Tidewater Inc. — Q2 2022 Form 10-Q
Business context and period: Unaudited results for the three and six months ended June 30, 2022. Tidewater provides offshore support vessels and related services to the energy industry. In April, it acquired Swire Pacific Offshore Holdings Ltd. (SPO), adding 50 vessels; it also acquired the remaining 51% of its Sonatide joint venture in Angola in January.
Financial performance
Amounts below are in millions of U.S. dollars, except per-share data and operating statistics.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $163.4 | $90.0 | $269.2 | $173.5 |
| Operating income (loss) | $1.8 | $(20.2) | $(5.5) | $(46.5) |
| Net loss | $(25.0) | $(29.6) | $(37.3) | $(65.2) |
| Net loss attributable to Tidewater | $(25.6) | $(29.5) | $(37.7) | $(64.8) |
| Basic and diluted loss per share | $(0.61) | $(0.72) | $(0.91) | $(1.59) |
| Cash from (used in) operating activities | — | — | $(33.2) | $10.6 |
- Revenue and margins: Q2 revenue rose 82% year over year, reflecting the SPO fleet addition and improved utilization and day rates. Worldwide active utilization was 82.5% versus 78.4%; average day rates were $12,544 versus $10,435. Vessel operating costs were 62% of vessel revenue, compared with 73% a year earlier. Operating margin was approximately 1.1% versus negative 22.4%. For the first half, operating margin was approximately negative 2.0% versus negative 26.8%.
- Cash flow: First-half operating cash outflow was $33.2 million, versus inflow of $10.6 million. Management cited working-capital movements and $31.1 million of cash spent on deferred drydocking and survey costs. Investing activities used $26.7 million; financing activities used $2.5 million. Cash, cash equivalents and restricted cash decreased $62.5 million to $91.8 million, including restricted cash.
- Liquidity and debt: June 30 cash and cash equivalents were $88.0 million; current assets were $329.8 million and current liabilities $187.6 million. Long-term debt had a $175.0 million face value and $168.3 million carrying value: 8.50% senior secured notes due November 2026. A $25.0 million revolving facility due in 2026 was undrawn. The company reported compliance with its financial covenants and expects to maintain compliance.
- Balance sheet: Total assets were $1.283 billion, compared with $1.096 billion at year-end 2021; equity was $841.6 million. Active vessels numbered 187 at quarter-end, versus 135 at December 31, 2021.
Material changes and unusual items
- SPO consideration totaled approximately $223.5 million, including cash payments and 8.1 million warrants exercisable at $0.001 per share. SPO contributed $43.2 million of revenue and $5.3 million of net earnings from acquisition through June 30. Purchase accounting valuations remain provisional. Acquisition-related costs were $7.2 million in Q2 and $9.4 million for the first half.
- The SPO warrants generated a $14.2 million Q2 fair-value loss before being reclassified from liabilities to equity following a June agreement amendment. The warrants represent potential dilution; the filing lists 52.5 million total shares including in-the-money warrants, restricted stock units and options, versus 42.0 million common shares outstanding.
- First-half results included a $1.3 million bargain-purchase gain on the Sonatide acquisition and $1.9 million of interest and other income related to a vessel litigation settlement. A $0.5 million impairment recovery was recorded after a vessel returned to the active fleet.
- The company exchanged $8.6 million of receivables for seven-year PEMEX bonds bearing 8.75%; a $0.8 million fair-value loss was recorded in other comprehensive income.
- Income tax expense was $6.6 million in Q2 and $11.8 million for the first half despite consolidated pre-tax losses. Management attributed this mainly to foreign deemed-profit, minimum-tax and withholding regimes and the inability to offset income and losses across jurisdictions.
Outlook, commentary and risks
- Management said higher commodity prices and customer activity support a continued industry recovery and expressed optimism about opportunities over the coming years. The filing provides no specific financial guidance or quantified forecast.
- Management said first-half 2022 revenue was not significantly affected by COVID-19, though related operating costs were approximately $2.2 million. It noted that further contract delays or cancellations remain possible.
- Key uncertainties include oil and gas prices and offshore customer spending, industry vessel supply and day rates, integration of SPO, limited capital resources, customer concentration, vessel maintenance and staffing, foreign exchange, political and regulatory conditions, climate and energy-transition pressures, and legal claims. Management does not expect ordinary-course legal proceedings to have a material adverse effect.
- Disclosure controls were judged effective at June 30. SPO, representing 25% of assets and 16% of first-half revenue, was excluded from management’s internal-control assessment while its controls are being integrated.
Investor verification priorities
- Track whether utilization and day-rate improvements persist and translate into operating profit and cash generation.
- Assess working-capital needs, drydocking expenditures and the decline in cash, including how much foreign cash is practically available.
- Review SPO integration, final purchase-price adjustments and fair-value estimates, and the status of internal-control integration.
- Evaluate potential dilution from SPO warrants and the effect of warrant-related accounting and indemnity terms.
- Monitor covenant headroom, tax liabilities and foreign-exchange exposure; the filing does not quantify covenant headroom.