Weakness in the offshore market causes Helix to delay its latest well intervention vessel
Helix Energy (ticker: HLX) announced today that it will be delaying construction of its Q7000 well intervention vessel, according to a company 8-K. The company said that it plans to push back delivery of the Q7000 from mid-2016 until July, 2017.
Helix is an offshore service company that specializes in remote operated vehicles (ROV), well intervention and offshore oilfield services. The company is headquartered in Houston, Texas, and operates in subsea fields in every major producing region of the world, according to the company.
The Q7000 is designed to be an upgraded version of Helix’s Q4000, which was used in the Gulf of Mexico during the BP (ticker: BP) Macondo Well blowout in 2010. The Q7000 will include features such as conventional and extended top hole drilling, subsea construction, decommissioning well intervention and coiled tubing operations.
According to HLX’s 8-K, twenty percent of the contract price for Q7000 was paid upon the execution of the contract in September 2013, with the remaining eighty percent due upon delivery. Now that delivery has been delayed, the remaining eighty percent will be paid in two installments, with 20% on June 25, 2016 and 60% upon delivery in July 2017.
The company also expects to incur several fees due to the delay. Jurong Shipyard’s prolongation costs of $2.0 million, vendors’ prolongation costs equal to the lesser of actual costs and $4.0 million, and a delay fee of $8.5 million are payable by Helix Q7000, according to HLX’s 8-K.
Source: Helix Energy
Marshall Adkins from Raymond James said the move was likely the right call, but that it was still a net negative for the company. “The collapse in offshore rig dayrates has likely put pressure on spot market rates, and contract restructurings still remain a possibility going forward.” The Raymond James note went on to say “while this reduces our EBITDA estimate, it does defer approximately $285 million of capex from mid-2016 to mid 2017.”
Well intervention vessels carry out operations on oil and gas wells during the end of the well’s lifecycle, which alters the state of the well or manages the production of the well.
