Demand Analysis

KEY DEMAND FACTORS

• Price and Volume – OK but volume increase hasn’t been as strong as the price rise
• Institutions and Mutual Funds – Poor as 91% ownership leaves little room for growth
• Inside Ownership – Neutral since there have been no recent open market purchases

Ratio Comparison

		ACTUALS				5 Year Averages
	2003	2004	2005	2006	2007	Actual	Projection
Valuation
P/E Ratio	27.9	19.5	19.3	8.1	14.9	17.94	12.42
Price to Sales	2.3	3.0	3.7	2.1	2.3	2.67	2.44
Price to EBITDA	7.3	6.9	8.4	3.3	4.8	6.15	4.48
Management Effectiveness
Return on Investment	4.21	8.90	10.65	9.36	6.62	7.95	12.12
Return on Equity	8.60	16.47	23.85	22.55	15.12	17.32	18.67
Financial Condition
Total Debt to Equity	0.58	0.31	0.71	0.97	0.85	0.68	0.55
Interest Coverage	20.70	21.01	16.20	12.65	5.43	15.20	8.46
Profitability
Gross Profit Margin	41.10	50.85	49.25	51.87	53.15	49.25	59.77
EBITDA Margin	31.97	43.50	44.18	62.19	48.22	46.01	54.58
Net Profit Margin	8.27	14.71	18.78	25.17	15.49	16.48	19.76
Dividend
Dividend Yield	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Payout Ratio	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Growth
P/E/G						0.20	0.64

COMPARISONS

• Valuation –projected ratios lower than historical reflecting conservative growth projections
• Management Effectiveness – projected ratios are at the high end of prior experience
• Financial Condition – projected debt will be slightly lower than current debt
• Profitability – projections are at the high end of experience
• Dividend – no dividends for the foreseeable future
• Growth – projected P/E/G is higher but still well below 1.0

Earnings Projections

Helix Energy Solutions (HLX)
Earnings Model (MM's)
	2007	2008E	2009E	2010E	2011E	2012E	Forecast
Revenue
Contracting Services	646	776	931	1,117	1,340	1,608	20.0%
Shelf Contracting	615	738	886	1,063	1,276	1,531	20.0%
Oil & Gas	553	664	797	956	1,147	1,376	20.0%
Intercompany Elimination	(125)	(128)	(130)	(133)	(135)	(138)	2.0%
Total Revenues	1,690	2,050	2,483	3,003	3,628	4,377	21.0%
- COGS	792	910	1,047	1,204	1,384	1,592	15.0%
Gross Profit	898	1,140	1,436	1,799	2,243	2,785	25.4%
Less Expenses & Items
Sales & Administrative	142	163	187	215	248	285	15.0%
Depreciation	306	383	479	599	748	935	25.0%
Total Expenses & Items	448	546	666	814	996	1,220	22.2%
Other Income & Expense	58	58	58	58	58	58	0.0%
EBIT	508	652	828	1,044	1,306	1,624	26.2%
- Preferred Dividend	4	4	4	4	4	4	0.0%
- Interest Expense	94	103	113	125	137	151	10.0%
Pretax Income	411	549	715	919	1,168	1,473	29.1%
- Income Taxes	149	192	250	322	409	515
Net Income	262	357	465	597	759	957	29.6%
Tax Rate	36.3%	35.0%	35%	35%	35%	35%
Dividends Paid	-	-	-	-	-	-	0.0%
EBITDA	811	1,035	1,307	1,642	2,054	2,559	25.8%
Shares outstanding (000,000's)	90	95	99	104	109	115	5.0%
Diluted Shares outstanding	96	101	106	111	117	123	5.0%
Earnings Per Share
Basic	$2.91	$3.77	$4.68	$5.73	$6.94	$8.33	23.4%
Diluted	$2.72	$3.54	$4.39	$5.37	$6.50	$7.81	23.4%
Source: estimates

