This Quarterly Report on Form 10-Q contains various statements that contain forward-looking information regarding Helix Energy Solutions Group, Inc. and represents 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 current 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 our 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 and any quarterly report on Form 10-Q filed subsequently thereto. 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 our intention to focus and shape the future direction of the Company around our deepwater construction and well intervention services that comprise our Contracting Services business. We intend to achieve this strategic focus by seeking and evaluating strategic opportunities to sell certain non-core assets, such as:

· all or a portion of our oil and gas assets;

· our ownership interests in one or more of our production facilities; and

· our remaining interest in CDI.

We also announced that economic and financial market conditions may affect the timing of any strategic dispositions by us and therefore a degree of patience would be required in order to execute any transactions. We continue to 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 approximately 13.6 million shares of CDI common stock held by us to CDI for $86 million in January 2009;

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

· Sold approximately 1.6 million shares of CDI common stock held by us to CDI for $14 million in June 2009;

· Sold 22.6 million shares of CDI common stock held by us to third parties in a public secondary offering for approximately $182.9 million, net of underwriting fees in June 2009; and

· Sold 23.2 million shares of CDI common stock held by us to third parties in a public secondary offering for approximately $221.5 million, net of underwriting fees in September 2009.

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 economic downturn and weakness in the equity and credit capital markets continue to lead to increased uncertainty regarding the outlook of the global economy. This uncertainty coupled with the negative near-term outlook for global demand for oil and natural 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 have increased in the second and third quarters of 2009 but remain significantly lower than the high prices achieved in second and third quarters of 2008. Natural gas prices continued to decline in 2009 with prices reaching near decade low levels. A decline in oil and gas prices negatively impacts 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 announce reductions in capital spending. The long-term fundamentals for our business remain generally favorable as the continual effort to replenish oil and gas production should drive demand for our services. In addition, 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 a substantial portion of our remaining expected production for the remainder of 2009 through a combination of forward sale and financial hedge contracts. We have also hedged a substantial portion of our anticipated oil and natural gas production for 2010 through the placement of additional swap and costless collar financial hedge contracts. For additional information regarding our oil and gas hedge contracts see Note 19.

At September 30, 2009, we had cash on hand of $410.5 million and $370.3 million available for borrowing under our revolving credit facilities. Our capital expenditures for the remainder of 2009 are expected to total approximately between $150 million to $180 million (including capitalized interest) and reflect the construction payments for our Well Enhancer, Caesar and Helix Producer I vessels and the development of two of our significant deepwater oil and gas properties expected to be placed on production in the first half of 2010. If we successfully implement the business plan, 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;
• the capacity and ability to store excess North American natural gas supply within existing storage;
• 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 deteriorated significantly over the past year with declines in the oil and gas market accelerating during the fourth quarter of 2008 and continuing into 2009. Oil prices have recovered in the second and third quarters but natural gas prices remain low relative to realized amounts in 2008. Predicting the timing and sustainability of any recovery in pricing is subjective and highly uncertain. Although we are still feeling the effects of the recent 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 offshore activity, particularly in deepwater; and (6) 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
(6) 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 FASB Codification Topic No. 280 Segment Reporting. As a result, our reportable segments consist of the following: Contracting Services, Shelf Contracting, and Production Facilities as well as Oil and Gas. As discussed below, in June 2009, we ceased consolidating our Shelf Contracting Business, which represents the results and operations of Cal Dive, following the sale of a substantial amount of our remaining ownership of Cal Dive (Note 4). Each line item within our condensed consolidated statement of operations for both the three month and nine month periods of 2009 is impacted significantly when compared to the prior year periods as a result of the deconsolidation of the Cal Dive results. Our 2009 consolidated results include Cal Dive's results through June 10, 2009, while we recorded our approximate 26% share of Cal Dive's results for the period June 11, 2009 through September 23, 2009 to equity in earnings of investments as required under the equity method of accounting. We continue to disclose the operating results of the Shelf Contracting business as a segment through June 10, 2009.

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. The Contracting Services segment includes operations such as subsea construction, well operations, robotics and drilling. The Cal Dive assets, representing our previous Shelf Contracting segment, are deployed primarily for diving-related activities and shallow water construction. 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 September 30, 2009, our contracting services operations had backlog of approximately $273.6 million, including $68.7 million for the fourth quarter 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 RDS Limited, our former reservoir technology consulting company, to a subsidiary of Baker Hughes Incorporated for $25 million. 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. We recognized an $8.8 million gain on the sale of Helix RDS. The operating results of Helix RDS were immaterial to all periods presented in this Quarterly Report on Form 10-Q.

Reduction in Ownership of Cal Dive

At December 31, 2008, we owned 57.2% of Cal Dive. In January 2009, we sold approximately 13.6 million shares of Cal Dive common stock held by us to Cal Dive for $86 million. This transaction constituted a single transaction and was not part of any planned set of transactions that would result in us having a noncontrolling interest in Cal Dive, and reduced our ownership in Cal Dive to approximately 51%. Since we retained control of CDI immediately after the transaction, the approximate $2.9 million loss on this sale was treated as a reduction of our equity in the accompanying condensed consolidated balance sheet.

