This Quarterly Report on Form 10-Q contains various statements that contain forward-looking information regarding Helix Energy Solutions Group, Inc. and represent our expectations and beliefs concerning future events. This forward looking information is intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995 as set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements, included herein or incorporated herein by reference, that are predictive in nature, that depend upon or refer to future events or conditions, or that use terms and phrases such as "achieve," "anticipate," "believe," "estimate," "expect," "forecast," "plan," "project," "propose," "strategy," "predict," "envision," "hope," "intend," "will," "continue," "may," "potential," "should," "could" and similar terms and phrases are forward-looking statements. Included in forward-looking statements are, among other things:

• statements regarding our business strategy, including the potential sale of assets and/or other investments in our subsidiaries and facilities, or any other business plans, forecasts or objectives, any or all of which is subject to change;
• statements regarding our anticipated production volumes, results of exploration, exploitation, development, acquisition or operations expenditures, and current or prospective reserve levels with respect to any property or well;
• statements related to commodity prices for oil and gas or with respect to the supply of and demand for oil and gas;
• statements relating to our proposed acquisition, exploration, development and/or production of oil and gas properties, prospects or other interests and any anticipated costs related thereto;
• statements related to environmental risks, exploration and development risks, or drilling and operating risks;
• statements relating to the construction or acquisition of vessels or equipment and any anticipated costs related thereto;
• statements that our proposed vessels, when completed, will have certain characteristics or the effectiveness of such characteristics;
• statements regarding projections of revenues, gross margin, expenses, earnings or losses, working capital or other financial items;
• statements regarding any financing transactions or arrangements, or ability to enter into such transactions;
• statements regarding any Securities and Exchange Commission ("SEC") or other governmental or regulatory inquiry or investigation;
• statements regarding anticipated legislative, governmental, regulatory, administrative or other public body actions, requirements, permits or decisions;
• statements regarding anticipated developments, industry trends, performance or industry ranking;
• statements regarding general economic or political conditions, whether international, national or in the regional and local market areas in which we do business;
• statements related to our ability to retain key members of our senior management and key employees;
• statements related to the underlying assumptions related to any projection or forward-looking statement; and
• any other statements that relate to non-historical or future information.

Although we believe that the expectations reflected in these forward-looking statements are reasonable and are based on reasonable assumptions, they do involve risks, uncertainties and other factors that could cause actual results to be materially different from those in the forward-looking statements. These factors include, among other things:

• impact of the weak economic conditions and the future impact of such conditions on the oil and gas industry and the demand for our services;
• uncertainties inherent in the development and production of oil and gas and in estimating reserves;
• the geographic concentration of our oil and gas operations;
• uncertainties regarding our ability to replace depletion;
• unexpected future capital expenditures (including the amount and nature thereof);
• impact of oil and gas price fluctuations and the cyclical nature of the oil and gas industry;
• the effects of indebtedness, which could adversely restrict our ability to operate, could make us vulnerable to general adverse economic and industry conditions, could place us at a competitive disadvantage compared to our competitors that have less debt and could have other adverse consequences to us;
• the effectiveness of our derivative activities;
• the results of our continuing efforts to control or reduce costs, and improve performance;
• the success of our risk management activities;
• the effects of competition;
• the availability (or lack thereof) of capital (including any financing) to fund our business strategy and/or operations and the terms of any such financing;
• the impact of current and future laws and governmental regulations including tax and accounting developments;
• the effect of adverse weather conditions or other risks associated with marine operations;
• the effect of environmental liabilities that are not covered by an effective indemnity or insurance;
• the potential impact of a loss of one or more key employees; and
• the impact of general, market, industry or business conditions.

Our actual results could differ materially from those anticipated in any forward-looking statements as a result of a variety of factors, including those described in Item 1A. "Risk Factors" in our 2008 Form 10-K. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. Forward-looking statements are only as of the date they are made, and other than as required under the securities laws, we assume no obligation to update or revise these forward-looking statements or provide reasons why actual results may differ.

Our Business

We are an international offshore energy company that provides reservoir development solutions and other contracting services to the energy market as well as to our own oil and gas properties. Our oil and gas business is a prospect generation, exploration, development and production company. Employing our own key services and methodologies, we seek to lower finding and development costs, relative to industry norms.

Our Strategy

In December 2008, we announced the intention to focus and shape the future direction of the Company around our deepwater construction and well intervention services. We intend to achieve this strategic focus by seeking and evaluating strategic opportunities to:

1) Divest all or a portion of our oil and gas assets;

2) Divest our ownership interests in one or more of our production facilities; and

3) Dispose of our remaining interest in our majority owned subsidiary, CDI.

