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Helix disposals create deep-water operator takeover bait

Wade Youngblood, a production team leader, walks up a set of steps on the Helix Producer 1 in the Gulf of Mexico on Thursday, Feb. 24, 2011(Photo: Rusty Costanza/ The Times-Picayune)

Helix Energy Solutions Group Inc. (HLX) is turning into a takeover target after streamlining the company to focus on its expanding operations for offshore oil-well support.

The Houston-based company agreed last month to sell its oil-and-gas unit and earlier exited a pipe-laying business, helping Helix reduce debt and center its operations on deepwater vessels and robotics for well maintenance. The divestments make the $2.2 billion company more appealing to a potential suitor such as Aker Solutions ASA (AKSO) or Technip SA (TEC) that may want to expand in marine contracting, said Capital One Financial Corp.

Helix also may attract other oilfield-services providers, according to Stephens Inc., while Iberia Capital Partners LLC says a rig owner such as Diamond Offshore Drilling Inc. (DO) could be interested. Even after Helix’s moves led to a 31 percent gain in 2012 that beat U.S. energy equipment and services stocks, the company trades at a 23 percent discount to its closest competitor Oceaneering International Inc. based on this year’s estimated earnings, according to data compiled by Bloomberg.

“It’s a cleaned-up company,” Trey Stolz, an analyst at Iberia Capital in New Orleans, said in a telephone interview. “Helix would be attractive as an add-on for existing offshore service providers to immediately get a head start on the well intervention side. It’s the next step forward in further specialization of the offshore equipment.”

Terrence Jamerson, director of investor relations at Helix, didn’t return phone or e-mail messages seeking comment.

Oilfield Divers

Helix, which traces its roots to a group of oilfield divers in the 1960s, evolved into an offshore energy company with operations spanning deepwater construction, oil-and-gas production and well maintenance and repair.

The company in October said it sold off its pipe-laying vessels and in December announced that it had agreed to sell its oil-and-gas unit as part of a plan to shift its focus toward so- called well-intervention services. This business, which encompasses undersea well maintenance, salvage and repair using floating vessels and robotics, is more profitable than pipe- laying while requiring less capital outlays than are needed for exploration and production, Chief Financial Officer Anthony Tripodo told investors during a presentation in November.

The asset sales spurred gains in Helix shares that contributed to the biggest advance last year among the 11 members in the Standard & Poor’s Midcap Energy Equipment & Services Index. The stock closed yesterday at $20.86.

‘Simpler Package’

By helping to center Helix’s operations on a single, growing business, the disposals also have bolstered the company’s allure as a potential takeover target, said David Streit, an Appleton, Wisconsin-based equity analyst at Thrivent Financial for Lutherans. The firm oversees about $76 billion in assets, including Helix shares.

“This focuses the company and provides potential acquirers with a much more focused and simpler package of assets,” Streit said in a phone interview. The sale of the oil-and-gas unit “removed the last major impediment to an acquisition. The balance sheet will be net cash positive after the divestiture of the business is complete. And beyond that it’s a very straightforward and clean business.”

Including its current net debt of $589 million, Helix’s enterprise value as of yesterday was 6.64 times its 2013 estimated earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. The multiple for its Houston-based rival Oceaneering International (OII) was higher at 8.64 times this year’s estimated Ebitda, the data show.

Deepwater Appeal

“It’s trading at a multiple out of whack with other offshore asset-based service companies,” Iberia Capital’s Stolz said.

In its streamlined form, Helix may appeal to some contractors already operating in deepwater oil fields, Stolz said. The addition would give them a leg up as demand grows for well-intervention services, which use equipment sent down from vessels on the water’s surface to tap into aging wells on the sea floor and boost production.

Well-intervention vessels are in demand because they’re a cheaper alternative to drilling rigs, which have long been the standard and are now able to charge near-record leasing rates due to higher oil prices, Stolz said. The market for well intervention could experience growth similar to the past five years, when the number of aging wells nearly doubled to 3,500, he said.

Aker, Technip

Aker Solutions, a Lysaker, Norway-based oil-services company with well-intervention operations, could be a potential suitor for Helix, said Joseph Gibney, a Houston-based analyst with Capital One. The $5.8 billion company has a fleet of three deepwater well-intervention vessels, according to its website.

