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Executives

A. Wade Pursell - EVP and CFO

Alisa B. Johnson - Sr. VP, General Counsel and Corporate Secretary

Owen Kratz - Executive Chairman

Bart H. Heijermans - EVP and COO

Robert P. Murphy - EVP, Oil & Gas

Analysts

Jim Rollyson - Raymond James

Roger Read - Natexis Bleichroeader

Stephen Gengaro - Jefferies & Company

Joseph D. Gibney - Capital One Southcoast, Inc

Bill Herbert - Simmons & Company

Michael Bodino - Coker & Palmer Inc.

Joe Agular - Johnson Rice

Helix Energy Solutions Group, Inc. (HLX) Q4 FY07 Earnings Call February 29, 2008 10:00 AM ET

Operator

Good morning, and thanks everyone for holding. At this time, I'd like to inform all participants that their lines will be on listen-only mode throughout today's conference call, until we're ready to take questions. Also today's conference call is being recorded. If you have any objections, you may disconnect at this time.

Now, I'd like to turn the call over to Mr. Wade Pursell. Sir, you may begin.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Thank you. Good morning everyone. Welcome to our fourth quarter 2007 earnings call. Appreciate your joining us today. With me here today is Owen Kratz, our CEO; Bart Heijermans, our COO; Robert Murphy, President of Helix Oil & Gas; and Alisa Johnson, our General Counsel. Hopefully, everyone has access to the press release and the slides, which is linked to the press release. If you don't, you can go to our website, helixesg.com, and on the IR page, click on the presentation there.

We're going to do things [ph] a little different this quarter. You can look at the outline on slide 3. I will summarize the results and then turn it over to Owen for our 2008 outlook and strategy discussion, and then we'll go to Q&A. A lot of the more detailed segment slides that we typically put in have still been included for your reference toward the back that we will not go through them on the call.

So before we get started, looking back to slide 2, Alisa has a very important announcement for you.

Alisa B. Johnson - Senior Vice President, General Counsel and Corporate Secretary

As noted in our press release and associated presentation, certain statements therein and in today's discussion are forward-looking statements. A number of factors could cause actual results to differ materially from those forward-looking statements. For a complete discussion of risk factors affecting the Company, we direct your attention to our press release and to our annual report on Form 10-K for the year ended December 31st, 2006 filed with the Securities and Exchange Commission as amended by a subsequently filed Form 10-K/A.

Also during this call, certain non-GAAP financial disclosures may be made. Our slide presentation together with the reconciliation of non-GAAP financial measures to comparable GAAP financial measures is available on our website. Thank you.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Thank you Alisa. So let's start on slide 4. During the fourth quarter we had several large unusual items come through, primarily a large gain from Cal Dive's acquisition of Horizon offset by oil and gas impairments. I'll go through those items.

For the quarter, revenues were little over $500 million or 26% more than last year's fourth quarter, as demand for our services continue to strengthen, particularly in the deepwater, and our oil and gas production was up 16% over the fourth quarter of 2006 level. Adjusted EBITDAX of $233.1 million grew 28%, compared to last year's fourth quarter, and EPS without the unusual items I referred to was $0.87, compared to $0.71 in last year's fourth quarter, excluding the unusual IPO gain in that quarter.

Summarizing the full year 2007 results, EBITDAX totaled $824 million, 22% more than the 2006 level. For Contracting Services, which contributed 43% of the operating cash flow, and the year was highlighted by escalating demand in the deepwater and are adding capacity on the shelf through Cal Dive.

For Oil and Gas, which contributed the other 57% of operating cash flow, our level of production was below our expectations, but we did have significant success in exploration which is a nice, say going to slide 5. See on slide 5, some of the key stats from the year-end reserve report, despite producing 65 Bcf equivalent, selling 29 Bcf equivalent, and revising down a net 9 Bcf equivalent, we still were able to grow year-over-year proven reserves 26% to 670 Bcf equivalent. This resulted in a PV-10 value at December 31, 2007, and a little over $4 billion and that's at $93.98 oil and $7.17 for gas.

Moving on to slide 6, as I mentioned earlier, we had several large unusual items came through during the fourth quarter. Last year you might recall, we recorded a $96.5 million gain net of tax on the sale of a minority interest in Cal Dive to the IPO. This year during the fourth quarter Cal Dive closed the acquisition of Horizon Offshore, and since they used stock in the transaction and we consolidate the results, we realized a gain for the mark-up in our investment to reconcile to their equity balance. We also recorded $61.4 million of charges net of tax, primarily related to Oil & Gas impairments and dry hole activities.

Slide 7 breaks down the components of that amount, and here on this slide these are pre-tax numbers. We recorded $59.4 million of oil and gas impairments during the quarter, relating primarily to Devil's Island, as a result of an unsuccessful development well, and also wells which experienced massive water encroachment late in the year, resulting in loss end-of-life reserves. We also wrote off $9 million of value that had been assigned to certain shelf prospects, the leases for which were hired during 2008 and we have no plans to drill them.

The $12.5 million of accelerated DD&A relates primarily to one of the properties which were impaired in the above $59.4 million and also our deepwater Tiger field, which began experiencing water much sooner than we had anticipated, resulting in an impairment of the reserves, and accordingly acceleration of DD&A. We also wrote off a well which had been previously suspended, deeming it non-commercial and that made out most of the $10.1 million.

Now, turning to slide 8 in our outlook for 2008. And before I turn it over to Owen, for 2008, we are budgeting internally EPS of $3.36 per share. This slide shows you a little bit of we get there, starting with what I will call pure operating earnings, that is before interest expense intercompany profit deferrals and the impact from oil and gas interest sales, which we do consider operating, but we do acknowledge the lumpy nature of those. We are budgeting $3.33, which compares to $3.34 for 2007.

Backing off interest expense and intercompany deferrals, which would be the number if we did no sell downs in 2008, you would get to $2.21 per share. And with the sales, we are budgeting incremental earnings of a $1.15 per share, and this will include the gain and also the impact of reduced interest expense and reduced profit deferral, offset by whatever production from 2008 was sold. So, it resulting $3.36, compares to a normalized $3.05 for 2007.

So with that, I'll turn it over to Owen.

