Tidewater Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied text does not provide a standalone fourth-quarter financial summary.
Business context
Tidewater operates offshore support vessels serving offshore oil and gas exploration, development and production, as well as offshore wind projects. At year-end it reported operations in more than 30 countries and a fleet of 183 owned vessels excluding eight classified as held for sale. The filing distinguishes 178 actively employed vessels from five stacked vessels.
On April 22, 2022, Tidewater acquired Swire Pacific Offshore Holdings (SPO), adding 50 vessels and expanding its geographic footprint. The company reports five geographic segments: Americas, Asia Pacific, Middle East, Europe/Mediterranean and West Africa.
Key financial results
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $647.7 million | $371.0 million |
| Operating income (loss) | $26.7 million | ($95.0 million) |
| Net loss | ($22.2 million) | ($129.7 million) |
| Net loss per share | ($0.49) | ($3.14) |
| Cash provided by operating activities | $40.2 million | $15.0 million |
| Cash, cash equivalents and restricted cash | $168.0 million | $154.3 million |
| Long-term debt, stated principal | $175.0 million | $175.0 million |
- Revenue increased 74.6%, reflecting SPO’s contribution, higher utilization and improved day rates. SPO contributed $149.7 million of revenue and $14.8 million of net earnings from acquisition through year-end.
- Worldwide active utilization rose to 82.8% from 80.1%; average day rates increased 23% to $12,754. Management said the fleet was close to full utilization and day rates had risen in recent quarters.
- Vessel operating costs were $397.3 million, or about 61% of revenue, compared with $261.8 million, about 71%, in 2021. General and administrative expense rose to $101.9 million from $68.5 million, including $18.8 million of SPO-related professional, transaction and severance costs.
- Operating margin was approximately 4.1%, compared with an operating loss margin of approximately 25.6% in 2021. The 2022 net loss included a $14.2 million non-cash warrant-related loss and $19.9 million income tax expense.
- Operating cash flow improved to $40.2 million, but regulatory drydock spending was $56.0 million. Investing activities used $23.8 million, including acquisitions and $16.6 million of property and equipment additions. Cash increased by $13.7 million during the year.
- Year-end current assets were $377.9 million and current liabilities $194.8 million, implying a current ratio of about 1.94. The $25 million revolving facility was undrawn; $175 million of 8.5% secured bonds mature in November 2026. The debt carried value on the balance sheet was $169.0 million after discounts and issuance costs.
Material changes and unusual items
- SPO was acquired for stated total consideration of $215.5 million. The purchase accounting included approximately $171.0 million of acquired property and equipment; estimates remain subject to measurement-period adjustments.
- Two stock offerings generated approximately $187.8 million net proceeds, used to redeem SPO acquisition warrants; no SPO acquisition warrants remained outstanding at year-end. Shares issued and outstanding increased to 50.6 million from 41.3 million.
- Tidewater acquired the remaining 51% of Sonatide in Angola for $11.2 million and recorded a $1.3 million bargain-purchase gain.
- Long-lived asset impairment expense was $0.7 million, primarily obsolete inventory, versus $15.6 million in 2021. The filing reports no 2022 long-lived asset impairment charge on vessels.
- The company received $1.3 million of government assistance, primarily employee retention credits, and $5.3 million of Norwegian wage and sick-cost refunds, recorded as expense reductions.
Outlook, risks and contingencies
- Management described the offshore oil and gas outlook as positive, citing demand recovery and a diminishing vessel supply. It expects positive 2023 operating cash flow after drydock costs and anticipates improved cash flow over the next several years. These are expectations, not quantified earnings guidance.
- Planned vessel construction includes two crew boats at about $3.5 million each, expected in 2023, and two ocean-going tugs at about $6.3 million each, also expected in 2023.
- Key exposures include volatile oil and gas prices and customer capital spending, competition and charter rates, customer concentration, contract termination or non-renewal, fleet maintenance and impairment, international political and currency risks, severe weather, cybersecurity, and climate regulation and energy-transition effects. The five largest customers generated 35.8% of 2022 revenue; Chevron alone accounted for 12.3%.
- The 2026 bonds and revolving facility include minimum liquidity and equity-ratio covenants. Tidewater said it was in compliance at year-end and expected ongoing compliance. The bonds are secured by vessel and other collateral.
- Ordinary-course legal proceedings were not expected by management to materially affect financial position, results or cash flows. The auditor identified uncertain tax positions as a critical audit matter: gross unrecognized tax benefits were approximately $177.4 million, while the balance-sheet liability for uncertain tax positions was $35.5 million. Management recorded a $441.9 million valuation allowance against deferred tax assets.
- Management and the auditor concluded internal control over financial reporting was effective. SPO, representing 23.6% of assets and 23.1% of revenue, was excluded from the 2022 internal-control assessment while integration work continued.
Important facts for investors to verify
- How much of the revenue and utilization improvement reflects sustainable legacy-fleet pricing and demand versus the acquired SPO fleet and its integration.
- Whether management’s expected positive 2023 cash flow remains achievable after drydocking, working-capital needs, capital spending and debt service.
- The assumptions behind SPO vessel fair values and expected synergies, and whether the acquisition measurement-period estimates change.
- Customer concentration, contract backlog, renewal terms and day-rate trends, particularly for major customers and key regions.
- The potential cash and earnings effects of tax examinations and uncertain tax positions, and the realizability of deferred tax assets.
- Progress integrating SPO’s controls and systems, and compliance with debt covenants and Jones Act foreign-ownership limits.