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Shares ofHelix Energy Solutions (NYSE: HLX) are up 13% as of 12:45 p.m. EST today after theoil services company reported earnings. While it reported a net loss of $0.46 per share on a GAAP basis, it slightly beat expectations on a normalized basis. The big surge seems to be more about its 2017 guidance than its fourth-quarter earnings.
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Part of that fourth-quarter loss came as part of $50 million in asset impairments and goodwill writedowns, as has been so common among any company in the oil and gas business over the past couple of years. If you strip out those impairment charges, net losses per share were a slightly more respectable ($0.05), which was slightly above consensus analyst estimates compiled by S&P Global Market Intelligence. The one bright spot is that the company announced the $220 million in shares it issued back in January brought net debt down to just $50 million, which should make any further weakness in the offshore oil and gas market much easier to stomach.
Overall, the earnings were OK, but probably not anything that would get investors up for a 13% gain. It would seem that the gains have more to do with the company's 2017 guidance. By the end of the year, it will complete work on two of its well intervention vessels, Seim Helix 1 and Seim Helix 2, that will immediately go to work in Brazil. It is also projecting higher well intervention activity in the North Sea as producers start to spend money on optimization and production enhancement activities at their existing facilities. The combination should give a decent boost to earnings in the coming year.
Based on Helix's guidance, the worst of the oil downturn is over for the particular part of the business in which Helix operates. Helix's well intervention and maintenance services should start to see a pickup in demand as producers look for those quick, low-cost methods to boost production and get more out of existing assets. One thing to consider, though, is that the company did miss its 2016 guidance targets, so there is a fear that management is painting a rosier picture than what is actually going on. For investors, there are signs things are better, but it's still probably best to watch a few more quarters of results to see if some of these guidance predictions come true.
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