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Helix Energy Solutions Group Inc (NYSE:HLX)

Q1 2014 Earnings Conference Call

April 22, 2014 11:00 AM ET

Executives

Terrence Jamerson - Director of Finance and IR

Owen Kratz - CEO

Tony Tripodo - CFO

Cliff Chamblee - EVP and COO

Alisa Johnson - General Counsel

Erik Staffeldt - Finance and Treasury Director

Analyst

Jim Rollyson - Raymond James & Associates, Inc

Jeffrey Campbell - Tuohy Brothers

Igor Levi - Morgan Stanley

Martin Malloy - Johnson Rice & Company

Joe Gibney - Capital One Southcoast, Inc

Trey Stolz - Iberia Capital Partners

Michael Marino - Stephens

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the First Quarter 2014 Earnings Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator instructions)

As a reminder, this conference is being recorded, Tuesday, April 22. I would now like to turn the conference over to Mr. Terrence Jamerson, Director of Finance and Investor Relations. Please go ahead, sir.

Terrence Jamerson

Good morning, everyone, and thanks for joining us. Participating on this call for Helix today is Owen Kratz, our CEO; Tony Tripodo, our CFO; Cliff Chamblee, Executive Vice President and Chief Operating Officer; Alisa Johnson, our General Counsel; and Erik Staffeldt, our Finance and Treasury Director.

Hopefully you all have had an opportunity to review our press release and related slide presentation released last night. If you do not have a copy of these materials both can be accessed through the Investor Relations page on our website at www.helixesg.com. The press release can be accessed under the Press Releases tab and the slide presentation can be accessed by clicking on today’s Webcast icon.

Before we begin our prepared remarks, Alisa Johnson, will make a statement regarding forward-looking information.

Alisa Johnson

During this conference call we anticipate making certain projections and forward-looking statements based on our current expectations. All statements in this conference call or in the associated presentation other than statements of historical facts are forward-looking statements and are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Our actual future results may differ materially from our projections and forward-looking statements due to a number and variety of factors including those set forth in our slide two and in our annual report on Form 10-K for the year ended December 31, 2013.

Also during this call certain non-GAAP financial disclosures may be made. In accordance with SEC rules the final slide of our presentation materials provide a reconciliation of certain non-GAAP measures to comparable GAAP financial measures. The reconciliation along with this presentation, the earnings press release, our annual report and a replay of this broadcast are available on our website. Owen?

Owen Kratz

Good morning, everyone. Let’s move to slide five which is a high level summary of Q1 results, 2014 is off to a very good start, EBITDA increased to $93 million from $82 million in Q4 and $42 million in Q1 of 2013. EPS came in at $0.51 per share benefiting by two non-recurring gains that contributed $0.11 a share. Revenues increased to 25 or $254 million in Q1 up from $227 million in the prior quarter, when you look at quarter over quarter results on the basis of the businesses we are operating today our quarterly revenues increased approximately 33% in 2014 versus 2013.

Turning to slide six, we closed on the sale of our former Ingleside Spoolbase in Q1 realizing a gain of $10.5 million. And we also collected insurance proceeds on an old oil and gas property related to Hurricane Ike, damage of some $7 million. After tax these two items contributed $0.11 of earnings in Q1. We continue to experience strong levels of utilization in Q1 for our Well Intervention fleet, at 91% despite the fact that the Well Enhancer spent the first 24 days of the year in a scheduled dry dock. The Q4000 realized a 100% utilization.

As we noted in our prior conference call the H 534 finally entered service in mid-February with 42 days of utilization. However, startup issues for its new Intervention Riser system led to 17 of these days at reduced rates. The Skandi Constructor continues to perform at a high level well operating during its West Africa campaign which was completed during Q1. Our Robotics chartered vessels fleet realized 80% utilization in Q1, which is relatively good for this business segment during the winter months. That tracked along with a fair amount of spot market work on the Gulf of Mexico, it got to its business off to a very good start. Year over year for Q1 our Robotics business increased revenues 38%.