We have engaged financial advisors to assist us in these efforts. The current economic and financial market conditions may affect the timing of any strategic dispositions by us and will require a degree of patience in order to execute any transactions. As a result, we are unable to be specific with respect to a timetable for any disposition, but we intend to aggressively focus on reducing debt levels through monetization of non-core assets and allocation of free cash flow in order to accelerate our strategic goals.

Since the announcement of our strategy to monetize certain of our non core business assets, we have:

· Sold two oil and gas properties for $67 million in gross proceeds;

· Sold CDI approximately 13.6 million shares of its common stock held by us for $86 million; and

· Sold Helix RDS Limited, our subsurface reservoir consulting business for $25 million.

Demand for our contracting services operations is primarily influenced by the condition of the oil and gas industry, and in particular, the willingness of oil and gas companies to make capital expenditures for offshore exploration, drilling and production operations. Generally, spending for our contracting services fluctuates directly with the direction of oil and natural gas prices. The performance of our oil and gas operations is also largely dependent on the prevailing market prices for oil and natural gas, which are impacted by global economic conditions, hydrocarbon production and excess capacity, geopolitical issues, weather and several other factors.

Economic Outlook and Industry Influences

The continuing economic downturn and weakness in the equity and credit capital markets has led to increased uncertainty regarding the outlook of the global economy. This uncertainty coupled with the probable decrease in the near-term global demand for oil and gas has resulted in commodity price declines over the second half of 2008, with significant declines occurring in the fourth quarter of 2008. Prices for oil remained relatively flat in first quarter of 2009 compared with prices at year end 2008 while natural gas prices continued to decrease to levels last seen in 2004. Declines in oil and gas prices negatively impact our operating results and cash flow. Further, our contracting services are negatively impacted by declining commodity prices, which has resulted in some of our customers, primarily oil and gas companies, to curtail capital spending. The long-term fundamentals for our business remain generally favorable as the need for the continual replenishment of oil and gas production should drive the demand for our services. In addition, as our subsea construction operations primarily support capital projects with long lead times that are less likely to be impacted by temporary economic downturns. We have economically hedged approximately 80% of our anticipated production for the remainder of 2009 with a combination of forward sale and financial hedge contracts. We have also hedged a portion of our anticipated natural gas production for 2010 through the placement of additional swap financial hedge contracts. The prices for these contracts are significantly higher than the prices for both crude oil and natural gas as of March 31, 2009 and as of the time of this filing on May 8, 2009. If the prices for crude oil and natural gas do not increase from current levels, and we have not entered into additional forward sale or financial hedge contracts to stabilize our cash flows, our oil and gas revenues may decrease in 2010 and beyond, perhaps significantly, absent offsetting increases in production amounts.

At March 31, 2009, we had cash on hand of $251.6 million and $346.1 million available for borrowing under our revolving credit facilities, of which $186.7 million relates to CDI. We have reduced our planned capital expenditures for 2009 to include primarily the completion of major vessel construction projects and limited oil and gas expenditures. If we successfully implement the business plan outlined above, we believe we have sufficient liquidity without incurring additional indebtedness beyond the existing capacity under the Helix Revolving Credit Facility.

Our business is substantially dependent upon the condition of the oil and natural gas industry and, in particular, the willingness of oil and natural gas companies to make capital expenditures for offshore exploration, drilling and production operations. The level of capital expenditures generally depends on the prevailing views of future oil and natural gas prices, which are influenced by numerous factors, including but not limited to:

• worldwide economic activity, including available access to global capital and capital markets;
• demand for oil and natural gas, especially in the United States, Europe, China and India;
• economic and political conditions in the Middle East and other oil-producing regions;
• actions taken by the Organization of Petroleum Exporting Countries ("OPEC") ;
• the availability and discovery rate of new oil and natural gas reserves in offshore areas;
• the cost of offshore exploration for and production and transportation of oil and gas;
• the ability of oil and natural gas companies to generate funds or otherwise obtain external capital for exploration, development and production operations;
• the sale and expiration dates of offshore leases in the United States and overseas;
• technological advances affecting energy exploration production transportation and consumption;
• weather conditions;
• environmental and other governmental regulations; and
• tax policies.

Global economic conditions have deteriorated significantly over the past year with declines in the oil and gas market accelerating during the fourth quarter of 2008 and continuing in the first quarter of 2009. Predicting the timing of any recovery is subjective and highly uncertain. Although we are currently in a recession, we believe that the long-term industry fundamentals are positive based on the following factors: (1) long term increasing world demand for oil and natural gas; (2) peaking global production rates; (3) globalization of the natural gas market; (4) increasing number of mature and small reservoirs;
(5) increasing ratio of contribution to global production from marginal fields;
(6) increasing offshore activity, particularly in Deepwater; and (7) increasing number of subsea developments. Our strategy of combining contracting services operations and oil and gas operations allows us to focus on trends (4) through
(7) in that we pursue long-term sustainable growth by applying specialized subsea services to the broad external offshore market but with a complementary focus on marginal fields and new reservoirs in which we currently have an equity stake.

