Tidewater Inc. — Q1 2022 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2022, compared with the three months ended March 31, 2021. Tidewater operates offshore support vessels serving oil and gas activity and offshore wind projects. At quarter-end it owned 150 vessels, including 138 active vessels and 12 held for sale.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Total revenue | $105.7 million | $83.5 million; up 26.6% |
| Vessel revenue | $103.9 million | $81.0 million |
| Operating loss | $7.3 million | $26.3 million loss |
| Operating margin | (6.9%) | (31.5%) |
| Net loss attributable to Tidewater | $12.2 million | $35.3 million |
| Basic and diluted loss per share | $0.29 | $0.87 |
| Operating cash flow | $(11.6) million | $5.7 million provided |
| Cash, cash equivalents and restricted cash | $143.7 million | $154.3 million at December 31, 2021 |
| Long-term debt | $168.0 million carrying value; $175.0 million principal | $167.9 million carrying value at December 31, 2021 |
Worldwide active vessel utilization improved to 82.5% from 77.6%; average day rates rose to $10,687 from $9,993. Vessel operating costs increased to $68.5 million from $61.0 million, while depreciation and amortization declined to $26.7 million from $29.7 million. The quarter included a $5.2 million income tax expense despite a pretax loss, principally due to foreign taxes based on revenue, deemed profit or minimum-tax regimes and the inability to offset income and losses across jurisdictions.
At March 31, current assets were $309.2 million and current liabilities were $125.5 million. The $25.0 million revolving credit facility was undrawn. The 8.5% senior secured notes mature in November 2026; the company reported compliance with its financial covenants.
Material changes versus the prior comparable period
- Revenue growth reflected 15 more average active vessels, improved utilization and higher day rates. Regional vessel revenue gains were strongest in West Africa and Europe/Mediterranean.
- Operating loss narrowed substantially, aided by higher revenue, lower depreciation and amortization, improved asset-disposition results and a $0.5 million impairment credit. General and administrative expense rose to $18.2 million from $16.0 million, partly due to SPO acquisition-related professional fees.
- Net loss improved, with 2022 results also benefiting from a $1.3 million Sonatide bargain-purchase gain, $1.9 million of litigation-settlement interest and other income, and a $0.9 million foreign-exchange gain. These items are not necessarily recurring.
- Operating cash flow moved from positive $5.7 million to negative $11.6 million, reflecting working-capital outflows and $12.6 million of cash paid for deferred drydocking and survey costs. Cash declined by $10.5 million during the quarter.
- In January, Tidewater acquired its partner’s 51% interest in Sonatide for $11.2 million, gaining control of its Angolan operations. The acquisition accounting remains provisional. Nigeria operations were severely affected; Tidewater had no owned vessels operating there, and its joint venture vessel was not employed.
Outlook, risks and unusual items
Management said higher commodity prices and increased offshore customer activity support cautious optimism for an industry recovery, but gave no quantified financial guidance. It noted lingering effects of the pandemic and the prior industry downturn, customer capital-allocation shifts, ESG pressure on fossil-fuel development, and possible further COVID-related contract delays or cancellations. Q1 revenue was not significantly affected by COVID-19, although related additional operating costs were approximately $1.4 million.
On April 22, 2022, after quarter-end, Tidewater completed its acquisition of Swire Pacific Offshore (SPO), adding 50 vessels. Consideration included $42.0 million cash, $19.6 million of pre-closing working-capital adjustments and 8.1 million warrants exercisable at $0.001 per share. The company reported the transaction reduced its net cash position by $25.6 million and expected it to increase revenue and operating cash flows substantially; acquisition fair-value and pro forma information was not yet available.
Other risks include volatile energy demand and prices, vessel supply and utilization, foreign exchange exposure, political and operating risks in international markets, maintenance delays, customer concentration, covenant compliance, environmental regulation and climate-related transition risks. Management said ordinary-course legal proceedings were not expected to have a material adverse effect. It also reported approximately $208.0 million of valuation allowance against $205.7 million of deferred tax assets before allowance analysis.
Important facts for investors to verify
- Whether the improvement in utilization, day rates and regional operating results continues, and whether revenue gains translate into sustained profitability.
- The drivers of negative operating cash flow and cash requirements for drydocking, working capital and fleet operations.
- SPO’s final purchase accounting, post-closing adjustments, integration costs and realized contribution to cash flow; also assess the potential dilution from its 8.1 million warrants.
- The status and collectability of affiliate balances and exposure to the DTDW joint venture, given effectively ceased Nigerian activity and fully reserved expected obligations.
- Tax expense and deferred-tax valuation allowance developments, as well as ongoing covenant compliance and foreign-currency constraints on cash availability.