Paris-based Technip, with a market value of $13 billion, also could be a logical buyer because of its experience working in deep waters offering construction and engineering services for oil fields, Gibney said.

Ivar Simensen, a spokesman at Aker Solutions, declined to comment on whether the company is interested in Helix. Christophe Belorgeot, a spokesman for Technip, didn’t respond to an e-mailed request for comment.

Other oilfield-services companies may want to buy Helix to augment their businesses and gain technical expertise, said Michael Marino, an analyst at Stephens Inc. in Houston. Rig contractors such as Diamond Offshore may be interested in Helix as a way to recapture some of the work lost to lower-priced well-intervention vessels, Gibney and Stolz said.

Going Alone

Darren Daugherty, a spokesman for Diamond Offshore, declined to comment on whether the company is interested in Helix.

With Helix now focused on well intervention, the company could look to stay independent or even seek out acquisitions itself, said Todd Smurl, president and chief investment officer of Houston-based Ascendant Advisors.

“It might put them in play down the road but now they might actually be strong enough to be an acquirer as opposed to being acquired,” Smurl said in a phone interview. What’s more, after the stock rose 19 percent in the past month alone, “it’s not the screaming bargain it was,” he said.

Still, Stephens’s Marino estimates the company could fetch $25 in a takeover, a 20 percent premium to yesterday’s close.

“A takeout at those levels doesn’t seem crazy,” said Marino, who recommended that investors buy the stock after Helix announced plans to sell its oil-and-gas unit. “It makes a lot of sense for someone who wants to increase their presence internationally and offshore.”

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Sonardyne, Oceaneering Demonstrate ROV Capabilities in U.S. Gulf

A recent trials partnership between Sonardyne International Ltd. and Oceaneering International, Inc. has resulted in the development of a Fly-By-Wire (FBW) system for ROV (Remotely Operated Vehicle) control in any water depth, allowing the vehicle to hold station indefinitely and navigate to real-world coordinates automatically.

A Sonardyne SPRINT system was installed on one of Oceaneering’s Maxximum ROVs and integrated with a Sonardyne Ranger 2 Ultra Short Baseline (USBL) system for acoustic aiding of the Inertial Navigation System (INS). The trials took place in the Gulf of Mexico in water depths of 3,057 metres (10,030 ft) and results showed that continuous hovering of the ROV in mid-water beyond Doppler Velocity Log (DVL) range was possible, as well as automatic navigation to waypoints.

The majority of ROV navigation systems utilize an Attitude and Heading Reference System (AHRS) and DVL to provide a relative or dead reckoned position. These systems are subject to time and distance based position errors and only operate close to the seabed, meaning mid-water operations are conducted via manual control so real world or relative coordinates cannot be easily used by the ROV pilot. To address these limitations, Sonardyne and Oceaneering have developed a novel navigation and control system solution utilising the dual output of INS and AHRS data from SPRINT to provide ROV Dynamic Positioning (DP) in all water depths with capabilities beyond current state-of-the-art, without affecting reliability or ease of use.

The system has two methods of ROV control: ‘Navigation’ and ‘Passthru’. In ‘Navigation’ mode, the ROV control system uses INS positioning optimised for DP with real-world position, velocity and attitude data at high output rates. This speeds up ROV operations by improving vehicle control precision, automating station keeping and delivering FBW capability. ‘Navigation’ mode is available continuously in all water depths when USBL data is available. If the INS solution should become degraded or is unavailable, the system automatically reverts to ‘Passthru’ mode. ‘Passthru’ mode is a dead reckoned solution using self contained AHRS data that is inherently robust and reliable when combined with DVL data.

The results of the trial showed that continuous hovering of the ROV in mid-water beyond DVL range was possible, as well as automatic navigation to waypoints. When the ROV was in DVL range of the seabed the ‘Navigation’ mode performed equally as well as the ‘Passthru’ mode but with the added benefit of real-world referenced positioning data from the USBL system. The faster update rate (20 Hz, compared to the 5 Hz rate of the DVL) has the potential to refine vehicle control precision.