In June 2009, we sold 22.6 million shares of Cal Dive held by us pursuant to an underwritten secondary public offering ("Offering"). Proceeds from the Offering totaled approximately $182.9 million, net of underwriting fees. Separately, pursuant to a Stock Repurchase Agreement with Cal Dive, simultaneously with the closing of the Offering, Cal Dive repurchased from us approximately 1.6 million shares of its common stock for net proceeds of $14 million at $8.50 per share, the Offering price. Following the closing of these two transactions, our ownership of Cal Dive common stock was reduced to approximately 26%.

Because these transactions reduced our ownership in Cal Dive to less than 50%, the $59.4 million gain resulting from the sale of these shares is reflected in "Gain on sale of Cal Dive common stock" in the accompanying condensed consolidated statement of operations. Since we no longer held a controlling interest in Cal Dive, we ceased consolidating Cal Dive effective June 10, 2009, the closing date of the Offering, and have since accounted for our remaining ownership interest in Cal Dive under the equity method of accounting until September 23, 2009 as discussed below.

On September 23, 2009, we sold 20.6 million shares of Cal Dive common stock held by us pursuant to a second secondary public offering ("Second Offering"). On September 24, 2009, the underwriters sold an additional 2.6 million shares of Cal Dive common stock held by us pursuant to their overallotment option under the terms of the Second Offering. The price for the Second Offering was $10 per share, with resulting proceeds totaling approximately $221.5 million, net of underwriting fees. We recorded an approximate $18 million gain associated with the Second Offering transactions which was recorded as a component "of Gain on sale of Cal Dive common stock" in the accompanying condensed consolidated statement of operations.

For more information regarding the reduction in our ownership in Cal Dive see Notes 1, 2, 3 and 4.

Comparison of Three Month Periods Ended September 30, 2009 and 2008

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

                                 Three Months Ended
                                   September 30,             Increase/
                                 2009          2008          (Decrease)

Revenues (in thousands) -
  Contracting Services       $  175,091     $ 276,131     $    (101,040 )
  Shelf Contracting                   -       278,709          (278,709 )
  Oil and Gas                    63,715       134,619           (70,904 )
  Production Facilities           5,888             -             5,888
  Intercompany elimination      (28,669 )     (81,723 )          53,054
                             $  216,025     $ 607,736     $    (391,711 )

                                    Three Months Ended
                                      September 30,            Increase/
                                    2009          2008         (Decrease)
Gross profit (in thousands) -
  Contracting Services          $   28,197     $  75,617     $    (47,420 )
  Shelf Contracting                      -        92,543          (92,543 )
  Oil and Gas                      (22,291 )      44,414          (66,705 )
  Production Facilities             (1,318 )           -           (1,318 )
  Intercompany elimination          (1,971 )     (13,494 )         11,523
                                $    2,617     $ 199,080     $   (196,463 )

Gross Margin -
  Contracting Services                  16 %          27 %        (11 pts )
  Shelf Contracting                    N/A            33 %            N/A
  Oil and Gas                         (35) %          33 %        (68 pts )
   Total company                         1 %          33 %        (32 pts )



                                             Three Months Ended
                                               September 30,
                                            2009            2008
Number of vessels(2)/ Utilization(3) -
  Contracting Services:
    Offshore construction vessels             8/77 %        10/98 %
    Well operations                           2/92 %        2/100 %
    ROVs                                     47/74 %        47/76 %

(1) Represents number of vessels (including chartered 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 September 30, 2009 and 2008 were as follows (in thousands):

                            Three Months Ended
                              September 30,             Increase/
                            2009           2008         (Decrease)

Contracting Services    $   23,922      $ 65,364     $     (41,442 )
Shelf Contracting(1)             -        16,359           (16,359 )
Production Facilities        4,747             -             4,747
                        $   28,669      $ 81,723     $     (53,054 )

(1) No amounts are included for the three-month 2009 period because Shelf Contracting ceased being a continuing business when we deconsolidated Cal Dive from our condensed consolidated financial statements effective June 11, 2009.

Intercompany segment profit during the three month periods ended September 30, 2009 and 2008 was as follows (in thousands):

                            Three Months Ended
                              September 30,             Increase/
                           2009            2008         (Decrease)

Contracting Services    $   2,153       $ 12,071     $      (9,918 )
Shelf Contracting(1)         (138 )        1,423            (1,561 )
Production Facilities         (44 )            -               (44 )
                        $   1,971       $ 13,494     $     (11,523 )

(1) No amounts are included for the three month 2009 period because Shelf Contracting ceased being a continuing business when we deconsolidated Cal Dive from our condensed consolidated financial statements effective June 11, 2009.

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

                                       Three Months Ended
                                         September 30,            Increase/
                                       2009          2008         (Decrease)

Oil and Gas information-
  Oil production volume (MBbls)           546           573              (27 )
  Oil sales revenue (in                                         $    (23,860 )
thousands)                         $   37,576     $  61,436
  Average oil sales price per                                   $     (45.78 )
Bbl (excluding hedges)             $    68.86     $  114.64
  Average realized oil price per                                $     (38.28 )
Bbl (including hedges)             $    68.86     $  107.14
 Decrease in oil sales revenue
due to:
    Change in prices (in
thousands)                         $  (21,950 )
. . .