Owen Kratz - Executive Chairman

Just staying on the slide 8 for a second like just a comment, essentially recalling for a conservative estimate on the same asset base, which is essentially a flat year-over-year. You can see that at the top line and the comparison at the bottom two lines, I will say that that's flat year-over-year in spite of what you see there the interest rate increasing, as well the intercompany profit deferral. So, its... if you switch over to the next page in the 08 outlook where you see a breakdown, one thing I think you will notice is that there is no ranges this year or complex variables. This is basically just a look at what we consider a very conservative internal budget, and we'll be focusing on leading it throughout the year.

In general though, we are looking at weakness on the shelf offset by growing strength in the deep. We are looking at production flat with shelf decline offset by deep contribution. Some upside contribution from new assets, both on the service side and production will become to make their presence felt by the year end. The transition towards the deep... I think from this you can see it's starting become apparent for both the services and the production.

As I said before, interest in expense and eliminations went up this year. That is an area that we can work on and it gives a sort of built-in upside to tap going forward, besides all of the new assets that we have the potential of bringing on online.

Just the comment on margins, there is nothing alarming in the margin drop in Q4 that was mainly an impact of taking the production impairments. The Q4000 being out for a full quarter, while it goes through its upgrade to drilling. And a large third-party content in deepwater contracting for the quarter, which although that drops margins of it, it's a very... all of these were sound decisions based on return on capital.

Moving on to the next slide on the... just to give you some background, so you can fill in on the 08 budget assumptions. I think from this, we've given you a view on some of them, and you can see that it is the conservative estimate of the margins. We are calling for a slight decrease in margins. This maybe conservative, but we do have a lot of new international work that's starting up and we just thought it would be prudent on the contracting side.

Assets coming into service, I believe these are conservative dates, and we will be working hard to beat those. The internal profit deferral, I might mention our budget is based on an assumption that we will be selling down some interest in deepwater properties. On the previous slides, you saw profit deferral of $50 million. Without those sell downs, they would have been $60 million and there is probably further upside in recapturing this value, if we consider any further sell downs.

On the oil and gas side, I mention the sell down is basically something that was always planned, and we are just playing a little catch-up here. And I will get to that when we'll talk to you about the strategy a little bit. But, the commodity prices at $7.50 and $75 oil is roughly the same as last year, and I believe they proved out to be conservative there and will going forward.

The production of 69 Bcf, again that's assuming no sell downs. The actual budgeted production is about 64.5 Bcf. So, there is not a great impact on the production from the sell downs, but it's all been netted out in the budget assumptions. Other than that, I think the only further note... well, two notes. The exploration and dry hole $40 million; $13 million of that was already taken in the... will be taken in Devil's Island in the first quarter, but the remaining $27 million, I believe, is conservative if you look at the drilling program that we have for the remainder of the year. The new field startup dates, again, hopefully these are very conservative and we can move these up.

Flipping slide now to strategy. Try to capture just on a few bullet points, the essence of what's been going on. Let me just say the long-term strategy for the Company remained the same for the last two years since we have Remington acquisition. There been an opportunity emphasizing EMP to really create some value. We have created a value, both in the portfolio from that we acquired from Remington, as well as making an aggressive investment in new service additions. So, there is a lot inherent or intrinsic value in the Company.

We now look.... we are now looking to capture some of the value that we created in the Remington portfolio, basically means taking a few chips off the table, laying off some of the risk and laying off some of the CapEx going forward. As I mentioned before, our budget does assume that we are going to be selling down some interests in our fields. That's basically in line with the strategic plan for the Company. We have had a tremendous year. We took some chances. We had some tremendous success, and we need to be happy with that, and start to play a little catch-up here on the sell down of the portion of interest that we own.

We will then use these proceeds from these sales and our cash flow to complete the CapEx projects currently committed to, both for the service side and the production developments that are underway, and this will take us through the remainder of 08 probably to accomplish. At that time, going into 09, we will execute going forward in accordance with our strategy, and we will also focus on net debt reduction. But for right now, we need to focus on the execution of the remainder of our CapEx projects and focus on the quality performance, as we bring these new assets into the service.

We will be giving a lot of serious consider to the best options going forward for unlocking value. I think everybody knows that there is a lot of value in this Company. PV-10 on reserves is $4 billion. We have another 4 Tcf and un-risk reserve potential, reserve additions of 244 Bcf going from 536 to 677. Our service assets are world-class. We arguably have most capability of any subsea contractor in the deepwater. We've got a global footprint well established in select global markets, and are positioned well to grow there.

As a contractor we are smaller and more nimble, and quite honestly, we perform better than our competitors. You will often see write-ups on our competitors about contractual disputes in losses on projects. But quiet honestly, I can't remember the last time any thing was written on us in that light. The quality of this Company is just next to none. Our people are just playing out of the box of just standard, they are just extraordinary, and our growth potential is tremendous. But, with all of this value, I think there needs to be some rationale to how we go forward. We don't need to promise to put the value of all of our production on the bottom line tomorrow.

Taking production equity is just one of the differentiators for us as a contractor. It's an adjunct to our contracting, and doesn't need to be the key driver of our growth. We had great success with deep prospects this year. We took some chances and are really happy that we did. But, we are as a company, risk reverse to the risk of E&P. Having said that, there are ways of capturing the value of our portfolio in support of our service growth without the E&P risk profile. It is simply not necessary for a contractor with the quality of Helix, and as well positioned as we are to be putting ourselves in unacceptable risk situations.

What we do, quiet honestly, is just not that complicated. It will be my goal through the year to simplify this and to come up with formats whether this becomes a lot more transparent and the easier to understand. The emphasis going forward will be absolutely focused on unlocking the values that's currently in the Company.

With that, I will open it up to the Q&A.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Operator, are you there?

Question And Answer

Operator

[Operator Instructions]. Our first question comes from Jim Rollyson of Raymond James. Go ahead.

Jim Rollyson - Raymond James

: Good morning, guys.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

: Hi, Jim.

Owen Kratz - Executive Chairman

Good morning.

Jim Rollyson - Raymond James

Owen, you mentioned just on your guidance, kind of setting the bar as a conservative base, so you can get things on track. Can you maybe just put this in reference to the last couple of years of guidance, how conservative you think you are this year versus when you put out numbers a year ago or two years ago, just relatively speaking?

Owen Kratz - Executive Chairman

Jim, I am just going to leave it. The guidance is the guidance, and I think I am going to really be pushing to have people judge this company again on our results, rather than what we might say our potential is.

Jim Rollyson - Raymond James

Understood. Obviously, one of the things you mentioned, just the timing of some of the vessel deliveries, you think that the dates are possibly conservative. They all seem in a lot cases to have slipped a little bit, can you may be talk about kind of why some of the delays, if that's impacted costs, etcetera?