ASSUMPTIONS

• All segments will continue to have strong growth but at half of historical rates
• Expenses will continue to grow at a slightly higher rate than revenues
• Recent debt growth will slow

Earnings History

Helix Energy Solutions (HLX)
Annual Income Statements (MM's)
	2007	2006	2005	2004	2003	2002	I Yr.	5 Yr.
Revenue
Contracting Services	646	485	328	198	150	142	33.2%	35.4%
Shelf Contracting	615	510	223	127	135	118	20.7%	39.1%
Oil & Gas	553	430	276	243	137	63	28.8%	54.5%
Intercompany Elimination	(125)	(58)	(28)	(24)	(26)	(20)	116.3%	44.3%
Total Revenues	1,690	1,367	799	543	396	303	23.6%	41.0%
- COGS	792	658	406	267	233	204	20.3%	31.1%
Gross Profit	898	709	394	276	163	99	26.7%	55.6%
Less Expenses & Items
Sales & Administrative	142	120	63	49	36	33	18.3%	34.0%
Depreciation	306	194	111	104	71	45	58.3%	46.9%
Total Expenses & Items	448	313	173	153	107	78	43.0%	42.0%
Other Income & Expense	58	261	22	9	(0)	(1)	-77.7%	-318.9%
EBIT	508	656	243	132	56	20	-22.6%	91.3%
- Preferred Dividend	4	3	2	3	1		12.6%
- Interest Expense	94	52	15	6	3	1	80.4%	158.5%
Pretax Income	411	601	225	123	52	19	-31.7%	84.8%
- Income Taxes	149	257	75	43	19	7	-42.1%	86.1%
Net Income	262	344	150	80	32.77	12	-23.9%	84.1%
Tax Rate	36.3%	42.8%	33.3%	35.0%	36.7%	35.0%	-15.2%	0.7%
Dividends Paid
EBITDA	811	847	351	234	125	65	-4.2%	65.9%
Shares outstanding (000,000's)	90	85	77	76	75	71	6.4%	4.9%
Diluted Shares outstanding	96	90	82	79	76	71	6.9%	6.1%
Earnings Per Share
Basic	$2.91	$4.07	$1.94	$1.05	$0.43	$0.17	-28.5%	75.6%
Diluted	$2.72	$3.87	$1.86	$1.05	$0.43	$0.17	-29.5%	73.5%
Source: Helix Energy Solutions Annual Reports & SEC Filings

NOTES

• All business segments have experiences phenomenal growth
• Expenses have increased slightly faster than revenues
• Debt has been very low

Investor Summary

HELIX ENERGY SOLUTIONS	Nasdaq:	HLX
Oil & Gas Equipment & Services	TARGET:	$59.59

Stock Data			Sales & Earnings	2007A	2008E	2009E
Price 11/30/2007	$40.59		Revenue (MM)	$1,689.6	$2,050.0	$2,483.0
52-Week Range	27.89 - 47.35		EBITDA (MM)	$810.9	$1,035.2	$1,307.2
Dividend Yield	0.0%		EPS (diluted)	$2.72	$3.54	$4.39
Capitalization			Value Measures
Shares Outstanding (MM)	90.05		Price/Earnings	14.90	13.90	13.58
Market Capitalization (MM)	$3,655.2		Price/Sales	2.31	2.42	2.47
Debt/Equity	0.85		Price/Book	2.25
Projections			Growth (5 Yr.)	Historical	Projected
12-Month Price Target	$49.18		Earnings	73.5%	23.4%
24-Month Price Target	$59.59		P/E/G	0.20	0.64
Annual Total Return	21.2%

KEY AREAS FOR GROWTH

• Deep Sea Oil Exploration – provides many construction services, worldwide
• Oil Field Decommissioning – provides worldwide abandonment and decommissioning services
  

MAJOR RISK
Major legal problems related to the Cal Dive spin-off or an environmental issue could emerge.