Onto slide seven, from a balance sheet perspective our cash and liquidity levels remain very strong, cash at $417 million along with the unused portion of our credit facility kept total liquidity at a fairly consistent level of approximately $1.1 billion. Net debt-to-book cap remains at a very conservative 6% level.

I’ll now turn the call over to Cliff for an in depth discussion of our contract and service results.

Cliff Chamblee

Okay Owen, thanks, good morning everyone. First of all, I’d like to echo Owen’s comments, all of its businesses are off to a good start for 2014. On the Well Intervention side in addition of the 534 and the Skandi Constructor has helped drive revenues higher, both over last quarter and over a year ago. Over to Robotics, by keeping the vessels working during this winter season’s been instrumental in improving revenues and profits from a year ago, increased activity in the Gulf of Mexico, and trenching work that carried over the last quarter has also helped provide towards strong performance from Q4 of last year. The decrease in vessel utilization of our chartered fleet from Q4 to Q1 this year as reflected in a decrease in Robotics gross margin from last quarter to this quarter.

As many of you already know, we sustained a power outage on the Helix Producer I at the end of this quarter. The outage occurred on March 28, which had a very minimal impact on the Q1 numbers. The vessel was returned to service and production went back on line on April 13. We move on slide 10 for Well Enhancer overview. The Q4000 continues to be extremely liable, this is now our third straight quarter achieving 100% utilization.

Our rental IRS system was on hire for 42 days during the quarter, 12 of which at standby rates. The 534 has been on higher average single day that’s going into service in mid-February. As we stated earlier 17 of those days were either reduced or repair rates due to connector issues we encountered with the IRS in first place in the service.

The 534 is back working at full rates and both vessels are full booked for the remainder of 2014. And we also expect strong utilization from our rental IRS system for the remainder of the year.

Over to North Sea, the utilization was 86% over quarter compared to 92% for the fourth quarter in 2013. This was primarily due to the Well Enhancer being in dry dock for the first 24 days of the year. We also had the Seawell of hire for approximately seven days in February for routine maintenance.

Although utilization was down, revenues were bolstered by strong performance of Skandi Constructor down in Africa and the recognition of deferred mobilization revenue. On the Robotics on slide 11, we achieved 80% utilization for the chartered vessels which is relatively strong for the winter months, when activity sometimes tapers off due to weather issues.

We’re also seeing greater activity in the Gulf of Mexico for this quarter. All four of the spot vessel utilized during the quarter were deployed in the Gulf of Mexico. Trenching also remained strong during the quarter, both of Deep Cygnus and the Grand Canyon performed trenching scope utilizing T750, T1200 and the i-Trencher.

Our fourth trencher the T600 completed trenching scopes aboard the client’s vessels during the quarter. Overall, pretty strong start for Robotics for the year and we have a good those building on our vessels which are the key drivers for revenues in this business.

We’ll go onto slide 12. I’ll leave this slide because of vessel utilization for your reference. And with that I’ll turn it over to Eric for our key balance sheet metrics. Erik?

Erik Staffeldt

Thanks Cliff. Good morning. Please turn to slide 14. Slide 14 provides an illustration of our debt instrument contributed profile at March 31. That reduction for the new quarter was a result of the required quarterly payments of our term loan and the semi-annual payments of MARAD notes.

Moving on slide15, it provides an update on our year-end growth to net debt levels historically ended March 31. We continue to maintain a strong liquidity position, possibly 1.1 billion of liquidity. Our net debt level was approximately $91 million remaining fairly constant quarter-over-quarter. Cash generated from our operations funded to cost mainly $45 million of cash investments, $6 million of the motor payments and $5 million of stock repurchases during the quarter and quarter ended our net debt to both capitalization ratio to the conservative 6%. Tony?

