WorkBoat sat down with Todd Hornbeck, president and CEO of Hornbeck Offshore Services, days after the Covington, La., company completed its all-stock merger with Houston-based Helix Energy Solutions Group and began trading on the New York Stock Exchange under the ticker “HOS.” The combination creates an integrated offshore services company with about 85 vessels working across the U.S. Gulf, Latin America, the North Sea, West Africa, and Southeast Asia. This interview has been edited for length and clarity.
How did this deal come together?
For a long time — probably the last five years — we had been looking at Helix. As the market started to change and the oil field started to come back from about eight years in the desert, we approached Helix President and CEO Owen Kratz about two years ago about combining the two companies. We always thought the assets complemented each other and that together they would differentiate us in the marketplace: a more sophisticated company with global reach, dealing with the most complex problems in the marine space, whether that is oil and gas, renewables, ultra-deepwater, or the specialized services we perform for the U.S. government.
Combining these assets lets us package things together that no one else can. We give customers a better solution and more efficiency while improving the margins of the company. This is not a merger of like-kind assets where you are only looking at [general and administrative] synergies. It is a different business model than anything else in the marketplace, and we are looking for explosive growth, organically and acquisitively.
Why is now the right time?
If you look out through the windshield at all three areas we operate in, the lines are crossing pretty fast on the macro. The drill bit is going to start turning. It has been delayed somewhat by conflict in the Middle East, but as that clears itself up, the majors and the state-owned oil companies are focused on expanding output through the drill bit. That bodes well for us, because drilling begets development, subsea construction, and well intervention. We think the period between now and 2030 to 2032 is going to be a strong market, particularly for the company we have just put together.
Did you consider other combinations?
We did, over the last six years. We sold about 18 vessels — the first deepwater boats we were building in 1997 and 1998, the DP1 vessels — and we upgraded the fleet while we were private. We made four or five acquisitions, expanded our military operations and entered renewables domestically, taking oil field assets that were oversupplied and putting them to work in the wind market until customers came back with the drill bit.
We analyzed everyone. The other transactions just weren’t as compelling on a go-forward basis. You have to weigh the long-term sustainability of the company, what is best for shareholders, and what is best for customers together, because if you focus on just one, it can mess you up in the future. Acquiring to acquire is not what Hornbeck is about.
Can you give an overview of the combined fleet? And how does the merger change your footprint?
We have 85 vessels now, and they are all highly specialized — the largest in each class. They can be worked against our three core industries: defense, renewables, and ultra-deepwater oil and gas. We can move them between service lines and customers pretty efficiently, using the same platform, without having to build new boats all the time.
Our bread and butter is the most difficult jobs in the world in the marine space. We are not a commodity player. We are a specialty player, and that is a different type of operation to run than simply owning a very large fleet.
Hornbeck was mainly focused on the Americas. We have worked all over the world with our specialty assets, but boots on the ground, we focused on cabotage markets. Big in the U.S., big in Mexico, and big in Brazil. There wasn’t a lot of overlap in this deal — none in Mexico, very little in Brazil, and very little in the U.S. — so we are growing our presence in those markets. Helix also works in West Africa in a big way, along with the North Sea and Southeast Asia. That opens all of those markets to our equipment.
Where do you see the greatest opportunities coming out of the gate?
Our customers have been calling since the day we announced. We couldn’t have in-depth conversations until we closed, but on day one they got it. They are asking for a suite of assets on a total project. We are not an engineering, procurement, installation, and commissioning contractor. We are a day-rate company, but we can bring all those pieces to bear.
If we are doing a plug and abandonment with the big Q-class vessels, we can now P&A an entire field, picking up the flowlines, the pipeline end terminations, and pipeline end manifolds, all of the infrastructure that has to come out, with our multipurpose support vessels, and servicing the project with our supply vessels at the same time. It is the same with the military. We can put together a collection of assets that a customer would otherwise have to contract from multiple different companies. It is a one-stop shop, more efficient and less friction cost for them and a higher margin and day rate for us. That is the secret sauce. The real synergies are not in G&A. They are in the bundling and in the margin and utilization we pick up across the board.
Government work is a significant piece of Hornbeck’s business. What do the Helix capabilities bring to it?
It is not really the Helix boats. It will be the Hornbeck iron, plus their robotics capability and the project management and engineering behind those robotics. We have a naval architecture firm inside Hornbeck and always have. We design our own equipment and have the shipyards build it. Helix has engineering skills we don’t have, in robotics and in well intervention. We can take those three disciplines, combine them, and organize the iron around them.
For defense, that means bringing all of that engineering and all of those specialty tools — the plows, the trenchers — into that market. And on the other side, Helix really wasn’t focused on oil and gas as much as you might think. It was more renewables in Europe, so there is opportunity there, too.
Do you see room for more consolidation? Is Hornbeck eyeing other targets?
We are always analyzing and reviewing. Now that we have these distinct service lines, we will look at renewables, not in the U.S., but in Southeast Asia and other areas where it is picking up, organically and acquisitively. On defense, just read the newspapers and you will know where we are focused. We do highly specialized marine solutions on projects with the U.S. armed forces, and only a few companies can participate in that type of work. That is our cornerstone, and it drives the returns of the company.
Hornbeck is testing vessel autonomy and nuclear power. Why are these important?
We have always been a technology company, from day one. When we started building the first deepwater boats, that was the frontier. Deepwater was 2,500 feet then. As it evolved, we evolved our fleet through six newbuild programs, each more sophisticated — 200-class vessels first, then 240s, 260s, 280s, and the 300-class.
We are building two new MPSVs now that will be the largest and most advanced under U.S. flag. They will work in 12,000 feet of water, with four wires that can go down to that depth. No one in the world can really do that right now, and that capability is attractive for our defense work as well. AI and autonomy are the next step. We test these technologies in phases on equipment that is operating with customers today, which cuts down our R&D cost.
Where does the nuclear investment stand?
We invested in Deployable Energy, a small nuclear reactor company, and we have a partnership with them. The reactor just passed criticality. Now it has to be put in service and proven. We also have to build the engine room of the future, with all of the after-circuit cooling that goes with it. It is a totally different type of engine room, and we are going after zero emissions.
The reactor produces 1 MW of power for five years, condensed into less than a 20-foot container. It is intrinsically safe and seawater cooled, and it uses very low-grade uranium, so it is never weapons grade. The thought is that we can build more efficient vessels with no carbon footprint and very low residual waste. If you can do that for five years, that is remarkable technology. We will probably be one of the first companies to put small nuclear reactors into commercial service. We have not determined yet which vessel will get one.
Are Jones Act waivers affecting your business, and does Hornbeck have a position on the situation?
We are a Jones Act player. Remember, the Jones Act is a defense bill and an infrastructure bill. A lot of countries have their own version; they just don’t name it after a person. This is domestic trade, not international trade, and I think it is here to stay because it is such a big security issue for the United States.
You are seeing the effects of neglect. The U.S.-flag fleet in the deep-draft space really hasn’t grown since World War II, and the shipyard infrastructure has suffered, which affects our military services as well. That is why you have seen the SHIPS Act and things of that nature come about.