Commenting on the development, Mark Carter, Business Development Manager for Inertial Systems at Sonardyne said, “Fly-By-Wire ROV control using real-world coordinates significantly improves operational efficiency compared to relative-only positioning methods. Faster navigation updates, automatic registering of waypoints and indefinite mid-water station keeping speed up ROV operations and ultimately save ROV and vessel time.”

Mark Philip, ROV Technology Manager at Oceaneering stated that, “Autonomous flight control is an increasingly important feature for ROVs. Oceaneering’s Fly-By-Wire system has greatly enhanced the efficiency of the service we provide to our customers since its introduction several years ago. The integration of the SPRINT inertial navigation system further enhances this capability by providing hands-free hovering and navigation throughout the entire water column. We place high importance on ease of operation and redundancy and are confident that our collaboration with Sonardyne satisfies these requirements.”

Sonardyne, Oceaneering Demonstrate ROV Capabilities in U.S. Gulf| Offshore Energy Today.

Oceaneering Charters Subsea Support Vessel from Otto Candies (USA)

Oceaneering International, Inc. announced today that it has entered into a five-year charter for use of the Cade Candies, a multi-service subsea support vessel owned by Otto Candies LLC. The charter is expected to commence during the second quarter of 2013.

This state-of-the-art, U.S. flagged vessel was built in 2010. It has an overall length of approximately 309 feet (94 meters), a Class 2 dynamic positioning system, accommodations for 69 personnel, a helideck, a 150-ton active heave compensated crane, and a working moonpool.

Oceaneering’s current rolling, short-term charter contract on the Cade Candies, in place since November 2011, will continue through early 2013. At that time, the vessel will enter a shipyard to undergo modifications to enhance its project capabilities. While in the shipyard, Oceaneering’s two, high-specification, work class ROVs onboard the vessel will be repositioned and fully integrated into the vessel for more effective operations. The vessel will also be equipped with a satellite communications system capable of transmitting streaming video for real-time work observation by shore personnel.

To be renamed the Ocean Alliance, the vessel will be used to augment Oceaneering’s ability to provide subsea intervention services in the ultra-deep waters of the Gulf of Mexico (GOM). These services are required to perform inspection, maintenance, and repair (IMR) projects and hardware installations. IMR projects are expected to include chemical well stimulation and hydrate remediation. Hardware installations are expected to include umbilicals, subsea trees, flowline jumpers, flying leads, and manifolds.

M. Kevin McEvoy, President and Chief Executive Officer, stated, “We are very pleased to have added, on a long-term basis, this modern, high-end, Jones Act-compliant vessel to our suite of assets to enhance our capabilities to serve our customers in the deepwater GOM. This charter demonstrates our belief the GOM deepwater subsea intervention market has a promising and sustainable future.”

Oceaneering Charters Subsea Support Vessel from Otto Candies (USA)| Offshore Energy Today.

Houston, TX: Oceaneering Reports Record Second Quarter Results (USA)

Oceaneering International, Inc. today reported record second quarter earnings for the period ended June 30, 2012. On revenue of $673 million, Oceaneering generated net income of $72.6 million, or $0.67 per share. During the corresponding period in 2011, Oceaneering reported revenue of $546 million and net income of $56.7 million, or $0.52 per share.

Subsea World News – Oceaneering Reports Record Second Quarter Results (USA).

Recap: Worldwide Field Development News (Apr 6 – Apr 12, 2012)

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This week the SubseaIQ team added 4 new projects and updated 22 projects. You can see all the updates made over any time period via the Project Update History search. The latest offshore field development news and activities are listed below for your convenience.

