Tidewater(TDW) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2019, consolidated revenue was $122.1 million, an increase of approximately$ 12 million from the prior quarter [37] - Average day rates increased by 3% to $98.06 per day, marking the first quarterly increase in five quarters [38] - Active vessel utilization decreased by approximately 243 active vessel days, or about two percentage points, due to vessel mobilizations and drydock days [39] Business Segment Data and Key Metrics Changes - North Sea and Mediterranean segment revenue increased by almost 200% year-over-year and approximately 40% quarter-over-quarter [11] - Americas segment vessel revenues increased by 35% year-over-year and 11% quarter-over-quarter, driven by the addition of 12 vessels from the merger [14] - Middle East Asia-Pacific segment experienced an 11% year-over-year revenue growth, with vessel operating margin up by 44% [15] Market Data and Key Metrics Changes - Active fleet utilization remained high at 80%, slightly down from 82% in Q4 2018 [9] - Spot rates in the North Sea rose to the highest level since 2014, driven by increased drilling activity [17] - Market sources estimate that at least 12 vessels are expected to depart the North Sea for work in West Africa and Russia [18] Company Strategy and Development Direction - The company aims to maximize cash flow and maintain capital discipline while continuing to divest non-core vessels [47][49] - A focus on upgrading the fleet with battery technology and fuel management systems to improve efficiency and reduce emissions [20][31] - The company is positioned as one of the top two OSV operators in the North Sea, anticipating benefits from the expected market recovery [19] Management's Comments on Operating Environment and Future Outlook - Management expects continued stability or upward trends in all reporting segments, particularly in the North Sea [16] - The company anticipates cash flow positivity for the year despite potential cash flow negativity in Q2 due to working capital obligations [50] - There is optimism regarding increased tender activity and demand for OSV services in 2020 [58] Other Important Information - The cash balance at the end of the quarter was$ 398 million, with the company being free cash flow positive at $8.5 million [46] - The company plans to consolidate its ERP systems by October 1, which is expected to enhance efficiency [43][44] - The company has sold 28 uncompetitive stacked vessels year-to-date, with a goal of selling 40 by year-end [29] Q&A Session Summary Question: Recent market developments in the North Sea and their impact on Tidewater numbers - Management indicated that Q2 will reflect a full quarter of activity levels in the North Sea, with improved spot and term rates [55] Question: Tender activity and demand forecast for 2020 - Increased tender activity and customer discussions about future vessel utilization indicate a tightening OSV market [58] Question: Balancing long-term visibility versus current rates - The fleet contracting strategy is likened to a bond portfolio, balancing short, mid, and long-term contracts based on market conditions [60] Question: Expected ramp in activity in the Gulf of Mexico - Management agrees with the view of rising demand in the Gulf of Mexico and the Caribbean, which could tighten supply [63] Question: Update on due from affiliate and due to affiliate balances - Ongoing constructive dialogues with partners are expected to improve the collectability of balances [65]