HLX 2026 Q3 Earnings Call

Greetings and welcome to the Hornbeck Offshore Services 3rd quarter earnings conference call. All lines are in listen-only. Later, we will conduct a question and answer session. If you require operator assistance at any time, press star 0. Today's call is being recorded. It is now my pleasure to introduce Potter Adams, Executive Vice President and Chief Financial Officer. Please go ahead, sir. Thanks, operator, and good morning, everyone.

We appreciate you joining us for Hornbeck Offshore's conference call to review our 3rd quarter 2026 results and recent developments. We also welcome participants listening to the call over the web. Joining me on the call today is Todd Hornbeck, President and Chief Executive Officer of Hornbeck Offshore. Please note that information reported on this call speaks only as of today, November 5th, 2026, and therefore you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. During today's conference call, Todd and I will make certain projections about future financial performance, liquidity, operations, and events that are not statements of historical fact and thus constitute forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and other factors that may cause such future matters including the company's actual future performance, to be materially different from that which is projected today. You can locate additional information about factors that could cause the company's results, to materially differ from those projected in the forward-looking statements in Hornbeck's SEC filings and in yesterday's press release under the Investor section of the company's website. which is www.hornbeckoffshore.com, or through the SEC website at www.sec.gov.

The earnings call also contains references to adjusted EBITDA and adjusted free cash flow, which are non-GAAP financial measures. A reconciliation of these financial measures is provided in the press release issued by the company yesterday afternoon. And finally, please note that the company uses its websites as a mean of disclosing material and other public information and for complying with disclosure obligations under SEC's Regulation FD. Such disclosures will be included on the company's website under the heading Investors. Accordingly, investors should monitor that portion of the company's website. In addition to following the company's press releases, SEC filings, public conference calls, and websites. Now I'll turn the call over to Todd. Todd? Thanks, Potter, and good morning, everyone.

We thank you for joining us. This is an important quarter for Hornbeck as it marks our first earnings call following our— the completion of our combination with Helix on September 1st. The transaction brought together 2 organizations with complementary assets, capabilities, talent, and customer relationships. More details around the transaction can be found in the slides posted to our website. Potter will share some additional details later in his remarks. When we announced the combination in late April, we said we saw an opportunity to create a premier integrated offshore service company providing innovative marine and subsea solutions across deepwater oilfield, defense, and renewable industries. This thesis has not changed. What has changed is that we're now successfully executing it. Before we get to the results, I'd like to spend a moment discussing 3 key questions that we believe are most important to our shareholders. First, what exactly is the combined Hornbeck Offshore? Second, how does bringing these 2 businesses together create significant value? And third, what should investors expect from us as we continue to integrate the businesses and allocate capital? Let me start with the first question. What is Hornbeck Offshore Services today?

The combined Hornbeck is a diversified deepwater offshore services business operating across 3 distinct segments: marine transportation and specialty, subsea services, and well intervention. We're not simply a larger offshore vessel company. We now have a global reach, especially into additional premier energy basins around the world, and participate across a considerably broader portion of the offshore lifecycle. With an emphasis on traditional and renewable energy and diversity through defense support and emerging technologies. Through our Marine Transportation and Specialty segment, we own and operate supply vessels, flotillas, and other assets to support drilling, development, military, and other specialty activities. In our Subsea Services segment, we own and operate subsea vessels and robotics to provide inspection, repair, and maintenance, engineering, construction, and specialized project services. And through our Well Intervention segment, we help customers maintain, restore, and extend production from existing traditional offshore infrastructure and ultimately provide decommissioning services. This full lifecycle exposure, complete with innovative technologies that we deploy, is a key part of our investment thesis. Offshore projects create demand for vessels, robotics, and subsea services. Producing assets require ongoing inspection, repair, maintenance, and intervention. And as oil fields mature, customers increasingly need well intervention and ultimately decommissioning services.