Africa – Other
Apache Secures Rig to Drill Mbawa Prospect
Apr 10, 2012 – Apache has secured the use of the deepwater drillship Deepsea Metro 1 (UDW drillship) to drill the Mbawa prospect. The operator is anticipating a spud date within the third quarter of 2012, pending on when the rig finishes with its current operations. The well is expected to take about 45 to 60 days to complete to a planned total depth of 10,662 feet (3,250 meters) in a water depth of 2,821 feet (860 meters). It is estimated that Mbawa has a maximum potential to contain 4.9 billion barrels of oil-in-place at the main Tertiary/Cretaceous level with significant additional potential also to be tested by the well at the deeper Upper Jurassic level and shallower Tertiary levels.
Project Details: Mbawa
S. America – Brazil
Oceaneering to Supply Umbilicals for Whales Park Development
Apr 12, 2012 – Oceaneering International has secured a contract from Petrobras to supply nearly 85 miles (135 kilometers) of thermoplastic production control umbilicals for the Whales Park (formerly Baleia Azul) field development project offshore Brazil in the Espirito Santos Basin. Product manufacturing is slated to commence in 4Q 2012 and be completed in 4Q 2014.
Project Details: Espadarte
Petrobras Completes Iara Extension
Apr 10, 2012 – Petrobras has completed drilling an extension to exploratory well 3-BRSA-1032-RJS (3-RJS-697) in the Iara Evaluation Area in the pre-salt area of the Santos Basin. The well, informally known as Iara Oeste, is the third well drilled in the Discovery Evaluation Plan 1-BRSA-618 (Iara). Drilling results have confirmed good quality oil samples ranging from 21 and 26 degrees API in carbonate reservoirs of the pre-salt. Iara Oeste is located 139 miles (223 kilometers) off the coast of Rio de Janeiro, about six miles (nine kilometers) from the discovery well in a water depth of 7,054 feet (2,150 meters).
Project Details: Iara
Europe – North Sea
Valiant Fails to Hit Pay in Cladhan
Apr 12, 2012 – Valiant Petroleum will plug and abandon the Cladhan South exploratory prospect in Block 210/29c in the UK sector of the North Sea. The well encountered multiple Upper Jurassic sand channels on prognosis, none of which were thought to be hydrocarbon-bearing.
Project Details: Cladhan
Marathon to Submit Boyla POD
Apr 11, 2012 – Marathon expects to submit a plan of development for the Boyla field subsea tie-back to the Alvheim FPSO in the first half of 2012. First oil is expected in 2014.
Project Details: Alvheim
Marathon Mulls Completing Caterpillar as Satellite to Boyla
Apr 11, 2012 – During the first quarter of 2011, the Caterpillar exploration well in PL 340BS was completed as an oil discovery. Caterpillar, located close to the Boyla field, will now most likely be developed through the Boyla subsea development facilities.
Project Details: Caterpillar
Duart Resumes Production
Apr 11, 2012 – Bridge Energy has restarted production at the Duart field, which has been shut-in since Oct. 5, 2011 as a result of planned maintenance activity on the host Tartan platform. The extended shutdown on the Tartan platform has enabled completion of a more comprehensive maintenance work scope which should increase the near term uptime of the facility.
Project Details: The Greater Tartan Area
Total’s Elgin Relief Well May Take More Than 6 Months
Apr 6, 2012 – Total estimates that it may take more than six months to drill relief wells near the Elgin oil rig in the Norwegian North Sea to stop a natural gas leak. The company is currently drilling a relief well to cut off the gas at the level of the reservoir at about one kilometer from the problematic well. Total plans to drill two relief wells, the second one acting as a backup. Another solution is also in the works: pumping heavy mud into the well to balance the pressure and end the leak. The Elgin/Franklin project has been shut-in since Monday, March 26.
Project Details: Elgin/Franklin
Asia – SouthEast
Lundin Says Bertam a Likely Commercial Success
Apr 11, 2012 – In January 2012, the Bertam-2 appraisal well was successfully completed proving the continuity and quality of the K10 oil reservoir sandstone. Lundin stated Bertam is likely a commercial oil field and studies are now progressing to review potential development concepts.
Project Details: Bertam
Lundin to Appraise Janglau Field
Apr 11, 2012 – Lundin Petroleum reported that the Janglau-1 well, completed in November 2011 as an oil discovery, proved a new play concept in Oligocene intra-rift sands. The discovery will require further appraisal drilling to determine commerciality.
Project Details: Janglau
N. America – US GOM
BHP Billiton Bites into $708M Funding for Mad Dog Proj.