Tony Tripodo

Okay. Moving over to slide 17, which represents our updated 2014 guidance. The combination of the following factors has led us to tweak our guidance upward a tad. First of fall we’re up to a very good start as we've documented here and quarter one came in better than we initially forecasted. Secondly, our backlog levels should produce high vessel utilization for our Well Intervention fleet throughout 2014. And third, better visibility in our Robotics fleet utilization should result in a strong year for this business unit. Thus, we believe we have more upside and downside off of our original provided $350 million EBITDA guidance and thus we are now saying EBITDA that should be equal to or greater than $350 million for the year.

Following suit, we have tweaked our EPS guidance up and nickel, now providing $1.60 to $1.70 range for 2014. Over to slide 18, our updated guidance takes in a consideration that both the Seawell and the Skandi Constructor will enter dry dock sometime in Q4. With the execution of the two vessel Petróbras contract we are now reporting our total backlog as of March 31 of approximately 2.9 billion.

Slide 18 also discusses the near term utilization levels for each of our Well Intervention vessels which I will leave for your reference. We have excellent near term backlog visibility for our fleet. Again, and as previously stated the outlook for the Robotics business is much stronger at this stage of the year versus 2013. We expect all geographic regions for robotics to improve in 2014.

The trenching market, a strong niche for us has materialized very nicely in 2014, as such we are presently working on two major trenching programs right now. Our newest trencher the T1500 is expected to be delivered to us shortly and will be immediately mobilized on our onboard spud vessel and deployed on initial three month project in the North Sea.

The Grand Canyon II is now slated to enter the fleet in early 2015, a slight root to the right, but this factor’s already baked in to our stated forecast. Year over year for ongoing operations we’re forecasting revenue growth of 29% in 2014. We are forecasting a total CapEx spend for 2014 of 400 million the same as previously guided. Of this number approximately 320 million is growth capital including progress payments for the Q5000, spending on the Q7000, all of the fleet additions, the T1500 trencher and initial spending to furnish the two vessels to be constructed for the Petróbras contract. I’ll skip slides 21 to 24, leave them for your reference and at this time I’ll turn the call back over to Owen.

Owen Kratz

Thanks, Tony. Well Q1 has certainly gotten us off to a good start in 2014. The earnings report is relatively self-explanatory and there’s not much more to be said about it. It does reflect our internal expectations of our current business model, our expectations regarding the market are materializing and we’re executing as planned, our newest Well Interventions vessel the H 534 is now in the market, working and working well, we did have some early shakedown issues with the Intervention Riser system but we expect those to be behind us. The construction of the Q5000 is going well, it’s on or under budget and we anticipate that it’ll be in service around mid-next year. The Q7000 is soon to cut first deal and all is going as planned for delivery in 2016. The two vessels for Brazil are still in the early stages of their construction schedule. The new trenchers will be delivered soon and we have six ROVs on order this year. The new Grand Canyon vessel should be joining the Robotics fleet in the beginning of next year. We believe that Helix is clearly the global leader now in non-rig. Well Intervention solutions as well as robotic jet trenching. We forecast a continuation in the increase and demand for our services and have a strong backlog extending our multiple years. While it may be a bit early to offer an upward revision to our 2014 full year guidance we’ve tweaked our original guidance to indicate an upward bias. We realize and are well aware of the concerns that have been expressed about the softening rig market and how it may impact Helix. Hopefully and as evidenced by our growing back log and our demonstrated operational efficiencies, we believe this concern as applied to Helix is fundamentally overstated. We’ll be happy to take any questions now.

Question-and-Answer Session

Operator

Thank you, (Operator Instructions) your first question comes from the line of Jim Rollyson.

Jim Rollyson - Raymond James & Associates, Inc

Owen, couple of big picture questions first, been a lot of talk you know the last few months about the IOCs and capital spending and refocusing you know towards returning cash to shareholders, seems like a lot of that discussion revolves around infrastructure cost but this as it relates to spending and off shore, deep market, your market niche, curious what your customers are telling you as far as that capital change in focus, how that may or may not impact you going forward for the next couple of years.

