Tidewater Inc. — Q3 2021 Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2021. Tidewater operates offshore support vessels for oil and gas activity and is also pursuing offshore wind opportunities. Financial statement amounts below are in millions of U.S. dollars unless noted.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $92.4 | $86.5 | $265.9 | $305.2 |
| Operating loss | $(21.6) | $(25.2) | $(68.0) | $(161.5) |
| Net loss attributable to Tidewater | $(26.3) | $(37.9) | $(91.0) | $(167.0) |
| Loss per share | $(0.64) | $(0.94) | $(2.22) | $(4.15) |
| Operating margin, approximate | (23.3)% | (29.1)% | (25.6)% | (52.9)% |
- Revenue drivers: Q3 revenue rose 6.9%, reflecting six more average active vessels and improved active utilization (81.6% versus 78.2%); average day rates edged down to $10,288 from $10,503. Nine-month revenue fell 12.9%, with 17 fewer average active vessels; utilization improved slightly to 79.2% from 77.0%, while day rates declined to $10,243 from $10,510.
- Cash flow: Nine-month operating cash flow was $8.1, versus $1.8 in 2020. Investing activities provided $31.4, mainly from vessel dispositions; financing activities used $41.0, including debt payments and repurchases. Cash, cash equivalents and restricted cash totaled $153.7 at period-end; the balance sheet separately reports $127.4 cash and $24.1 current restricted cash, with an additional $2.2 long-term restricted cash.
- Liquidity and debt: Current assets were $350.1 and current liabilities $299.9 (current ratio approximately 1.17), compared with $388.6 and $183.2 at year-end 2020. Debt was $155.1 net of discounts, including $135.2 of 8% Senior Secured Notes due August 2022; $141.0 was classified as current. Tidewater had no revolving credit facility. The notes’ interest-coverage covenant waiver ran through December 31, 2021.
- Fleet and assets: Tidewater owned 153 vessels: 139 active and 14 held for sale. Net property and equipment was $709.3, down from $780.3 at December 31, 2020. Nine-month capital additions were $2.6.
Changes versus the prior comparable period
- Q3 operating loss narrowed by $3.6, and attributable net loss narrowed by $11.7. Lower interest expense, from $6.1 to $3.7, reflected debt repayments. Q3 vessel operating costs increased to $65.3 from $61.8, associated with more activity and higher-than-normal repairs and maintenance.
- Nine-month losses improved substantially year over year, largely because 2020 included $65.7 of asset impairment, $53.6 of affiliate credit impairment and a $2.0 affiliate guarantee charge. The 2020 period also included $17.2 of affiliate dividend income and $7.5 of net gains on dispositions; 2021 recorded $3.0 of net disposition losses.
- Nine-month general and administrative expense declined to $50.9 from $56.5, while interest expense declined to $12.2 from $18.2. Long-lived asset impairment was $2.2 for the nine months, compared with $67.6 in 2020.
- Regional results were mixed: Q3 revenue increased in Middle East/Asia Pacific, Europe/Mediterranean and West Africa, but fell in the Americas. For the nine months, only Middle East/Asia Pacific revenue increased; the Americas, Europe/Mediterranean and West Africa declined.
Outlook, risks and notable items
- Management said oil prices and natural gas prices had recovered, but offshore activity remained affected by pandemic-related disruption, customer spending decisions, and pressure on energy customers to shift toward lower-emission businesses. The filing provides no specific financial guidance.
- Management expected the planned refinancing to extend major maturities and stated that cash, operating cash generation and asset sales should meet obligations. After quarter-end, Tidewater priced a $175 million five-year senior secured Nordic bond offering at 8.5%, with funding anticipated November 16, 2021, subject to closing conditions. Proceeds were intended to repay existing notes and Troms Offshore borrowings, including make-whole premiums; this was not yet funded as of the filing.
- COVID-19-related contract cancellations and delays reduced revenue by less than 1% in Q3 and 4% year to date, according to management. Related higher operating costs were approximately $5.2 year to date. Crew-change constraints, vessel outbreaks and shipyard delays remained risks.
- Affiliate exposures remain important. Tidewater reported $47.3 due from Sonatide and $38.6 due to it; management continues to assess collection and currency-devaluation risks. Nigerian joint venture DTDW was not operating, and Tidewater had effectively ceased activity there; Tidewater paid approximately $2.0 on its share of a debt guarantee during April 2021.
- Other risks include commodity and offshore demand volatility, foreign currency exposure, customer concentration and capital spending, fleet overcapacity, debt covenant compliance, and political and operating risks in international markets. Ordinary-course legal claims were not expected by management to have a material adverse effect.
- A vessel sold to an entity with a senior manager who is an immediate family member of a Tidewater director generated $11.4 proceeds and a $4.3 gain; the proceeds were collected. Management reported disclosure controls effective at September 30, 2021.
Key facts for investors to verify
- Whether the Nordic bond offering funded as anticipated, and the final payoff amounts, premiums and resulting liquidity and covenant terms.
- Cash available for domestic use, considering restricted balances and foreign currency conversion or repatriation constraints.
- Collections and valuation of Sonatide receivables, including the effects of Angolan kwanza devaluation and the partner’s stated divestment intent.
- Whether vessel utilization, day rates and regional operating results continue to improve, and whether the fleet’s remaining stacked or held-for-sale vessels are sold or reactivated at expected values.
- Effects of customer spending shifts, pandemic disruption, environmental transition pressures and any additional impairments or contract cancellations.