Our operations are conducted through two lines of business: contracting services and oil and gas. We have disaggregated our contracting services operations into three reportable segments in accordance with SFAS No. 131. As a result, our reportable segments consist of the following: Contracting Services, Shelf Contracting, and Production Facilities as well as Oil and Gas.

Contracting Services Operations

We seek to provide services and methodologies which we believe are critical to finding and developing offshore reservoirs and maximizing production economics, particularly from marginal fields. Our "life of field" services are organized in five disciplines: construction, well operations, production facilities, reservoir and well tech services, and drilling. The Contracting Services segment includes operations such as subsea construction, well operations, robotics and drilling. The Shelf Contracting segment represents the results and operations of Cal Dive, of which the assets are deployed primarily for diving-related activities and shallow water construction. We owned approximately 51% of Cal Dive through shares of its outstanding common stock at March 31, 2009. Our contracting services business operates primarily in the Gulf of Mexico, the North Sea, Asia/Pacific and Middle East regions, with services that cover the lifecycle of an offshore oil or gas field. As of March 31, 2009, our contracting services operations had backlog of approximately $0.9 billion, with $0.4 billion associated with Cal Dive. We expect that approximately $0.7 billion of our backlog will be completed over the remainder of 2009. These backlog contracts are cancellable without penalty in many cases. Backlog is not a reliable indicator of total annual revenue for our Contracting Services businesses as contracts may be added, cancelled and in many cases modified while in progress.

Oil and Gas Operations

In 1992 we began our oil and gas operations to provide a more efficient solution to offshore abandonment, to expand our off-season asset utilization of our contracting services business and to achieve incremental returns to our contracting services. We have evolved this business model to include not only mature oil and gas properties but also proved and unproved reserves yet to be developed and explored. By owning oil and gas reservoirs and prospects, we are able to utilize the services we otherwise provide to third parties to create value at key points in the life of our own reservoirs including during the exploration and

development stages, the field management stage and the abandonment stage. It is also a feature of our business model to opportunistically monetize part of the created reservoir value, through sales of working interests, in order to help fund field development and reduce gross profit deferrals from our Contracting Services operations. Therefore the reservoir value we create is realized through oil and gas production and/or monetization of working interest stakes.

Discontinued Operations

On April 27, 2009, we sold Helix RSD Limited to a subsidiary of Baker Hughes Incorporated for
$25 million. Helix RDS is a provider of reservoir engineering, geophysical, production technology and associated specialized consulting services to the upstream oil and gas industry. We have presented the results of Helix RDS as discontinued operations in the accompanying condensed consolidated financial statements (Note 2). Helix RDS was previously a component of our Contracting Services business. No asset or liability of HEL and Helix RDS are material to any single line item in our accompanying condensed consolidated balance sheet.

Comparison of Three Months Ended March 31, 2009 and 2008

The following table details various financial and operational highlights for the
periods presented:

                                                Three Months Ended
                                                    March 31,               Increase/
                                                2009          2008          (Decrease)

   Revenues (in thousands) -
     Contracting Services                   $  230,855     $ 174,718     $      56,137
     Shelf Contracting                         207,053       144,571            62,482
     Oil and Gas                               160,181       171,051           (10,870 )
     Intercompany elimination                  (27,114 )     (48,571 )          21,457
                                            $  570,975     $ 441,769     $     129,206

   Gross profit (in thousands) -
     Contracting Services                   $   46,581     $  36,494     $      10,087
     Shelf Contracting                          38,805        24,690            14,115
     Oil and Gas                                76,114        61,379            14,735
     Intercompany elimination                     (290 )      (3,980 )           3,690
                                            $  161,210     $ 118,583     $      42,627

   Gross Margin -
     Contracting Services                           20 %          21 %           (1 pt )
     Shelf Contracting                              19 %          17 %           2 pts
     Oil and Gas                                    48 %          36 %          12 pts

      Total company                                 28 %          27 %            1 pt

   Number of vessels(1)/ Utilization(2) -
     Contracting Services:
      Construction vessels                        8/79 %        6/99 %
       Well operations                            2/76 %        2/26 %
       ROVs                                      46/64 %       39/63 %
     Shelf Contracting                           30/49 %       34/31 %

(1) Represents number of vessels as of the end of the period excluding acquired vessels prior to their in-service dates and vessels taken out of service prior to their disposition.

(2) Average vessel utilization rate is calculated by dividing the total number of days the vessels in this category generated revenues by the total number of calendar days in the applicable period.

