Tidewater Reports Results for the Three and Six Months Ended June 30, 2022
Tidewater Inc. announced revenue for the three and six months ended June 30, 2022 of $163.4 million and $269.2 million, respectively, compared with $90.0 million and $173.5 million, respectively, for the three and six months ended June 30, 2021. Tidewater’s net losses for the three and six months ended June 30, 2022, were $25.6 million ($0.61 per common share) and $37.7 million ($0.91 per common share), respectively, compared with $29.5 million ($0.72 per common share) and $64.8 million ($1.59 per common share), respectively, for the three and six months ended June 30, 2021. Included in the net losses for the three and six months ended June 30, 2022 were merger and severance expenses of $7.3 and $9.6 million, respectively; and loss on warrants of $14.2 million for both periods. Included in the net losses for the six months ended June 30, 2022 were long-lived asset impairment credit and gain on bargain purchase of $1.8 million. Excluding these items, we would have reported a net loss for the three and six months ended June 30, 2022 of $4.1 million ($0.10 per common share) and $15.7 million ($0.38 per common share), respectively. Included in the net losses for the three and six months ended June 30, 2021 were severance expenses of $0.8 and $0.9 million, respectively; and a credit loss impairment credit of $1.0 million for both periods. Excluding these items, we would have reported a net loss for the three and six months ended June 30, 2021 of $29.7 million ($0.73 per common share) and $64.9 million ($1.59 per common share), respectively.
Quintin Kneen, Tidewater’s President and Chief Executive Officer, commented, “We believe the second quarter of 2022 marks the inflection point in the industry that we have long awaited and is now evident in our financial performance. Revenue, gross margin, average day rate and utilization all improved meaningfully during the second quarter as the building momentum in offshore vessel activity reached critical mass. The second quarter results reflect the impact of the Swire Pacific Offshore (SPO) acquisition, necessarily showing a large jump in revenue and vessels worked, but when viewing the quarter on relative metrics, the improvement is clear. The average day rate improved by nearly $1,900 per day sequentially, which is in excess of the improvement we would typically expect to realize over the course of an entire year in a normal market upcycle. Vessel level cash margin improved to 38%, up approximately four percentage points and continuing to meaningfully outperform the 30% target we have discussed in recent quarters. These improvements during the quarter, particularly the move in day rates, speak to continued demand growth as offshore activity continues to increase and as the vessel supply fundamentals continue to work in our favor given the shortage of available vessels on the market today. We expect activity to continue to improve throughout the remainder of 2022 with another likely step-up in 2023.
“As previously mentioned, we closed on the SPO acquisition on April 22, 2022. Post-closing of the transaction, the legacy SPO fleet contributed approximately $43.2 million of revenue during the second quarter and generated a vessel level cash margin in line with the total fleet vessel level cash margin of 38%. The legacy SPO business incurred approximately $3.9 million of general and administrative expense during the second quarter, down meaningfully from the pre-close run rate as we achieved some early successes in reducing general and administrative expenses as we continue to target $20.0 million in annual general and administrative costs synergies. Overall, we remain confident in our ability to realize total annual cost synergies of $45.0 million, including $25.0 million in annual synergies from operating expenses.
“While there are a variety of macroeconomic factors driving recent market volatility, the current commercial environment for offshore vessel activity remains robust. Commodity prices remain at attractive levels, recent volatility notwithstanding, providing a compelling economic rationale for our customers to continue driving their spending plans and operational goals. The supply of capable and available vessels continues to tighten. As our vessels continue to roll off older contracts, we are taking advantage of the tight supply environment to drive day rates in a strong demand environment. To illustrate this point, during the second quarter, 24 of our vessels entered new contracts of various duration that will ultimately provide a nearly 50% aggregate uplift in day rate as compared to the previous aggregate contracted day rates. Commercial momentum for new contracts is broad-based, evident in all of our operating regions and in all of our vessel classes, with West Africa and our largest PSV class notable drivers of this improvement. We remain mindful of inflation pressures that inevitably impact our business in our commercial strategy and believe that the market tightness will allow for net pricing improvements well in-excess of the impact of any inflation we may incur.
“The various initiatives we have executed over the past several years have prepared us to reap the benefits of the rapidly improving market we are currently experiencing. Building a strong leadership team positioned us to weather market challenges and position the company to take advantage of improved market fundamentals. Optimizing the organizational cost structure positioned us to maximize margins. Streamlining the fleet positioned us to offer the highest quality vessels to the market that can command the best pricing. Addressing the balance sheet positioned us to operate with a high degree of financial flexibility. Acquiring SPO positioned us to transform the company into a global leader in offshore support vessels with additional exposure to the world’s highest growth markets.
“The combination of initiatives we have successfully executed, combined with the market dynamics we are currently experiencing, has set up Tidewater as one of the largest and most efficient OSV operators globally, and has the company poised to create significant value over the coming quarters and years. The combination of high operating leverage and low financial leverage positions Tidewater to generate significant cash returns from its operating activities and the option to further leverage those returns. We remain committed to pursuing executional excellence in all facets of our business. Moving forward, we expect to continue to drive utilization and day rates, execute on realizing continued efficiencies within the business, including our commitment to realizing the synergies associated with SPO, and to opportunistically pursue platform-enhancing, value accretive strategic transactions.
“This is an exciting time for the company, and we expect all of Tidewater’s stakeholders to benefit from the continued improvement in the business. I want to thank all of our employees, including our new employees from SPO, for their continued hard work to position Tidewater to capitalize on what looks to be the best market for offshore vessels in recent memory.”
In addition to the number of outstanding shares, as of June 30, 2022, the company also has the following in-the-money warrants.
Source: Tidewater Inc.