Owen Kratz - Executive Chairman

We have throughout the year seen continual slippage. We have firm dates, and in our budgets, we are actually putting the dates a bit to the right to add some contingency. But, I might let Bart speak to some of the reasons and specifics about which vessels are late and why.

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

Yes. This is Bart. I mean there is a industry trend, and we are not isolated from that trend. We have seen some delays in the shipyards quite often because of delayed engineering work, output from engineering firms that is needed by the shipyards to complete the conversion of these vessels. But, we hope that these dates that we put in here that we can achieve these dates, and we see the light at the end of the tunnel on several of these projects.

Jim Rollyson - Raymond James

Understood. And then, I guess, Owen, if you look at you have got Noonan, Phoenix starting up late 08, you have got the Caesar coming in kind of later part of 08, Helix producer I, Q4000 comes back in, but it will be in... going into 09 for hopefully all of 09, and then you get your well intervention vessel. It seems like you've got a lot of inherent growth built into going from 08 to 09, any step... just ballpark with kind of step up you might have from these events?

Owen Kratz - Executive Chairman

Well Jim, I could add the return estimates from all of the AFEs on these, but quite honestly, I haven't done it. As you can imagine, I've been a little busy trying to take a look at everything for 08 from the bottom up. And I'm just not quite at the point of being able to do that for you.

Jim Rollyson - Raymond James

It seem like you've got a pretty good step up in earnings ability next year versus this year with those things happening, agreed?

Owen Kratz - Executive Chairman

I think the way I phrased it in my comments was that I think our potential for growth is just tremendous.

Jim Rollyson - Raymond James

Very good. Thanks guys.

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

Sometimes we focus only on these conversions and these new builds. But last year we added two chartered vessels to our fleet and long-term charter vessels, and also this year and starting in April, add another DP2 charter to our vessels. So, we are continuously adding vessels to our fleet. So, that's a good sign.

Owen Kratz - Executive Chairman

I might give you a little bit more flavor, Jim also. Although, we are seeing weakness in the shelf market, the only weakness that we are starting to see in the deepwater is some of the third-party vessels that are owned by ship owners. The rates are starting to become a little more rational. That means good thing for us, because it means that's sort of behind the decision that we have made of adding fleet capacity to Canyon on the ROB side. But the continued strength in the deepwater is really encouraging. I think if you go back and remember when we brought the Q4000 online, we were ahead of the market, and the market didn't.... we were anticipating the market there for 2000, and it didn't show up until 2002. This time, it looks like our timing is a little better. The market is remaining strong for the introduction of these new assets.

Jim Rollyson - Raymond James

Very good. Thanks guys.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Thanks.

Operator

Thank you. Our next question comes from Roger Read of Natexis Bleichroeader. Go ahead.

Roger Read - Natexis Bleichroeader

Hi. Good morning, gentleman.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Hi, Roger.

Roger Read - Natexis Bleichroeader

Hi, Owen.

Owen Kratz - Executive Chairman

Good morning.

Roger Read - Natexis Bleichroeader

I guess, I just want to understand a little bit here within the forecast, you talked about, I think it was $50 million or $60 million of backed out profitability on the offshore construction piece. One number was if no sales, the other number was assuming some sales in the deepwater, is that correct?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Yes, that's correct.

Roger Read - Natexis Bleichroeader

Okay. And then, in terms of the oil and gas sales expected during the year, I mean, is this pretty well identified sell down on your part now, or just a general sort of budget number you anticipate getting to? And then the other part of that question is the timing of these oil and gas sales, clearly if you do it the first quarter, then the profit deferrals would much less. But, if they had that later in the year, could the profit deferrals be at the high side?

Owen Kratz - Executive Chairman

I am going to sidestep this a little bit with you. Obviously, we've through an awful lot, so it would be a little misleading to say that we don't have specific ideas in mind. But, we do have a fairly large deepwater cost portfolio now. If you notice, our reserves now, we are roughly 50-50 shelf and deep. So, it gives us some latitude on which options to explore, and we are exploring numerous options. On the timing, we have taken our best shot on estimating what the timing is going to be. Of course that could move around a little bit, so we're not going to really when. But, that's why our guidance is on the annual basis, and given all... given the variables, I think we can manage to that.

Roger Read - Natexis Bleichroeader

Okay. And then on the production volumes, the 69 Bcf equivalent number, it's a little bit less than if I took the fourth quarter and annualized it, fourth quarter 07 number. Is that just a function of you are not going to be doing as much work in your shallow water area, so the depletion rates are simply eating into that, or... I mean because you explain pretty well kind of if with sell downs a number is closer to 65, I was just trying to understand what the moving parts are there?

Owen Kratz - Executive Chairman

Well, let me let the expert to address that. Robert.

Robert P. Murphy - Executive Vice President, Oil & Gas

Well, it's a conservative number, and we do fight the depletion rate on the shelf. And frankly, at your end, we had... as you can see in the impairments, we did had some wells that pretty maturely had water encroachment, and one of them was a pretty high rate well on deepwater. So, we are just look at it with the depletion, and with really from the timing standpoint. I think what we saw in last year when you look at our projections versus our actuals, we had an aggressive timing on getting some developments on. We still have several. In fact, we got four shelf developments that didn't get on that were anticipated to be on last year, and we just don't want to count on those coming on time. So, bottom line is, at Q4 we did have a couple of high rate wells at early water encroachment.

Roger Read - Natexis Bleichroeader

Okay. So that's not the right run rate to take going forward?

Robert P. Murphy - Executive Vice President, Oil & Gas

What we've put out is for that 64 versus 69 of the sales in there. That's what I would use what the fourth quarter having anticipated increased deepwater production can trigger.

Roger Read - Natexis Bleichroeader

Okay, thanks. That's helpful. And then, I guess my final question. The Q4000, you're converting it to a drilling mode. Owen, you mentioned sort of maybe I guess if I interpret it correctly, a lower risk profile to your overall E&P. Is the Q4000 more likely to work this year in a well intervention mode or more likely to do as was kind of indicated before and maybe a half drilling half well intervention, both during 2008?

Owen Kratz - Executive Chairman

I'll let Bart to tell you, and we've had some pretty exciting developments on the Q4000 contracting front.