Owen Kratz

Okay, Jim, we don’t hear much more from the clients than you do about their capital spending aspirations but what I will tell you is one of the reasons that I really love the niche that we’re in right now is that it’s more life appealed oriented, when capital spending drops on the drill bit and the field development side, increasing production, production has to come from somewhere and that typically falls to well enhancement and improved recoverability and that’s the essence that’s behind intervention, so a life appealed service focusing on improving production at a time when the drilling is in the slow cycle is actually beneficial to us.

Jim Rollyson - Raymond James & Associates, Inc

Makes perfect sense, couple of questions around backlog, either Owen or Tony, if I’m not mistaken last quarter you guys had stated the 534 had backlog through ’16 and into ’17 and the wordings a little different now, it says through ’15 with visibility into ’17, a. I’m curious if that’s a word that’s changed or something actually changed on the backlog and then maybe a little color on where you stand in giving additional backlog to the 4000 and actually backlog for the 7000.

Tony Tripodo

Jim, a good question, I think it’s subtle semantics here. We only count as backlog it’s sort of set in stone contractually internally and to our customers we have committed these vessels with the understanding that they’re committed to certain customers, our semantics may have been a little different last time but really nothing has changed in the backlog.

Jim Rollyson - Raymond James & Associates, Inc

Okay and any hope or visibility on extending the Q4000 into ’17 and or getting backlog for the Q7000.

Tony Tripodo

I’ll take the Q4, I’ll let Owen take the Q7. The Q4 in our own mind and to certain customers is committed through 2017. We don’t count all of it as backlog again until some of these quote, intents are firmly set in stone. But in our own mind and in our own scheduling the Q4 is really pretty much spoken for it, through that time period. I’ll let Owen address the Q7000.

Owen Kratz

Jim, as you know, we don’t deal purely on speculation, although technical you could call the Q7 a spec build vessel. The -- if you notice the Q7 was built ahead of the Q6 and that’s because all of the design are pre-engineered, but the Q7 jumped the queue, because of dialog with clients. Sometimes it takes longer to translate that into written document in the signed contract, but I’ve0 just advice a little patients and I’m not worried about the queue, it’s just a matter of when not if we contracted.

Operator

Your next question comes from the line of Jeffrey Campbell.

Jeffrey Campbell - Tuohy Brothers

Good morning. Today Baker Hughes announced an alliance Aker Solutions that will include, and I quote, focus on advancing the industry's well intervention capabilities to further optimize efficiency and reduce risks in subsea developments. And in Baker's own earnings call, they also called out a deep-water Gulf of Mexico ESP solution specifically designed so that it could be serviced by a light well intervention system. Sounds like well intervention utilization is being considered in a significantly different way than might have been the case even a year ago. What is your take on these developments? And is Helix specifically part of any project discussions or planning?

Owen Kratz

I’ll take the second part of that question first, if we were, we wouldn’t be allowed to talk about it right now. But we’re certainly in discussion with a lot of parties. With regard to the first part of the question, I think we have seen in the last few years, they’re really awakening of the industry to the fact that the producers are going to need long term intervention solutions to the deepwater subsea wells and that probably the solution needs to be more efficient than what a rig rate can offer.

And I think you’re starting to see people wake into that, but I would caution that intervention is not a single market niche, single intervention is actually multiple market niches. A great deal of what drill rates are -- have been used for, to intervene into well, can be done more efficiently by specialization of the vessel. And then you have to look at which segment of the intervention market you are talking about there. You mentioned ESP that’s one of them, you’ve got well construction activities which may take one time of platform, you’ve got production enhancement which is another platform, decommissioning you had another platform.

So I think you are going to see a lot of room for multiple niches and specialization, that’s one thing that makes me pretty excited about where Helix is right now, because we have the vessels of opportunity from Canyon. We have the light intervention vessels in the North Sea. We have the monohulls deploying risers, we also have the semi-submersible. So there is -- we’re more than just intervention company. We are and intervention solution provider and we are the only one that provided across the board. So I would, I think which way the market goes and which way Helix goes, will depend on the outcome of the discussion that I alluded to.