Intercompany segment revenues during the three months ended March 31, 2009 and 2008 were as follows (in thousands):

                                       Three Months Ended
                                           March 31,               Increase/
                                       2009           2008         (Decrease)

            Contracting Services   $   23,903      $ 42,220     $     (18,317 )
            Shelf Contracting           3,211         6,351            (3,140 )
                                   $   27,114      $ 48,571     $     (21,457 )

Intercompany segment profit during the three months ended March 31, 2009 and 2008 was as follows (in thousands):

                                       Three Months Ended
                                           March 31,                Increase/
                                     2009             2008          (Decrease)

           Contracting Services   $   (104 )      $    2,863     $      (2,967 )
           Shelf Contracting           394             1,117              (723 )
                                  $    290        $    3,980     $      (3,690 )

The following table details various financial and operational highlights related to our Oil and Gas segment for the periods presented:

                                              Three Months Ended
                                                  March 31,              Increase/
                                              2009          2008         (Decrease)

       Oil and Gas information-
         Oil production volume (MBbls)           820           910              (90 )
         Oil sales revenue (in                                         $    (32,063 )
       thousands)                         $   47,391     $  79,454
         Average oil sales price per                                   $     (40.41 )
       Bbl (excluding hedges)             $    51.74     $   92.15
         Average realized oil price per                                $     (29.50 )
       Bbl (including hedges)             $    57.82     $   87.32
         Decrease in oil sales revenue
       due to:
           Change in prices (in
       thousands)                         $  (26,843 )
           Change in production volume
       (in thousands)                         (5,220 )
         Total decrease in oil sales
       revenue (in thousands)             $  (32,063 )

         Gas production volume (MMcf)          6,990        10,103           (3,113 )
         Gas sales revenue (in                                         $    (51,032 )
       thousands)                         $   39,431     $  90,463
         Average gas sales price per                                   $      (3.47 )
       mcf (excluding hedges)             $     5.30     $    8.77
         Average realized gas price per                                $      (3.60 )
       mcf (including hedges)             $     5.35     $    8.95
         Decrease in gas sales revenue
       due to:
           Change in prices (in
       thousands)                         $  (36,363 )
           Change in production volume
       (in thousands)                        (16,669 )
         Total decrease in gas sales
       revenue (in thousands)             $  (53,032 )

         Total production (MMcfe)             11,908        15,563           (3,655 )
         Price per Mcfe                   $     7.12     $   10.92     $      (3.80 )

       Oil and Gas revenue information
       (in thousands)-
         Oil and gas sales revenue        $   84,822     $ 169,917     $    (85,095 )
         Other revenues(1)                    75,359         1,134           74,225
                                          $  160,181     $ 171,051     $    (10,870 )

(1) Other revenues include fees earned under our process handling agreements. The amount in 2009 also includes $73.5 million of previously accrued royalty payments involved in a legal dispute that were reversed in January 2009 following a favorable ruling by the Fifth District Court of Appeals, which rendered the probability of being required to make these payments remote (Note 6).

Presenting the expenses of our Oil and Gas segment on a cost per Mcfe of production basis normalizes for the impact of production gains/losses and provides a measure of expense control efficiencies. The following table highlights certain relevant expense items in total (in thousands) converted to Mcfe at a ratio of one barrel of oil to six Mcf:

                                                    Three Months Ended March 31,
                                                  2009                         2008
                                         Total          Per Mcfe       Total        Per Mcfe

  Oil and gas operating expenses(1):
    Direct operating expenses(2)       $ 18,599       $     1.56     $ 22,300     $     1.43
    Workover                             10,390 (3)         0.87        2,742           0.18
    Transportation                        1,202             0.10          952           0.06
    Repairs and maintenance               2,743             0.23        4,873           0.31
    Overhead and company labor            1,462             0.12        2,662           0.17
      Total                            $ 34,396       $     2.88     $ 33,529     $     2.15

  Depletion expense                    $ 44,088       $     3.70     $ 53,628     $     3.45
  Abandonment                               745             0.06          659           0.04
  Accretion expense                       4,003             0.34        3,246           0.21
  Impairment                                358             0.03       16,723           1.07

(1) Excludes exploration expense of $0.5 million and $1.9 million for the three months ended March 31, 2009 and 2008, respectively. Exploration expense is not a component of lease operating expense.

(2) Includes production taxes.

(3) Includes $9.6 million of hurricane-related repair costs, net of insurance proceeds.

Revenues. During the three months ended March 31, 2009, our total revenues increased by 29% as compared to the same period in 2008. Contracting Services revenues increased 32% for the three months ended March 31, 2009 as compared to the same period in 2008 primarily reflecting the placing in service two new trenchers in our ROV business since first quarter of 2008. Overall utilization levels for well operations and ROVs increased while utilization for our subsea construction vessels decreased. The increase also reflects a decrease in the number of out-of-service days for the drilling upgrade and regulatory drydock for the Q4000. Shelf Contracting revenues reflect higher vessel utilization . . .