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

Yes. I think for this year, I mean we've got some completion work we are going to do on a Little Burn well which is tied back to Phoenix, that means it's part of the Phoenix development, and tied back to the Helix Producer I. There we're going to plan to do some top-hole drilling. I mean we are going to get into this drilling slowly. I mean we'll have to build up in track record, so we have to get everything worked out in the vessel. So, the top-hole drilling and the completion of Little Burn we have got seven [ph], and the contract there we're signing for some shallow water... I mean relatively shallow targets and deepwater that we plan to drill. And then we are probably going to spend 100 to 150 days this year in the deepwater well intervention.

So, it's going to be... on a continuous basis, it's going to be a mix between deepwater well intervention where we think we can get some pretty good rates for the vessel because of competing with fifth and sixth generation drilling rigs, and then we are going to be active in the drilling modes in the, let's say the 2,000 to 4,000 feet range where we are competing with third generation drilling rigs.

Owen Kratz - Executive Chairman

Let me follow up just a little bit. Right now the MMS has given us partial clearance on the use of the Q4000, but we still don't have full regulatory permission to drill with it. But, when I mentioned, there's options of drilling without the full E&P risk, it's not just the fact that the Q4000 can drill cheaper than our drill rig. Strategically, I don't think you will see us doing any more 100% wells where... it makes more sense for us a contractor to take on partners and lay off some of that risk. And then by doing so, we also lay off some of the CapEx, and in the process it reduces the profit elimination for the use of the Q4000 for instance. And really, if you look at the economics of the Q4000, it really make sense where we are using it from a minority position with majority partners, and that's where we maximize the profitability on the vessel.

Roger Read - Natexis Bleichroeader

Okay. Thank you.

Unidentified Company Representative

Thank you.

Operator

Thank you. The next question comes from Stephen Gengaro, Jefferies & Company. Go ahead.

Stephen Gengaro - Jefferies & Company

Thank you. Good morning gentlemen.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Good morning Stephen.

Stephen Gengaro - Jefferies & Company

Two main things, the first just coming back to the guidance on the deep.... on the contracting services side. To me the margin looked conservative, and I guess I have two questions. One is sort of what's driving that? And two is a general part of that question, are you using kind of the mid point of DVR's guidance, or low end, or can you kind of frame it for us what you're using out of the DVR side?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

: Yes. Stephen, this is Wade. We are using just below their mid-point in our budget, and I'll let Bart speak to the margins, if you want to.

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

Yes. I mean I think I mean it's clearly that... what we are stating is that we are seeing some softening on the shelf, so that has there is some margin compression there, that I mean just also a little bit conservative forecasting, which results in margin compression. And then also we have more chartered vessels more third-party content, which results in margin compression. But, as that... I am not that worried about margin compression where we used chartered vessels or we used... we have more third-party content because on the model shifting, because results in incremental profit on the bottom line. And so, it's not like margins go down and profit goes down, it's may be margins compress a little bit, but the profit goes up, because we get higher revenue from some of those international projects. So, it's not something that I am concerned about at all, because it's not going to go at the expense of decreased profit, to the contrary.

Stephen Gengaro - Jefferies & Company

Okay. And then the other question I guess is directed for Owen. Owen, when you take another kind of look and I know you've always been paying close attention, but when you at look sort of the struggle I guess on the production side since the Remington acquisition, I mean how do you categorize kind of what's been going on? I think more importantly, what should give us sort of increasing confidence that things are going to get materially better over the next year?

Owen Kratz - Executive Chairman

Well, if you look at back that what went on I think it was a combination of events that made the recovery from the hurricanes lot more difficult than what we anticipated access to third parties, the cost of third parties, just a number of things. I think the difference going forward is it would have been one thing to... it's say what you do and then do what you say. If we had said that we're going to have the difficulties and then out perform than there would have been one thing. And going forward, I think what we are doing is looking at a realistic conservative case with proper contingencies and production levels that we feel that we can meet and exceed. There is more specifics, Robert, feel free to

Robert P. Murphy - Executive Vice President, Oil & Gas

I think from the production side, obviously it's been a disappointment. However, for a value and the purpose of the acquisition, I think we've shown that the deepwater portfolio does have considerable value. And just to reiterate, we've only drilled one out of 20 plus deepwater prospects that came with that market. So, I think in combination with the Q and slowly becoming a drilling unit. The use of that to drill the majority of those prospects with our ability to not only drill on generate them and produce them, as the case with our HP1 that the value is not going to be created overnight. It's going to take time, and maybe we were just out of the gates a little too quick after the merger.

Owen Kratz - Executive Chairman

No, I didn't mean to imply that we had any problems with the deepwater production. I was speaking primarily to the shelf which quite honestly right now is taking on less emphasis for us as we see the deep... we're transitioning from shelf to deep, and the deep is now half of our reserves and very successful. So, it becomes less of a meaningful event going forward as well.

Stephen Gengaro - Jefferies & Company

Okay. That's helpful. And then, just as a final question, maybe for Wade. When we look at sort of the strategy of maybe mitigating risk and selling down some interest, is there an optimal debt-to-cap ratio you are looking to get to overtime?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Yes. I would say, certainly below 40%, and our target is to get it down to 30%.

Stephen Gengaro - Jefferies & Company

Okay.

Owen Kratz - Executive Chairman

I think historically, we are comfortable in the 30%, 35% range. Our philosophy on the use of debt is we are not opposed to using it and spiking it up, but the visibility of the capacity and the intent to pay it back down as quickly as possible is something that we need to be disciplined about.

Stephen Gengaro - Jefferies & Company

Okay. Thank you.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from Joe Gibney of Capital One. Go ahead.

Joseph D. Gibney - Capital One Southcoast, Inc

Good morning everybody.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Good morning.

Owen Kratz - Executive Chairman

Good morning.

Joseph D. Gibney - Capital One Southcoast, Inc

Owen, I just want to touch base a little bit. We haven't talked to you much about the production hubs. Obviously, you have talked about monetizing and unlocking some of this value, and you need to bring it all down to the bottom line certainly in 2008. But I just want to get a little bit color here about your strategic thinking about how the hubs did into, where Helix is going to be over the next several years?

Owen Kratz - Executive Chairman

I think our entry into the facilities market was prompted by our need to establish creditability and expertise in production facilities in support of our marginal field approach. The concept of getting into hubs arose back when the Gulf of Mexico didn't, there was not yet the infrastructure in the deepwater to make it commercial for a lot of the smaller discoveries, and there were an awful lot of them at the time. With enterprise, we came... we entered into the Marco Polo hub and that allowed the basin to really opened up and a lot of smaller reservoirs become commercial.