Jeffrey Campbell - Tuohy Brothers

Okay, great. Thanks. I appreciate that color. And I have one follow-up. I was just curious to know what was the motivation to increase the ownership of the Helix Producer to 100%, and does it say anything about the potential for any additional floating production units similar to the Helix producer in the future?

Owen Kratz

I’ll take that. When the Helix produce for one was originally acquired that is the whole itself, the vessel is acquired from a Danish shipping concern and there was always a quick call on the minority interest that is we have the right to call them minority interest and if we didn’t call the Danish ship owner had the right to put it to us, we viewed that in availability will occur and decided just to clean it up and buy up the minority interest. So that was the reason, that was going to happen anyway, because it was very likely that the partnered there was going to put the vessel to us and there was add a pre determine formulae at purchase price. It is highly, unlikely that we will see to expand our plug-in production system business answer to the second question.

Operator

Your next question comes from the line of Igor Levi - Morgan Stanley.

Igor Levi - Morgan Stanley

I'd like to focus a bit on the robotics segment where it appears you have grown visibility relative to what we've seen in prior years. I was wondering if you could talk a bit about how visibility in this segment has changed over the last 12 months.

Owen Kratz

Well, I’ll take that one. Last year was a slow start to us in the first quarter and historically, in the Gulf of Mexico and in the North Sea and Europe, the first quarter, now maybe December through the first quarter is a slow start because the weather nobody wants any work when the weather is bad offshore on these monohull type vessels. So we have - we strove to improve our first quarter of this year by looking a little bit some other activities which way we find some work in the Middle East and things like that. So last year in the first quarter, we probably had three boats idle. This year first quarter, we had like boat and half and trying to idle half the time maybe, and Deep Cygnus was idle quite a bit as well.

Going forward, we’re seeing activity in the trenching side pick quite a bit. You’ll notice what I’ve said earlier all four the existing trenchers that we have now been working this first quarter. And we’re taking the delivery of the new trencher 1st of May and it goes straight to work on a spot, but they’re going to pick up I think 160 days or so as well. So, we have a couple of spot those will pick it for the North Sea and potentially the same here in the Gulf of Mexico. So we’re seeing a little bit increase in activity in vessel utilization as well as you might have noted that the ROV utilization increase as well, it’s really about this first quarter and helps us all the second and third quarter pretty much I think as planned for budge maybe potential a little bit outside in the fourth quarter.

Igor Levi - Morgan Stanley

Great. And the Grand Canyon II vessel that you're -- once you take delivery of that, will there be enough work, you think, to keep that as an incremental sixth long-term vessel?

Owen Kratz

Well, it will be long-term vessel. We’re taking it on chart for multiyear or so. It will be a long-term vessel. And our strategy at that part of business is all those vessels are charted vessels and they’re staggered in. So we can get rid of a vessel or two vessels in any given year just about and we also as I mentioned have charter -- spot charter boats in for 60 to 180 days or something like that. So we’ll bring that boat online when it comes out and as Tony mentioned I think probably mid-January or maybe little bit later. And we’ll play the spot market and if we don’t need to pick the spot -- more boats than we want which would be Grand Canyon visit.

Operator

Our next question comes from the Martin Malloy.

Martin Malloy - Johnson Rice & Company

Congratulations on the quarter. First question, how much was the deferred mobilization fee that you recognized in the first quarter?

Owen Kratz

Malloy, the impact earnings was about $0.05; however, I wouldn’t try to isolate that because during course of any quarter we’ve got a lot of give and take for instance. The 534 came on late and really didn’t contribute much during the quarter in terms of bottom line earnings. But to answer your question and isolation specifically was about $0.05, but that kind of stuff happens all the time. It was perhaps a much larger amount than we normally see for promote that carried over in terms of revenue recognition. But like I said, we have that kind of stuff that is a give and take every quarter.