In addition, our well intervention fleet should benefit from higher levels of production enhancement demand and the forecast increases in utilization and day rates for deepwater rigs. With this in mind, I also want to provide an update on our progress towards exiting the activities that are noncore to what I just outlined. Prior to closing the merger, Helix divested of its shallow water decommissioning business, and we intend to wind down the oil and gas interests, including Thunderhawk and Dworsky, that were previously acquired by Helix. We also expect to reduce our reliance on in-chartered vessels over time. We've already replaced one in-chartered vessel. Because several existing commitments are long-term, that transition will take some time, but the direction is clear. Given the focused portfolio we now operate, our job is to translate this full lifecycle platform into higher utilization, stronger margins, greater free cash flow, and improved returns on invested capital. Turning now to value creation, we see 4 primary ways that Hornbeck can deliver outsized returns. First, our diversified platform gives us greater visibility across our customers' offshore programs. That allows us to identify more opportunities, compete for a greater scope of work, and deploy a range of integrated assets and services across more projects and geographies.

Second, it creates opportunities to improve asset utilization. An MPSV is more valuable when marketed as part of a broader solution incorporating ROVs, engineering, subsea tooling, and/or intervention capabilities. Likewise, our subsea and intervention business benefit from access to owned marine assets while creating opportunities for pull-through work for our high-specification OSV fleet. We have positioned the company and its assets into specific markets where we can drive integrated services. Third, by assembling more capabilities within the same organization, we will retain a greater portion of the revenue, margin, and cash flow associated with the projects. And fourth, our scale allows us to eliminate redundant costs and create efficiencies across procurement, maintenance, operations, and the supply chain. In terms of what investors should expect from us as we continue to integrate the business and allocate capital, there are a few key points I'd like to highlight. One of the most important opportunities created by the combination is our integrated services. Complex offshore projects frequently require multiple service contractors with different operating schedules and commercial agreements. The timing and scope of each of those vendors needs to be harmonized, and, and each additional interface creates complexity and increases project risk. By bringing marine assets, ROVs, trenchers, engineering capabilities, and intervention systems together under one roof, we can simplify and optimize those interfaces and coordinate a broader scope of work around our customers' requirements.

For our customers, this means simpler contracting, more coordinated scheduling, and clearer accountability for execution. For Hornbeck, it means a greater share of our customers' spending, better asset utilization, and less economic leakage to third-party providers. We are already seeing the evidence that our customers value this model. This week, we announced service agreements with Shell covering operations in the US Gulf of America. The contemplated scope brings together assets from all 3 of our operating segments, including a riser-based well intervention vessel, an intervention riser system, ROVs, project management and engineering, as well as a high-specification MPSV with ROVs and technical services, and a Jones Act compliant OSV to support these operations. Operations under those agreements are scheduled to commence in 2027 for a 5-year duration for the well intervention vessel and OSV. Importantly, this marks the first 5-year agreement for a cube vessel in over a decade. This is even a broader illustration of the opportunity we saw in combining these 2 companies. Just like our North Sea award announced in September, these Shell agreements confirm that Hornbeck's unique offering and ability to bundle services is differentiating and positions us for sustainable growth and value creation. We also believe the combined businesses will create additional opportunities to grow our defense support business.

We currently have several vessels chartered to the U.S. government performing a variety of work scopes. Most recently, we successfully completed a proof of concept to demonstrate the ability to quickly retrofit autonomous capabilities into a commercial supply vessel that had been previously modified for a defense support work scope. It has been reported that this HAAS vessel is the largest vessel retrofitted with autonomy across the entire Department of Defense commercial fleet. Within the full spectrum of our market exposure, we currently see attractive opportunities in both subsea services and well intervention. In subsea, one area of particular interest is deep and ultra-deep water inspection, repair, and maintenance. The offshore industry has accumulated a large installed base of subsea infrastructure, and that infrastructure continues to age. At the same time, Epic or major subsea contractors have accumulated record levels of contracting backlog that will create demand as that backlog moves into execution over the next several years. Operators need to inspect, repair, and maintain these assets, extend their economic lives, and support ongoing production. This creates recurring demand for vessels with large subsea cranes, ROVs, and specialized technical capabilities, which is where we come in. A recent organic investment in 8 additional world-class ROV systems is intended to position more of our MPSV fleet to address this opportunity by combining the vessel and subsea capability as these new assets deliver throughout 2027.