Followed that on with the independence hub, I think when we got into that we always knew that that was probably a limited duration market for us, as financial players come in and as infrastructure is established, financial players with lower cost of capital than ours, and it becomes a financing game to see who can get these contracts. We knew that that wasn't a long-term solution, but it did allow us to build the creditability and expertise to really look at where we take that business. Where that is, is again an application to marginal fields, that's where we believe our niche is.

The Helix Producer I is currently coming out of the yard that will be deploying on to the Phoenix field, but it's the first of the vessels in that line. It's a much smaller floating production unit. In fact, this is the first one in the Gulf of Mexico that's a DP with a disconnectable turret [ph] which has some very attractive qualities with regard to the hurricane avoidance. So that the smaller units that then can be used to produce small field sequentially is probably the path we are taking in the future.

With regard to the existing hubs, we did look at monetization of them. Quite honestly, on an outright sale, the discount applied to the cash flow of interested MLP parties was not sufficient to make it that attractive on an outright sale. There was some consideration last year given to forming our own MLP with big... I don't know, I just felt like given the complexities of our business and as much that we have on our plate right now to try and do an MLP with its own standalone infrastructure just was probable and not the best path for us to consider.

In general, I think we have a lot more value to be unlocked reasonably out of the production interest, and it's also in line historically with our strategy. The facilities are good return on capital projects, very visible cash flow; it's almost in an annuity. And for the reasons that they get find multiples elsewhere, they have that same value for us internally for ongoing cash flow. So right now, there is no intent to look at monetizing them in the near future.

Joseph D. Gibney - Capital One Southcoast, Inc

Alright. That's helpful. Thanks. I just wanted a follow up on an earlier question relative to shipyard delays, just if you can give us a little bit of color here. Are we just dealing with typical shipyard capacity constraints relative to equipment and personnel that's impacting the entire industry? Or is there anything specific that's kind of delayed some of the Q and some of the other vessels coming out and the Caesar coming back?

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

No. It's Bart. It's really what the whole industry is experiencing. I mean I think it interesting note is that... it's not all assuming shipyard constraints, but if you just look at the whole shipyard capacity, especially in South East Asia, I mean that's doubled in the last five years, and what's on the critical path nowadays is the lot of the and the engineering and design that has to be done, because that design and engineering not being done in South East Asia. It's being done in Western Europe. So, you have doubling of shipyard capacity and doubling of demands, and then still the engineering is still the same number of engineers really and... so that has been one of the bottlenecks.

But, if you look like that Helix Producer I, I mean we own the homestretch there, and with the Caesar we have made very good progress in the last six months. I mean there is really no lead items, no long lead items that we're waiting for. We have ordered all the material that we need to order, all the pipeline equipment that has to go on the deck of the Caesar, the fabrication of the stinger is going very well. So, we are on the homestretch of these projects. But there the shipyards are busy and sometimes it's difficult to keep the owner of the shipyard focused on your project when he gets in a couple of all of projects that are bid at higher margins than some of these contracts that we have signed with the shipyard owners two years ago. So, just a process the whole industry goes through. But we are on the homestretch.

Joseph D. Gibney - Capital One Southcoast, Inc

Alright. That's helpful. One last one, if I may, just I noticed your comment there on the express has arrived in November, commence to work there with reliance there, any update on that project and how that's progressing?

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

Reliance arrived there in late November and has been working on the project. We are still contracted on that project, and we have performed very well. We also expect the Eclipse, the DSP to arrive in the next week, so that vessels can be available for the diving work that's needed to find the pipelines to their shallow water platform. We see that as a big growth area. As you saw last year, we entered into an RRM [ph] contract with the customer and that Southeast Asia region. I mean it's in a world-class gas... oil and gas base, deepwater and oil and gas basin that we hope we can play an active role in the next couple of years.

Joseph D. Gibney - Capital One Southcoast, Inc

Alright. That's helpful. I appreciate it. I will turn it back. Thanks.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from Bill Herbert of Simmons & Company.

Bill Herbert - Simmons & Company

Thanks. Good morning.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Hi Bill.

Owen Kratz - Executive Chairman

Good morning.

Bill Herbert - Simmons & Company

Owen, I guess I want to take a more conceptual approach here and get back to strategy. You know on one hand, what I am taking away here is that we want to de-risk the portfolio, we want to de-lever. We're contemplating some asset sales. But ultimately at the end of the day, given all the different component parts of your portfolio as it stands today, and I think one conclusion that we can draw is that Cal Dive of old subsequently became Helix. There was true symbiosis with regard to the marriage of offshore construction ENT in subsequent years however, the complexity of the asset portfolio morphed beyond the limits of your business model. And so now, I think it's welcome news that you're trying to get back to what worked. So ultimately at the end of the day, how does this company look? How do you want it to look down the road? We're actually realizing the synergies that you once did realize and that you no longer are.

Owen Kratz - Executive Chairman

It's a good question Bill, and I don't know that its one that's got a definitive answer at this moment in time. I think the company has sort of morphed recently and how it reacts to implementing that strategy right now I think remains to be seen. I think for right now the first steps will be to sell down production, not deemphasizing prospect generation. I don't want to put the wrong impression in anyone minds. We bought Remington in order to acquire the prospect generating group with the backlog of prospects. The value for us in production side now as it relates to deepwater is in generating prospects that we could then promote out to the marketplace bringing in partners that adds both capital, access and backlog for our service assets and gives us a built-in market to apply new assets too. That value is still there.

As we move forward in selling this down, a lot will depend on how the... I think there is a big disconnect, I think that's pretty obvious between the intrinsic value in the company and the market value. Whether or not we actually see the market value come back and recognize the intrinsic value, we'll then dictate the next as we go from there. The only thing that I'll say right now or willing to say is that I'm taking no option off the table, and looking at ways of unlocking the value that's in the company.

Bill Herbert - Simmons & Company

Well, that is welcome news. So, it sounds like given the sort of growing chasm, if you will, between public value and intrinsic value that you guys have a lot more intellectual flexibility here with respect of unlocking the value which I think is welcome news. With regard to some of the details here, Wade, on your hedges, we have a pretty broad range here with regard to the collars. It looks like you have got about 27 Bs of I guess 08 production hedge, which will be about close to 40%... 35% to 40% of expected production for 08. On a blended basis, if you will, what is the blended hedged gas and oil price for that production, as it stands today?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

The hedged volumes?

