Tidewater: Earnings up, red ink down

Written by Nick Blenkey
Tidewater OSV

Image: Tidewater

“Tidewater is uniquely positioned to capitalize on what is looking to be a truly transformational period for vessel activity and day rate improvements over the next several quarters,” said CEO Quintin Kneen as Houston-headquartered offshore services giant Tidewater Inc. (NYSE:TDW) reported its results for the quarter ended March 31, 2022

Earnings were $105.7 million compared with $83.5 million for the prior year same quarter. Net losses were $12.2 million compared with $35.3 million for the three months ended March 31, 2021.

Excluding charges, Tidewater would have reported a net loss for the quarter of $11.7 million and a net loss of $35.2 million in the prior year quarter.

In other highlights:

  • average active fleet increased by 6 vessels during the quarter and active utilization remained strong at 82.5%
  • average day rate increased to $10,687; the highest since fourth quarter 2020
  • vessel level gross margin increased from 24.7% to 34.0% and global fleet utilization increased from 52.9% to 70.9% compared to the first quarter of 2021

“Over the past several years we have been executing on a multi-faceted strategy to build significant and sustainable value at Tidewater,” said Kneen. “Recognizing the cyclicality of our highly fragmented, capital intensive industry, there were several priorities we focused on to prepare the company to successfully weather the lean times, while being well-positioned to capitalize on the inevitable upswings in the cycle when they occur … With a strong team and efficient cost-structure and operations, we were then in a good position to address the company’s balance sheet, and we are proud that Tidewater now has the strongest, most liquid and most flexible capital structure in the industry. Finally, with all of those pieces in place, Tidewater is well-positioned to act strategically, acquire the best assets to complement our global fleet and capitalize on improving industry dynamics and drive sustainable value. The acquisition of Swire Pacific Offshore that we closed in April is transformational as Tidewater is now the undisputed industry leader at a time when the demand for high quality offshore vessels is poised to significantly exceed the available supply.”

Commenting further on the vessel supply side of the market, Kneen said, “since the offshore energy downturn began in 2014, there have been very few new vessels enter the market, and existing vessels have aged or been taken out of service. Many operators in the industry have struggled to survive under the burden of high debt levels, low day rates, and inefficient operations. As a result, the available supply of high quality PSVs has declined substantially over the past eight years such that only approximately 30 remain to be reactivated worldwide.

“The prolonged under-investment in offshore hydrocarbon infrastructure began to result in increased demand for offshore oil and gas activity in the second half of 2021, and that demand has been compounded by recent geopolitical issues. The demand for offshore wind energy infrastructure continues to accelerate as well. As a result, the outlook for OSV demand to support these offshore energy activities has begun to accelerate significantly. We are already seeing this impact in the market, but the most significant improvements will materialize over the next several quarters as this demand swiftly eclipses available supply. As an example, during the first quarter of 2022, we entered into contracts of various durations for 16 vessels with charter dates beginning after the first quarter. The average day rate improvement across these vessels’ contracts compared to their previous contracts is over 20%, with our largest PSVs in this group achieving average day rate improvement of nearly 30%. We believe the improvements in day rates are a clear signal of the fundamental shift in vessel supply and demand, and that as additional tendering continues and existing contracts roll-off, upward acceleration of day rates will continue.

“Everything we have been working on these past several years has positioned us to thrive under any market condition, and now that the market is rapidly improving, we are poised to capitalize.”


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