Martin Malloy - Johnson Rice & Company

Okay, and then on the last quarterly conference call you mentioned you were evaluating potentially some investments in some additional IRS systems. Anything new to report there?

Owen Kratz

We have the fifth IRS system in construction right now with the components ordered for the sixth one and our aspirations are to build as many as ten of course that’s a multiyear aspiration.

Martin Malloy - Johnson Rice & Company

Okay. And the timing for the fifth and the sixth coming out?

Owen Kratz

The fifth is -- correct me, if I’m wrong here, Cliff. The fifth is targeting the -- that will go onto the Q5000, so it will be completed prior to the Q5000 going into service and then the IRS 6 will be going onto the Q7000 which comes out in 2016.

Operator

Your next question comes from the line of Joe Gibney.

Joe Gibney - Capital One Southcoast, Inc

Thanks, good morning. Just a couple quick ones for me. Tony, I was just curious, on the other income within oil and gas, it skewed a little bit higher sequentially, even backing out some of the one times you called out. I was just curious, what drew up the change in that figure sequentially? Was there some other figure in that number?

Erik Staffeldt

This is Erik. When you backed out the items that we identified the oil and gas insurance recovery, we do have couple of oil and gas fees but we’ll revenue from Wang property. And we do have a couple of other obligations related to that where we receive annual fees here in the first quarter and that would cause a one-time lift every year.

Joe Gibney - Capital One Southcoast, Inc

Got you, okay, that's helpful. And just a follow-up on Marty's IRS related question. You referenced expectations for strong utilization for the balance of the year for that asset. What is strong utilization for that asset class? Is it above 80%? I'm just trying to understand what you really see in terms of utilization there?

Erik Staffeldt

Yes, I think you’re referring to IRS #2 which is on a third-party drilling rig. All our intervention vessels, the heavy usage vessels have one of their own but we have what we called IRS II which originally built to be a spare for our fleet but it got sucked up into use by one of our clients needed one of their rig. And originally they were supposed to use that and get rid of that probably I think around March or April of this year. Indications are they’re probably going to keep that all rest of this year. So that’s at much over the budget utilization that we had for.

Operator

Your next question comes from the line of Trey Stolz.

Trey Stolz - Iberia Capital Partners

Just to go back to Marty's question on 1Q impact, may ask it a different way. If we're -- somebody always asks every quarter, what's the trend in rates? I think we know the answer, generally speaking. But if we look at 4Q to 1Q, any help you can give us on isolating that, how much of that increase in revenue was due to higher rate quarter over quarter and if there's any change in how that's trending over the next several quarters?

Owen Kratz

I’ll take that Trey. I think any rate increase Q4 to Q1 is generally negligible. We do have inherent rate increases in our North Sea fleet when contracts rollover. But I think that’s really the impact on earnings is going to be more effective by utilization than increase in rate, but when you look at it in such a short time period as Q4 to Q1.

Trey Stolz - Iberia Capital Partners

Understood. Thanks. And on the expense side, OpEx side for Well Intervention assets with the deep-water rigs building up their labor forces and wondering if there's an impending labor shortage and how you view your daily OpEx potentially trending over the course of 2014, particularly second half of the year when more of the rigs are out working.

Owen Kratz

Yes, I’ll answer that. Yes, there is a pressure on the labor for drilling rig intervention vessels across the fleet and more coming. And that’s part of the reason why we got to do hold velocity there, one is we owned some of our own vessels and the other is that we lease some for example the two going to Brazil and Skandi Constructors, so those come with marine crew already on them. And that’s where we’re seeing the most pressures on the marine side being the captain and the mates and engineers et cetera. And we have our own internal little bit of training program going on as well. So we’re going to see that just like everyone else is but it’s nothing that we can’t overt come.

Tony Tripodo

Just let me add to that commentary and say that we’ve seen cost pressure for years now and we’re playing for it. It’s really baked into our numbers so to speak.