Bill Herbert - Simmons & Company

Yes sir.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

I would say, it's right at 8... around 830.

Bill Herbert - Simmons & Company

830. Okay, fine. And

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Because on the callers, we would a make 830 between 732 and 1087.

Bill Herbert - Simmons & Company

Okay. So this is 830 on the gas. Okay. And on the oil, it's what?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

On an oil, it's probably around $72.

Bill Herbert - Simmons & Company

Alright. So with a strip that it's hovering at about $100 for 08 right now on oil and $960 for gas, it sounds to me that the price index that you chose with respect to providing guidance are somewhat arbitrary. Is that fair?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

That's fair. We wanted to select some conservative prices that we hope to beat.

Bill Herbert - Simmons & Company

Okay, fine. And then lastly, with regard to your 59% stake in Cal Dive, I think the timing of the announcement of this registration late last year was unfortunate and the stock is subsequently imploded. What are the plans there? I mean is there any big hurry to sell that off, or we are going to wait until you get a better expression of value, if you will, for your holdings?

Owen Kratz - Executive Chairman

I am glad you ask that Bill. The reason we spun Cal Div bond in my mind was to create a amenity in the shelf that was not a strategic core business for us. But it was one that we did recognize a lot of growth potential through M&A and by spending it off creating its own currency in light of the fact that our multiples have been compressed. It would have the multiples to pursue that M&A path. Unfortunately, it just hasn't worked out that way. But, I have to say I am still a believer in that path. Obviously, we registered the shelf. I think it something that is prudent to have in place, but I will tell you that we have no intentions of being a seller at this time, instead we plan to be a rationale investor and start to explore ways of assisting Cal Dive and working together closer going forward.

Bill Herbert - Simmons & Company

Alright, great guys. Thank you very much.

Unidentified Company Representative

Thank you.

Operator

Thank you. Our next question comes from Greg Goules of Bancord Advirors [ph]. Go ahead.

Unidentified Analyst

Hi guys. I just had a couple of questions. First one, I think is for Bart. Bart on the Helix Producer I, I think that's in Croatia its Victor Lenac in the shipyard there. And as I understand it, and correct me, if these assumptions aren't right that this is a conversion of a former rail ferry into an FPSO. And I am just curious I don't know how many of those you have been done, and with the issues that have happened with Victor Lenac in the past, what's the likelihood of may be this doesn't really even... we don't even see this come out in 08, because I understand that's a pretty Herculean effort for this conversion? And how much is predicated in your guidance I guess that's more of an Owen question in terms of Helix Producer I?

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

Okay. I am glad to answer that question. I mean if you go to page 20 in the presentation, like all those picture of Helix Producer I and was taken six weeks ago or seven weeks. It doesn't look like the train ferry anymore and that was the whole plan of this conversion. And we have a partner and the Danish company Kommandor RØMØ partner in this vessel that has been through this couple of times. And it's a pretty unique vessel, because as you can see, it's under 600 meters [ph] and flat, looks like an offshore construction vessels around the 62 meter long. It's not going to serve as an floating production, storage of loading unit and FPSO that you referred to, because we are not going to store any oil on the vessel, and we are not going to offload oil onto shuttle tankers. We are going to discharge it into the expert pipelines. So, I mean as you can see in the picture that we've made a lot of progress. The vessel, all the probes have been installed, all the engines, really what's left is I mean is some piping insulation on the vessel, and then finishing, pulling the cables, and terminating the cables, connecting it with the equipment. And as I mentioned earlier, I mean feel lot more confident that we are on the homestretch here then this vessel is going to move, it's going to sale to the Gulf Coast where they are going to install the production modules on to the vessel. And these production modules have capacity of 45,000 barrels a day. The fabrication of these production modules at Kiewit yard in Ingleside is progressing very well. It's ahead of schedule, so these modules are waiting.

Total weight of these modules is 4,000 tons. That are pretty big modules. They are waiting for these vessels to arrive, and then this is going to... the vessel is going set to the Phoenix location. So, we feel pretty confident in the concept. The hard part of the conversion is all behind us. Victor Lenac yard has performed pretty well, and they had difficulties themselves, but they have been a good contractor on this project. And what Owen mentioned earlier, what we liked about this concept is a couple of things. First is that the damage that these hurricanes have caused in deepwater really are, if you are an owner of production facility of vessel in deepwater really are self assured. So, it makes more sense to mitigate that risk by not being there when the event happens, so we can disconnect and we can sail away if the hurricane is in the Gulf of Mexico, and also we can relocate this to all other fields very easily. So, we like the concept, and as you can see the conversion is almost completed. And we are confident that this vessel is going to leave Croatia in the second quarter, and it's going to be in the Phoenix field ready for production in the fourth quarter of this year.

Unidentified Analyst

Are you having... Thank you, Bart. Are you having any issues at all in terms of ordering enough engines to power... the install power on deck for either the Caesar or the Helix Producer? I know that there has been sort of a shortage out there for getting installed power.

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

All these long lead items have been ordered a long time ago and were installed a long time ago. First on for the Caesar, I mean the Caesar was in that five year old cave-related ship [ph], and we are not installing any new engines. We are not installing any new thrusters. We are not touching that part of the vessel. The Caesar arrived her own power sail to... I mean arrived on her own power in China and the conversion has to do with changing the cable laid vessel into a pipe laid vessel. And again all these vessels, I mean all the long lead items have been installed are in the process. Pretty soon, we are going to commissioning these vessels again. And so, yes, we are on that.

Owen Kratz - Executive Chairman

Let me just follow-on, most of these assets are due to coming to market here within the next 8 to 10 months. So, these are mature projects that are well on the way. Just to answer the other part of your question. The way we approached it in the budget as we took all the expected delivery dates and we had shifted them to the right, that's not to say that they couldn't shift further to the right. The Helix Producer I in specific, we have got in the presentation here at December. That means that our budget only has one month of Phoenix production into it. And the delay in the vessel would not that severely impact the budget other than the one month of production.

But to counter that, there is probably equal or better opportunities to be early for instance on Noonan production. So even if there is a delay, I think we have got enough contingency built into the budget. The same goes for the other assets, the floating assets on the service side, the Q4000 Caesar. I think by moving them all to the right just a little bit, it gives us the opportunity to have as much upside as down.

