On Thursday, BTIG changed its stance on Helix Energy (NYSE:HLX) Solutions Group, Inc. (NYSE: HLX) stock, moving from a Buy to a Neutral rating. The firm cited a potential stagnation in pricing for well intervention services and possible impacts from oil price fluctuations on the company's shallow water abandonment (SWA) revenue as the primary reasons for the downgrade.
BTIG acknowledged the company's success in maintaining high utilization rates for its well intervention assets, which averaged approximately 97% in the third quarter. Additionally, Helix Energy's recent three-year contracts for the Siem Helix 1 & 2 vessels in Brazil are set to keep these assets in operation until the second half of 2027.
Despite the positive contract news, BTIG expressed concerns over the offshore rig market, which is currently dealing with excess capacity, commonly referred to as "white space." The firm predicts that this condition will likely cause well intervention work pricing to plateau in the near future. They noted that the pricing for the Brazil contracts was adversely affected by competition from 6G drillships.
Furthermore, BTIG pointed out that any downturns in oil prices could negatively affect Helix Energy's SWA revenues, which have already seen a decline of about 30% year-over-year through the first nine months of 2024. The analyst firm summarized their position by stating that while management has successfully secured pricing gains for the Well Intervention fleet over the past two years and the long-term SWA opportunity remains attractive, they foresee a halt in pricing momentum in the medium term.
In other recent news, Helix Energy Solutions has demonstrated remarkable financial performance. The company's Q2 2024 results showed revenues of $365 million, a gross profit of $75 million, and a net income of $32 million. The updated 2024 revenue guidance is between $1.25 billion and $1.4 billion, with an EBITDA forecast ranging from $270 million to $330 million.
Helix Energy has also secured new vessel charter and service contracts valued at approximately $786 million with Petrobras for its Siem Helix 1 and Siem Helix 2 vessels. In addition, the company has amended its credit agreement, extending the maturity date and increasing its letter of credit capacity, enhancing financial flexibility.
On the other hand, Amerino Gatti has resigned from the Board of Directors, reducing the board size from eight to seven directors. TD Cowen, maintaining its optimistic stance on Helix Energy, reiterated a Buy rating with a price target of $16.00, buoyed by positive expectations in the Robotics division.
These are recent developments that reflect the company's strong cash and liquidity positions, with $275 million in cash and $370 million in total liquidity. Helix Energy is also in advanced discussions to secure market rate contracts for well intervention assets and is considering adding more assets to meet the growing demand in the wind farm market.
InvestingPro Insights
Recent InvestingPro data provides additional context to BTIG's downgrade of Helix Energy Solutions Group (NYSE: HLX). The company's market cap stands at $1.45 billion, with a revenue of $1.39 billion for the last twelve months as of Q2 2024, representing a robust growth of 24.35% over the same period. This growth aligns with BTIG's acknowledgment of Helix's success in maintaining high utilization rates for its well intervention assets.
However, the InvestingPro data also reveals some challenges. The company's gross profit margin is relatively low at 16.16%, which supports BTIG's concerns about potential pricing pressures in the well intervention market. Additionally, an InvestingPro Tip indicates that HLX suffers from weak gross profit margins, further corroborating this point.
Another InvestingPro Tip notes that the stock has taken a big hit over the last week, with data showing a 1-week price total return of -8.81%. This recent downturn could reflect the market's reaction to the concerns raised by BTIG regarding potential stagnation in pricing and the impact of oil price fluctuations on the company's revenues.
Investors seeking a more comprehensive analysis can find 9 additional InvestingPro Tips for HLX, offering deeper insights into the company's financial health and market position.
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