We also believe well intervention gives us exposure to a growing part of the offshore lifecycle. As the global offshore infrastructure continues to mature, operators are increasingly focused on maximizing recovery from existing subsea infrastructure they already own. In many cases, intervention can restore or enhance production without requiring the capital and lead time associated with a new greenfield exploratory development. In addition, attractive commodity prices should drive production enhancement demand and forecasted increases in utilization and rates for deepwater rigs. to support offshore drilling campaigns, which should benefit our well intervention fleet. That makes well intervention an important strategic complement to our marine and subsea businesses and gives Hornbeck additional exposure to production and decommissioning customer spending as offshore fields continue to mature. Defense and renewables remain another attractive long-term opportunity. Hornbeck spent the last 25 years developing the U.S.-flagged marine platform. customer relationships, and operating capabilities required to serve the defense market. This, in combination with Helix's subsea robotics engineering and technical capabilities, allows the combined company to now serve a broader range of missions. Our stacked fleet includes 23 Jones Act vessels and 1 Mexican-flagged vessel that uniquely afford us the ability to rapidly and efficiently respond to incremental defense requirements.

Those vessels can potentially be returned to service more quickly and with less capital than a new build. We will only reactivate capacity when the commercial arrangement appropriately compensates us for the required investment and execution risk. We're also well-equipped to support offshore renewable energy projects. We see indicators that our renewable customers in the North Sea have a growing backlog of projects requiring trenching and ROV services in that region, which is exactly what we're designed to do. I'd also like to touch a little bit on organic growth strategy, which will remain focused on investments that increase the earnings capability of assets we already own or have under construction. As I mentioned, as a part of our strategy to grow our subsea services business, we will be acquiring 8 world-class ROV systems for approximately $56.4 million. Deliveries are expected to begin in the 2nd quarter of 2027 and continue throughout the year with 4 systems designated for our 400+ Ultra-deepwater new builds. We also expect the first new build MPSV to become commercially available late in the 3rd quarter of 2027 and the second in the 2nd quarter of 2028. These highly capable assets designed for demanding subsea work were contemplated from the outset as vessels capable of supporting more technical complex services including intervention and defense work.

As a combined company, our commercial opportunity for these vessels is much broader because now we can market them alongside our robotics, engineering, and subsea intervention capabilities. In closing, we believe the long-term deepwater offshore opportunity is especially attractive. But we also know that an attractive market by itself does not guarantee attractive shareholder returns. Performance and execution do. Our responsibility is to operate safely, maintain asset reliability, price risk appropriately, integrate the business thoughtfully, and allocate capital when prospective returns justify the investment. If we execute consistently against those priorities, we believe we can build a company capable of creating value not simply at the top of an offshore cycle, but throughout the cycle. I want to thank all of our offshore and shore-based employees for the continued focus during a period of substantial organizational change. Our team has been working tirelessly to ensure the successful integration of these 2 companies. And I want to recognize their efforts and dedication. On that note, one thing I want to highlight is that we prioritize share ownership in the new company for our entire shoreside support team. Not just the executives. We aim to foster a culture of ownership that is closely aligned with our investors, which we believe makes us unique among our public peers.

With that, I'll turn over the call to Potter to take you through the numbers in more detail. Potter? Thanks, Todd. Before reviewing our 3rd quarter results, there are 2 important points about this transitional quarter.

First, because legacy Hornbeck is the accounting acquirer, our 3rd quarter results include 3 months of legacy Hornbeck but only 1 month of legacy Helix. Accordingly, the quarter should not be viewed as a run rate quarter for the combined company. Second, the quarter includes $79 million of merger and integration costs and $41 million of accelerated stock-based compensation expense associated with the transaction. With this in mind, our 4th quarter results will be the first to include 3 full months of operations from all 3 segments and will provide a better baseline for sequential comparisons going forward. Please note, though, that the 4th quarter will reflect normal seasonality, planned dry dock and maintenance activity, project timing, mobilizations, and integration costs. Following the merger, we have 326 million total basic shares. Additional details are included in the earnings release and our forthcoming 10-Q. We posted some slides to accompany the earnings release to our website yesterday. In those materials, you will find more information about the merger and certain consolidated and segment financial data, which we have adjusted to reflect results of the combined companies for the 3rd quarter and certain historical periods for illustrative purposes.