Unidentified Analyst

I got you. Good. And the last question Owen or may be it's for Wade. Just a better understanding forgive the simplicity question, but just understanding the hedging and the collaring, the gentlemen who asked a couple of questions back, assuming we see a price deck, I'll just go at about of $90 for WTI, with the collaring, will you enjoy roughly, called the non-hedged portion for spot market crude, sort of upside for Helix on the oil side. I understood the answer for net gas. But just could you help me better understand may be oil portion? Thanks.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Yes. We would on both gas and oil.

Unidentified Analyst

Okay. Good, alright. Thank you, guys.

Operator

Thank you. Our next question comes from Michael Bodino of Coker & Palmer. Go ahead.

Michael Bodino - Coker & Palmer Inc.

Good morning guys.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Hi, Michael.

Unidentified Company Representative

Hi.

Michael Bodino - Coker & Palmer Inc.

Hey Robert, I got to congratulate you. That was a great year. Good F&D cost.

Robert P. Murphy - Executive Vice President, Oil & Gas

Thank you.

Michael Bodino - Coker & Palmer Inc.

I've got couple easy questions. I want to follow up on relative to the way we are looking at production for this year. Would it be conservative on our part to assume some general decline in production for the first three quarters and then a ramp-up with Danny, Noonan come online for the fourth quarter?

Robert P. Murphy - Executive Vice President, Oil & Gas

I think the earlier gentlemen had a similar question Michael just from Q4 to Q1, Q3 we did have that monitoring out issue. So I think we had, because we are not giving individual quarter guidance at this point with the notes on the Phoenix coming on December, and then Noonan in September. I think it's inherent that we will see the upward moving production and like Q3 and then Q4. So

Michael Bodino - Coker & Palmer Inc.

Okay. Why... I ask question on lifting cost. Your lifting cost was fairly low last year. Why is the guidance for lifting costs so high now?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

It would be on page 22... slide 22. The operating expenses that we deal with in the company with the combined company have increased. We have some older fields that after the hurricanes have required more maintenance, and not that they were not maintained prior, but there are certain fields that are legacy fields that require that it is still a very economic. That just require more O&M, they are more expensive to operate.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Yes. The number are quoting includes R&M.

Robert P. Murphy - Executive Vice President, Oil & Gas

Right, it includes the maintenance of the platform also and wells.

Michael Bodino - Coker & Palmer Inc.

And so to ask question little bit differently when Danny, Noonan fields come on line we should expect or may be expect LOEs to start declining again?

Robert P. Murphy - Executive Vice President, Oil & Gas

Yes, yes exactly.

Michael Bodino - Coker & Palmer Inc.

Okay. So to come to a 220 or to the numbers $2.02 LOE average, it may be little bit higher pre-Danny, Noonan little bit higher?

Unidentified Company Representative

You are right.

Michael Bodino - Coker & Palmer Inc.

Okay. Relative to the deepwater business, just had a curiosity, is there a dollar or percentage ownership that is optimal to own relative to the prospects, or is it... and/or is it a sell down to generate cash or mainly to the mitigate risk?

Owen Kratz - Executive Chairman

Yes, to all. There is not a formula I think strategically for our model you can make the case that it makes sense for our contracting business to have control of the cost and control of the contracting from a small and equity position as possible that reduce, minimizes the profit elimination and lays of as much of the CapEx as possible. But having said that there is incremental value in these fields, from with production it becomes cumulative over time, and it can very quickly overshadow and outpace the services side. I think going forward we'll be selling down continually. I don't know that there is an optimal level.

The model also has the benefit from the production side of having the visibility of cash flow in the event of down cycles. So, you don't want to get the production down to low. Quite honestly, I think in the 50 Bcf to 100 Bcf range is a good range to manage towards and this not a dollar amount. It's more how much cash makes sense to have, how much capital are you incurring, and it's sort of moving target. But, I think you'll see us as we build our... as we prospect more and drill more in the deepwater, you'll see us settle down and probably manage the production to roughly its current level or slightly higher.

Michael Bodino - Coker & Palmer Inc.

That helps a lot. Relative to the... I have few more quick questions, if you indulge me here. Relative to the $1.15 and earnings from sales what goes into that number? How do you calculate that?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Well, we looked at the potential sales and took into account the basis obviously in the properties that we also took into account how much reduced interest expense would come with cash proceeds and how much additional profit deferral would come. In fact, unfortunately I can't get you any more specific in that.

Michael Bodino - Coker & Palmer Inc.

Okay. I am not just assuming you have a deal on hand or anything like that?

Owen Kratz - Executive Chairman

Nothing that we could talk about right now.

Michael Bodino - Coker & Palmer Inc.

Okay. And my last question, one of the things that we haven't talked about today is the deepwater portfolio. Is there any... I know you got a lot of development dollars being spent this year both in Phoenix and Danny Noonan, is there any other significant deepwater prospects that you have on the books to be drilled this year?

Owen Kratz - Executive Chairman

I think we are letting the balance sheet dictate the momentum that we put back into the drilling program. Right now, we are sort of... we still got the tail-end of these capital projects and we are going to be funding them through 08, and then we are going to be going to be looking for a little bit f debt reduction. But, I think starting 09, 08's drilling program is sort of is lean. We have no deepwater prospects due to be drilled in 08, but you will see a start to see those in starting in 09.

Michael Bodino - Coker & Palmer Inc.

Okay. Alright guys. Thanks very much.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

: Thank Michael.

Operator

Thank you. The next question comes from Joe Agular of Johnson Rice. Go ahead.

Joe Agular - Johnson Rice

Thank you. I just want to clarify on some of your shipyard projects, if there has been any increasing cost overall or not?

Owen Kratz - Executive Chairman

From the original inception?

Joe Agular - Johnson Rice

I guess with the news that you all have released to day or yesterday?

Owen Kratz - Executive Chairman

Yes. From the point when the AFEs were submitted for these projects, yes, there has been some tremendous cost increase. I'd say tremendous cost increases. It's in line with what the industry is experiencing, but given the high increasing cost of steel, the currency exchange, and just the demand in the market, yes, there prices or the costs are much higher.

Joe Agular - Johnson Rice

Is there something that's kind of you are paying for, is the shipyard on the hook for this?

Owen Kratz - Executive Chairman

No. Well, it's back and forth. It depends on the contract on each individual vessel. But, I should put a copy out on that. The original AFEs for when we initiated that these projects were very, very low cost and I think with the cost overruns that we've got if you look at the cost basis and the assets that they come to market, we are still going to have a competitive advantage on cost.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Yes.

