Quintin Kneen upbeat on Tidewater outlook

Tidewater president & CEO Quintin Kneen: “We remain confident in the outlook for the business as demand for our vessels remains robust across a variety of end markets.” [Photo: Tidewater]

In another indication of the continuing uptick in the offshore services sector, the largest player in the game, Tidewater Inc. (NYSE: Tidewater) yesterday reported third quarter revenue that president and CEO Quintin Kneen said “nicely exceeded our expectations.”

Highlights of Tidewater’s third quarter 2023 results

• Revenue of $299.3 million, a 39.2% increase from the second quarter of 2023
• Average day rate increased to $17,865 per day, $1,823 higher than the second quarter of 2023
• Composite leading edge term contract day rate up 21.7% to $28,609
• Net income of $26.2 million, an increase of $3.6 million from the second quarter of 2023
• Adjusted EBITDA of $117.2 million, an increase of $45.2 million from the second quarter of 2023
• Completed integration of 32 of the 37 recently acquired PSVs from Solstad Offshore
• Initiating 2024 revenue guidance of $1.40 to $1.45 billion and 2024 gross margin guidance of 52%
• Announcing share repurchase authorization for the maximum permissible amount under existing debt agreements

“The third quarter marks the third consecutive quarterly cyclical revenue and global average day rate high-water marks,” said Kneen. “Third quarter revenue nicely exceeded our expectations as a continued push on day rates globally drove consolidated day rates up by approximately $1,800 per day sequentially, representing the largest sequential improvement in day rates since the recovery began. The pace of day rate expansion was largely a combination of legacy contracts rolling on to current market day rates and a meaningful step up in leading edge term contract day rates; leading edge term contracts increased to $28,609 sequentially, an improvement of approximately $5,100 per day over the same measure in the prior quarter. The momentum in day rates is being driven by a global supply shortage of large and small offshore vessels, and, in fact, our medium and small classes of PSVs showed the most relative improvement in leading edge term contract day rates during the third quarter.

“We remain confident in the outlook for the business as demand for our vessels remains robust across a variety of end markets, including offshore drilling, subsea, construction, offshore wind and existing production work. This confidence allows us to initiate revenue guidance for 2024 of $1.40 to $1.45 billion and initial gross margin guidance of 52%, which is driven by our projection of an increase in year-over-year day rates of over $4,000 and an annual utilization level of 86%, increases that are in line with our recent quarterly improvements.

“On a global basis, revenue, gross profit, utilization, and day rate were all up from the previous quarter. Revenue for the quarter totaled $299.3 million, an increase of $84.3 million, or 39.2% sequentially through a combination of the recently acquired PSVs and improved day rates and utilization globally. Utilization increased to 82.1% from 79.4% in the prior quarter. We incurred approximately $6.0 million of acquisition and integration related expenses associated with the acquisition of 37 PSVs from Solstad Offshore. As of today, we have 32 of the acquired PSVs integrated into the Tidewater infrastructure and anticipate the remaining five vessels to be completed by the end of November. We now anticipate fourth quarter 2023 revenue of approximately $309 million and that gross margin will be approximately 47%.”

Kneen noted that Tidewater continues to “pursue additional acquisitions that enhance the company’s strategic position and leadership in certain vessel classes or geographies.”

“Turning to our regional operating results, each of our regions experienced an overall increase in revenue, gross profit, and average day rate, further evidence of the global shortage of large and small offshore vessels,” continued Kneen. “Day rates in the Americas region increased approximately 15.9% sequentially with particular areas of strength in the U.S. Gulf of Mexico and the Caribbean. Day rates in West Africa increased 9.0% sequentially due to broad-based secular tailwinds in the region. Similarly, day rates in Asia Pacific increased by 6.7% sequentially as activity through-out Southeast Asia and Australia continues to improve. Day rates in the Europe and Mediterranean region moved up modestly during the quarter, up approximately 0.6%, as a somewhat muted late summer season in the North Sea, particularly for our large AHTS vessels, was offset by strength in the Mediterranean. Regional utilization was up in all regions except for West Africa region, where utilization was down due to higher frictional unemployment during the quarter.”

• Download the full Tidewater release HERE