TIDEWATER INC annual report, FY2023

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Tidewater Inc. — FY2023 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2023; comparisons are principally with FY2022. This is an annual filing, not a standalone fourth-quarter report. Amounts below are in U.S. dollars.

Business context

Tidewater operates offshore support vessels for the global offshore energy industry, supporting oil and gas exploration, development, production and maintenance, as well as offshore wind projects. At year-end, it owned 217 vessels serving customers in more than 30 countries, across five geographic segments. Results depend mainly on fleet utilization, vessel day rates and customers’ offshore spending.

Financial and operating results

  • Revenue: $1.010 billion, up 56% from $647.7 million. Vessel revenue was $999.0 million. The Solstad acquisition contributed $115.1 million in 2023 revenue; SPO vessel revenue was $276.8 million, versus approximately $150.0 million in 2022.
  • Profit: Operating income was $182.2 million, compared with $26.7 million. Net income was $95.6 million, versus a $22.2 million loss; net income attributable to Tidewater was $97.2 million, or $1.88 per basic share and $1.84 diluted.
  • Margins: Operating margin was approximately 18.0%, compared with 4.1% in 2022. Net margin was approximately 9.5% based on consolidated net income.
  • Fleet performance: Average day rate rose 31.7% to $16,802. Total utilization increased to 79.1% from 75.4%, while active utilization eased to 81.2% from 82.8%. Average active vessels increased to 200 from 166. Management cited higher day rates and acquired capacity as key revenue drivers; drydocking and vessel mobilizations weighed on active utilization.
  • Costs: Vessel operating costs rose 40% to $556.5 million, slower than revenue growth; those costs fell to 56% of revenue from 62%. Depreciation and amortization increased to $180.3 million, chiefly due to acquired vessels and drydock amortization. General and administrative costs declined to $95.3 million from $101.9 million.
  • Cash flow: Operating cash flow was $104.7 million, up from $40.2 million. The filing reports $97.4 million of regulatory drydock spending and a $74.5 million cash use from changes in operating assets and liabilities. Investing activities used $610.3 million, largely reflecting the $594.2 million Solstad purchase. Financing activities provided $615.6 million.
  • Liquidity and debt: Cash and cash equivalents were $274.4 million, plus $1.2 million of current restricted cash; total cash, cash equivalents and restricted cash were $278.0 million. Working capital was $262.4 million. Debt was $751.7 million, including $103.1 million classified as current. The $25 million revolving facility was undrawn. Management said the company was in compliance with financial covenants and expects cash, the facility and operating cash flow to meet liquidity needs.

Material changes versus FY2022

  • The July 2023 acquisition of 37 Solstad platform supply vessels for approximately $594.2 million expanded the fleet and was funded with cash and new borrowing. The acquisition is accounted for as an asset acquisition, with no goodwill recognized.
  • To fund the purchase, Tidewater issued a $325 million senior secured term loan and $250 million of 10.375% senior unsecured notes due 2028. Interest and other debt costs increased to $48.5 million from $17.2 million.
  • Approximately 2.0 million Series A and B warrants were exercised in July, raising $111.5 million and resulting in issuance of approximately 1.9 million shares; remaining warrants expired.
  • The company repurchased and retired 590,499 shares for approximately $35.0 million, excluding commissions and excise tax. It paid no dividends.
  • Net cash rose to $278.0 million from $168.0 million. Net properties and equipment increased to $1.315 billion from $796.7 million, reflecting the enlarged fleet.

Outlook, commentary and risks

Management expects favorable offshore oil and gas supply-demand fundamentals and sees potential for a multi-year increase in offshore upstream development spending. It described the fleet as close to full utilization and said day rates had increased in recent quarters. Management also expects 2024 operating income from the Solstad vessels to be sufficient to meet the related increase in debt obligations. The filing provides no specific revenue, earnings or cash-flow guidance.

Key risks include the cyclical dependence on oil and gas prices and customer capital spending; concentration in a limited customer base (the top five customers generated 37.3% of 2023 revenue and the top ten 51.0%); contract nonrenewal or early termination; vessel oversupply and pricing pressure; acquisition integration and fleet maintenance costs; and substantial debt, interest expense, covenant restrictions and refinancing needs. Other material exposures include foreign currency and political risks, customer credit and collection risk, severe weather, personnel availability, cybersecurity, environmental and climate regulation, and potential uninsured marine losses.

Unusual or judgment-sensitive items include a $8.7 million net gain on asset dispositions, a $2.3 million pension settlement gain, and a $43.3 million income tax expense despite significant tax attributes and a large valuation allowance. The auditor identified income-tax accounting as a critical audit matter. Tidewater reported effective disclosure controls and internal control over financial reporting; the independent auditor also opined that internal control was effective.

Most important facts for investors to verify

  • Review the debt maturities, required amortization, interest-rate terms and covenant headroom, particularly the $103.1 million current portion and the 10.375% notes.
  • Assess whether Solstad vessel revenue, utilization and cash generation support the acquisition financing and management’s 2024 debt-service expectation.
  • Track day rates, active utilization, drydock spending and operating costs to test whether strong revenue growth converts into sustained cash flow.
  • Monitor receivable collection and customer concentration, including the impact of major customer contract changes or payment delays.
  • Review tax disclosures and valuation allowances: reported tax expense, deferred tax assets, uncertain tax positions and the critical audit matter may materially affect future results.
  • Confirm the treatment of cash held by foreign subsidiaries and any restrictions on conversion or repatriation; the filing notes that some balances await repatriation.