Joe Agular - Johnson Rice

Okay.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

And you might have noticed the guidance we gave for CapEx was for 08 is $800 million, and about 50% of that being the services and 50% being oil and gas. And those amounts that we are now expecting to occur are included in that.

Joe Agular - Johnson Rice

Okay.

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

And some of these... what Owen mentioned some of the cost increase is cost I mean the weakening of dollar and of course I mean several of these assets are global assets, I mean like the well enhancer will predominately work in the North Sea in the Caesar, probably will work eight months a year, I mean outside the Gulf Mexico. And so we also extract that these assets are going to generate more dollar revenue on the go forward basis.

Joe Agular - Johnson Rice

So, I guess what I think I hear you saying is that even with maybe a little bit higher cost in the asset, you still think the economics are very attractive once they come to market?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Absolutely.

Joe Agular - Johnson Rice

Right. Okay. In fact that also there was some conversation earlier regarding the variation in charter vessels in maybe 08 versus 07, is there anyway you could... and I assume you are just talking to short-term charters. Is there anyway you could put some numbers around that in terms of either number of vessels or vessel days or ?

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

Now, if you look, let me see one of the slides, I mean slide 14 for example, in our business units, the robotics business units or business unit called canning offshore, that's the entity that has the most charted vessels. And as you can see we list the five long-term charters of which there are three that we entered into last year and there are three or five year charters at pretty favorable dayrates. And two of these vessels for examples in the Canyon and Olympic Triton joint fleet or Triton in the late 2007 Olympic Canyon in the mid 2007, the Ireland Pioneer will join the fleet in April of this year, and so we are adding capacity. And several of these vessels have long-term contracts for example, the IRM contract that we announced. $160 million IRM inspection repair maintenance contract that we announced a couple of months ago. This is going to take one of these vessels in the Olympic Canyon off the market for about the two years, and then the other vessels have some nice contract in North Sea and in the Gulf Mexico. And so we expect that that's going to be at the bottom line in 2008.

Owen Kratz - Executive Chairman

I mean they are not going to effect us [ph] as that we are also planning to add robotic units to service the vessels. So that's a smaller but a meaningful component of the CapEx this year.

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

And this is an area too where you see some margin compression because of the higher charge costs. But from the return on capital perspective, these are the... these really to increase the return on capital, which is one of the most important metrics that we use on the profit side.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Yes. Joe, if you want when... because our 10-K will come out today. There is listing in of all the vessels we own and the charters. They are all included in there with their specs, if you care to see.

Joe Agular - Johnson Rice

Yes. It's sounded like that the number of overall days in 08 is up pretty much over 07 therefore. I mean the question was related to the margins in the contracting business, and I think you explained that I just wanted to maybe put some numbers around it. But, if I could just ask one more question on the contracting overall, I don't know if you said this or not, but deepwater, not margins or total EBITDA in 08 versus 07, are you expecting that to be up or do some of the... having the Q4000 out, is that a big impact?

Bart H. Heijermans - Executive Vice President and Chief Operating Officer

The Q4000, we expect Q4000 to have on the high utilization 2008 and 2008, because I mean of problems we have with the vessel in 2007. So we expect that to be I mean a good profit contributor again, and then hopefully better in 2009. I mean, overall we have seen deepwater budget and I mean slight increase in EBITDA profit contribution. I mean we hope that we can beat them.

Joe Agular - Johnson Rice

Slight increase for deepwater, slight decreases for shallow water. Okay. Thank you.

Owen Kratz - Executive Chairman

Then a net increase for the entire year due to the assets at the end of the year coming online.

Joe Agular - Johnson Rice

Okay, great. Thank you very much.

Unidentified Company Representative

Thank you.

Operator

Thank you. Our next question comes from Kelly Krenger [ph] of Banc of America Securities. Go ahead.

Unidentified Analyst

Good morning. Two quick questions, on the CapEx budget of $800 million, does that contemplate the sell down, or are you included in that number is there an assumed portion of sell downs of the E&P assets?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Yes. That does contemplate the sell downs, and it's reduced by the amount of future CapEx which would be shared with the partners after the point of sale.

Unidentified Analyst

Okay. And then on the reserve reconciliation page, can you just... can you provide us more detail on the revision line item. I know it wasn't very big, but I am just wondering if there were more components that went into that number.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

On the reserve revisions?

Unidentified Analyst

Yes, on their reconciliation. So, it looks like you had four in the shelf, five in the deepwater negative, and I am just curious in terms of kind of what went into those, if there was positive components [ph]?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Yes. There is considerable positives that obviously offset some of the negatives. But we had the Devil's Island project that we just brought to zero, zero reserves on the books. And then on the shelf, we did have several fields that had PUDs drilled this year. When you look back at our drilling on the shelf last year, I know it seemed through and cause a lot of the exploratory drilling. But, we had an equal as much type conversion and we were pleasantly surprised with some of our drilling on our PUDs. So, the end result was that we had uplifts in both the deepwater and the shelf that resulted with the nine negative revisions.

Unidentified Analyst

Was there any price related impact?

A. Wade Pursell - Executive Vice President and Chief Financial Officer

There is some, but I mean just being for a successful efforts company and we have to look at every field individually. So, it's not like forecast ready to throw it on the pool. And that's not unique to us, but for the amount of drawing that we do and everything, we are mandated to look at every single field. So, the pricing helps may be on some of the older fields, but really doesn't impact the new field, the high fields.

Owen Kratz - Executive Chairman

I think it's fair to say Robert that excluding Devil's Island the reserve provisions were neutral to slightly.

Robert P. Murphy - Executive Vice President, Oil & Gas

Right. They were positive. Yes.

Unidentified Analyst

Okay. Yes, I guess that was the core of what I was hopeful to out. Okay. Thank you, guys.

Unidentified Company Representative

Thank you.

Operator

Thank you. [Operator Instructions] There are no further questions at this time.

A. Wade Pursell - Executive Vice President and Chief Financial Officer

Okay. Well, thanks everyone for joining us today and we look forward to speaking with you soon.

Owen Kratz - Executive Chairman

Thanks. For a second, [ph] Roger, I didn't mean to ignore you, but thanks it is good to be back.

Operator

This concludes today's conference call. Thank you for your attendance and participation. You may disconnect at this time.

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Source: Helix Energy Solutions Group, Inc. Q4 2007 Earnings Call Transcript
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