretary
|
||
|
|
/s/ Owen Kratz | |
Owen Kratz | |||
President and Chief Executive Officer | |||
|
|
/s/ Anthony Tripodo | |
Anthony Tripodo | |||
Executive Vice President and
Chief Financial Officer
|
|||
|
/s/ Owne Kratz | ||
Owen Kratz | |||
President and Chief Executive Officer | |||
|
/s/ Anthony Tripodo | ||
Anthony Tripodo | |||
Executive Vice President and
Chief Financial Officer
|
|||