Apr 11, 2012 – BHP Billiton has approved the $708 million (BHP Billiton share) in pre-commitment funding for the Mad Dog Phase 2 project in the deepwater Gulf of Mexico. The funding will facilitate detailed engineering and the procurement of long lead time items related to the hull, topsides and subsea equipment. The proposed project, focusing on the southern portion of the field, includes the development of a second spar facility with all subsea production and injection wells. The new facility is estimated to have a design capacity of approximately 130,000 bopd that will be exported via the Mardi Gras Pipeline under existing agreements. A final investment decision is anticipated in 2013 with first production scheduled for 2018.
Project Details: Mad Dog
McMoRan Trying to Establish Commercial Production at Davy Jones
Apr 10, 2012 – McMoRan has completed technical work on the Davy Jones No. 1 well on South Marsh Island Block 230 in the GOM. Work is ongoing to establish commercial production from the well, stated the operator. To maximize production from the well and enable effective formation penetrations, McMoRan plans to use electric wireline casing guns that are larger than the tubing guns used to perforate the Wilcox “C” and “D” sands. The company expects its current operations to enable a measurable flow rate during the second quarter of 2012 followed by commercial production shortly thereafter.
Project Details: Davy Jones
Australia
Technip Scores Subsea Gig for Wheatstone Project
Apr 12, 2012 – Chevron awarded Technip a subsea contract for the Wheatstone project offshore Australia. The contract, covering the development of the Wheatstone and Iago fields, includes project management, design, fabrication and installation of subsea isolation valve, production tee protection structures, spools and jumpers; transportation and installation of manifolds, foundation structures and pipeline termination structures; and the supply and installation of 25 miles (41 kilometers) of umbilicals.
Project Details: Wheatstone
Technip Grabs EPCI Contract for Ichthys Field
Apr 11, 2012 – Inpex awarded Technip a flexible pipe supply lump sum contract for the Ichthys gas field in Australia. This contract is part of the overall subsea umbilical, riser, flowline EPCI contract. The Supply A ??? production & gas export lines’ contract includes: 1.86 miles (3 kilometers) of technologically advanced smooth bore 10-inch-diameter flexible gas export risers, 1.86 miles (3 kilometers) of 12-inch-diameter production risers. The contract is scheduled to be completed in the first semester of 2015. Gas from the Ichthys field will undergo preliminary processing offshore to remove water and extract condensate. The 552 mile (889 kilometer) Ichthys gas export pipeline will transport production from the offshore central processing facility through a subsea pipeline to the onshore liquefied natural gas (LNG) facility to be located at Darwin.
Project Details: Ichthys
Clough AMEC Receives ORM Contract for Wheatstone Facility
Apr 11, 2012 – Chevron awarded Clough AMEC a contract for the operability, reliability and maintainability component of Wheatstone’s offshore facility. The scope of work involves building the maintenance database, assuring operational readiness for the offshore facility, including writing of all operations procedures, all training and development programs, and operations engineering and support services. The work will be performed by Clough AMEC, with support from AMECs specialist Performance Improvement team. Work will commence immediately and will last for about three years.
Project Details: Wheatstone
Clough AMEC Secures Work for Eni’s Blacktip
Apr 10, 2012 – Clough Limited has received a contract for the provision of maintenance support to the 1.3 Bcm per year onshore gas treatment plant and the offshore unmanned wellhead platform for Eni’s Blacktip project. The scope of work involves the provision of trades labor to support routine and campaign maintenance. Supporting services include specialist consultancy services, multidiscipline engineering, procurement, and management of subcontractors and fabrication. The initial contract is for three years with further extension options. Blacktip has been producing since September 2009.
Project Details: Blacktip
Browse Amendments Receive Govt Approval
Apr 10, 2012 – Woodside was advised that the Commonwealth Minister for Resources and Energy and the WA Minister for Mines and Petroleum have approved amendments to the Browse Basin retention leases. The amendments include extending the condition relating to readiness for a final investment decision on the proposed Browse LNG Development in Australia from mid-2012 to the first half of 2013. This will allow time to better evaluate the outcomes of front-end engineering and design work and the results of the tender processes for the developments major contracts. The Browse LNG development consists of three fields: Torosa, Brecknock and Calliance. It is estimated they hold roughly 13.3 Tcf of dry gas and 360 million barrels of condensate in reserves.
Project Details: Browse LNG
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