Tough quarter for Tidewater

AUGUST 11, 2015—Amid the challenging oil market conditions, offshore support vessel owner Tidewater Inc., New Orleans, LA, reported a first quarter net loss for the period ended June 30, 2015, of $15.1 million, or $0.32 per common share, on revenues of $304.8 million. For the same quarter last year, net earnings were $43.7 million, or $0.88 per common share, on revenues of $385.7 million. The immediately preceding quarter ended March 31, 2015, had a net loss of $9.1 million, or $0.19 per common share, on revenues of $324.8 million.

Tidewater (NYSE:TDW), which operates over 300 offshore support vessels worldwide, reported that the net loss for the quarter ended June 30, 2015 included:

• $15.0 million ($14.0 million after-tax, or $0.30 per share) in non-cash asset impairment charges that is included in “Gain/loss on asset dispositions, net,” and resulted from impairment reviews undertaken during the quarter, including write-offs of unreimbursed and/or potentially unrecoverable costs related to cancelled vessel construction contracts and a vessel construction project that is the subject of an on-going arbitration proceeding.
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• $10.2 million ($9.5 million after-tax, or $0.20 per share) of total foreign exchange losses, $6.1 million of which is included in Equity in net earnings/(losses) of unconsolidated companies and related to its Angola joint venture, Sonatide.

 Income tax expense of $10.3 million for the quarter ended June 30, 2015 (and the resulting effective income tax rate) largely reflects tax liabilities in certain jurisdictions that levy taxes on bases other than pre-tax profitability (so called “deemed profit” regimes).

Included in the net loss of the preceding quarter ended March 31, 2015 were charges resulting from cost reduction initiatives related to a more challenging business environment since the precipitous decline in crude oil prices that began in the second half of fiscal 2015, as well as period end asset impairment reviews and assessment of realization of deferred tax assets:

• A $4.1 million ($3.3 million after-tax, or $0.07 per share) restructuring charge related to severance and other termination costs resulting from right-sizing efforts during the March 2015 quarter.
• $6.4 million ($5.1 million after-tax, or $0.11 per share) of total charges related to stacked vessel and other asset impairment reviews undertaken during the March 2015 quarter, which is included in “Gain/(loss) on asset dispositions, net.”
• A $23.8 million ($23.8 million after-tax, or $0.51 per share) non-cash adjustment related to the valuation of deferred tax assets.

Newbuilding program

During Fiscal Year 2015, Tidewater added nine new vessels, while disposing of 13 others. At the end of the fiscal year, Tidewater was due to add 24 vessels over the next two fiscal years, representing a financial commitment of $691 million, of which $311 million had already been expended. Of the 24 new construction commitment vessels, 17 were PSVs ranging between 3,800 and 6,000 deadweight tons of cargo capacity, six were non-deepwater towing supply class vessels with 7,145 brake horsepower (BHP) and one is a fast supply vessel.

In its Fiscal Year 2015 Annual Report, Tidewater said it had notified an international shipyard this past April that it was terminating three towing-supply vessel construction contracts as a result of late delivery and requested the return of approximately $36 million in aggregate installment payments together with interest on those installments. There was about $13 million in remaining expenditures to be made on these three vessels at the time of the termination.

In May 2015, Tidewater and another international shipyard that is constructing two of the 275-foot deepwater PSVs came to an agreement that provides the company an option to take delivery of one or both vessels at any time prior to June 30, 2016 or receive the return of installments aggregating $5.7 million per vessel at the end of this period. There were about $41 million of remaining costs to be incurred on these two vessels at the time of the agreement. Also, a partially constructed fast supply boat under construction in Brazil was originally scheduled to be delivered in September 2009 and has experienced substantial delay.

Since 2000, Tidewater has built or purchased 280 vessels spending about $4.7 billion.