Trey Stolz - Iberia Capital Partners

Okay. Labor, should we assume into 40% to 50% range on a daily OpEx basis for an offshore asset like that?

Owen Kratz

I’m trying to pick up top my head, I’d better not answer. But I’m afraid I’m going to be too far off, Trey. Like I’ve said, we’ve been dealing with labor increases for the last four to five years. It’s probably in more cost to 30% of our daily OpEx than annual Trey.

Tony Tripodo

And for example in the UK when we have inflation increase on the labor side, we have adjustment factors in our rates so we get it back on revenues.

Owen Kratz

That’s probably the answer. We try to increase revenue like everybody is going to a treadmill there. And we’re spread between three regions the Gulf of Mexico, Europe and Brazil. So, we’re not seeing all those vessels in one area and drive an uptick area.

Trey Stolz - Iberia Capital Partners

Are you having success with getting those clauses and contracts in the Gulf of Mexico with the Q4 or with the Q5 coming up?

Tony Tripodo

The Q5 has an inflation adjustment clause of its contract, the Petróbras vessels do as well. The Q4 doesn’t but we’ve been successful in pushing rates over the years on the Q4.

Trey Stolz - Iberia Capital Partners

All right. And one more, when the Constructer started out -- started without the riser system and was operating at breakeven, I guess, initially. With the H534 starting out, is it operating at full possibility from the get-go here, and 1Q, the contribution there for the 40-some odd days? Or is there a ramp up on the operating income side as we go through a shakedown period?

Tony Tripodo

Yes, the 534 in the first quarter tray of the 42 days that was producing revenues only 25 of those days were in full rate, the constructive stand full rates right.

Trey Stolz - Iberia Capital Partners

And use full rate going forward on the H534?

Tony Tripodo

Yes, that’s our expectation.

Operator

(Operator Instructions) Your next question comes from the line of Michael Marino.

Michael Marino - Stephens

Tony, forgive me for a nitpicky question. I'm just trying to calibrate my model here, and looking at the Well Intervention revenue guidance for this versus the last time you gave it, it actually ticked down $5 million. I'm just trying to figure out, is that just an added dry dock in there somewhere? Or was there -- because presumably, things are getting better there. I'm just trying to calibrate my model a little bit for the Q1 results and how to think about it.

Tony Tripodo

Yes, well we give the quarterly guidance, there was a delay in the 534 going to work so again without going back to the original guidance, vessel by vessel I would have to off the top of my head say it was the 534.

Michael Marino - Stephens

Okay, that's helpful. And then just another modeling question looking out a couple years, can you update us again on the CapEx runoff, $400 million this year. What does next year look like, what does 2016 look like? And now I guess -- where do you get when you're fully deployed maybe from a maintenance level standpoint?

Tony Tripodo

Owen, you want to take that one up.

Owen Kratz

I can try right now, although we don’t finalize our actual capital commitment until budgeting time, for any following year but I would assume that you, you could assume that our CapEx is going to remain at the 400 level, least through 2016. As far as the maintenance CapEx run, we tend to look at dry docks, you know dry docks are not fully capitalized, a lot of this is repair and maintenance but we tend to look at it as cash out the door and it falls onto our CapEx project for cash management. Looking at it that way I’d say our maintenance CapEx on an ongoing basis would be 50 million to 60 million.

Michael Marino - Stephens

And that’s on the fully deployed fleet with the 5000 and 7000 there?

Owen Kratz

I would think that right now, I’d say it’s a little early for us to define it any closer than that.

Operator

(Operator Instructions) At this time there are no further questions.

Terrence Jamerson

Okay, thanks for joining us today, we very much appreciate your interest and participation and look forward to having you on our second quarter 2014 call in July, thank you.

Operator

Thank you, ladies and gentlemen, that does conclude our conference call for today. We thank you for your participation, and we ask that you please disconnect your lines.

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