Tidewater Inc. — Q1 2021 Form 10-Q
Business context and reporting period. The filing covers the three months ended March 31, 2021; financial statements are unaudited. Tidewater operates offshore support vessels serving oil and gas and other offshore industries. At quarter-end it owned 166 vessels: 146 active and 20 held for sale.
Financial performance and liquidity
- Revenue: $83.5 million, down 28% from $116.4 million in Q1 2020. Vessel revenue was $81.0 million. Management attributed the decline mainly to weaker utilization, pandemic-related contract cancellations and reduced demand; average active vessels fell by 37 year over year.
- Utilization and rates: Worldwide active utilization was 77.6%, versus 78.5%; average day rate was $9,993, versus $10,267. The average active fleet was 116 vessels, versus 153.
- Profitability: Operating loss was $26.3 million, compared with $18.5 million. Net loss attributable to Tidewater was $35.3 million, or $0.87 per share, versus $18.4 million, or $0.46 per share. Vessel operating costs fell to $61.0 million from $78.8 million, while depreciation and amortization rose to $29.7 million from $27.1 million. General and administrative expense decreased to $16.0 million from $21.4 million.
- Cash flow: Operating activities provided $5.7 million, versus $27.5 million used in Q1 2020. Investing activities provided $9.8 million, including $11.0 million of asset-sale proceeds; capital additions were $1.2 million. Financing activities used $27.3 million, including debt principal payments and repurchases. Cash, cash equivalents and restricted cash totaled $143.4 million at quarter-end, down $11.8 million from year-end 2020.
- Debt and liquidity: Debt carrying value was $166.5 million, including $18.2 million due within one year. The 8% senior secured notes totaled $135.2 million and mature in August 2022. Tidewater had no revolving credit facility. Management said cash on hand, operating cash and anticipated asset-sale proceeds should be sufficient for 2021 debt obligations. The senior-note trailing-year interest coverage covenant was waived from April through December 2021; other covenants and minimum-liquidity requirements remain.
- Balance sheet: Current assets were $363.7 million and current liabilities $172.6 million; total equity was $788.7 million. Total assets were $1.19 billion.
Material changes and unusual items
- Revenue fell $32.9 million year over year, principally from lower utilization; management also cited lower capacity and other revenue, and a modest decline in average day rates.
- Europe/Mediterranean vessel revenue declined 50% and the segment moved from operating profit to an $8.0 million loss. West Africa revenue declined 40%; its operating loss widened to $6.8 million. All four geographic vessel segments reported operating losses in Q1 2021.
- There was no asset impairment charge in Q1 2021, compared with $10.2 million in Q1 2020. Asset dispositions produced a $1.9 million net loss, compared with a $5.3 million gain in the prior-year quarter.
- Q1 2021 included a $2.0 million income tax expense, versus a $5.2 million benefit in Q1 2020. The company cited foreign taxes and the inability to offset profits and losses across jurisdictions. It collected a $6.9 million CARES Act-related tax receivable during the quarter.
- Tidewater repurchased $11.8 million of senior secured notes and made $26.4 million of total debt principal payments during the quarter. Additional Troms debt prepayments of $9.7 million and $3.4 million were scheduled for Q2 and Q4 2021, respectively.
Outlook, commentary and risks
- The filing provides no specific revenue or earnings guidance. Management said the pandemic’s ultimate financial impact could be material and long-lasting and could not be reasonably estimated. COVID-related cancellations or delays reduced Q1 2021 revenue by approximately 8%; related higher operating and vessel-stacking costs were $2.5 million in the quarter.
- Management expected approximately $20 million of drydock expenditure in 2021, while noting planned drydocks could be delayed or canceled. It continued cost-reduction measures and fleet rationalization.
- At March 31, stacking costs were $5.4 million for the quarter, compared with $3.9 million a year earlier; 52 vessels were stacked at quarter-end. Twenty vessels remained held for sale, valued at $31.2 million.
- Joint-venture exposures: The net amount due from Angolan venture Sonatide was approximately $6.1 million after offsetting amounts due to it. Tidewater continued to evaluate potential impairment amid currency-devaluation and liquidity risks; its partner Sonangol had indicated an intention to divest. Nigerian venture DTDW’s vessel was unemployed and projected cash flows were insufficient to meet obligations. Tidewater had fully reserved its expected related liabilities and paid approximately $2.0 million on April 22, 2021 for its share of the debt guarantee.
- Other disclosed risks include depressed offshore energy demand and oil prices, industry overcapacity, foreign exchange and political risks, COVID-related staffing and operating disruption, debt covenant compliance, and the need to maintain liquidity. Management said ordinary-course legal proceedings were not expected to have a material adverse effect.
Important facts for investors to verify
- Whether vessel utilization, day rates and offshore customer demand improve, particularly in Europe/Mediterranean and West Africa.
- Whether operating cash generation and asset-sale proceeds are sufficient to cover scheduled debt payments and covenant requirements, including future Troms prepayments.
- The extent of any further COVID-related contract cancellations, operating-cost increases or drydock delays.
- Recoverability of the Sonatide receivable and the ultimate costs of the DTDW guarantee and wind-down.
- Proceeds and timing for sales of the 20 vessels held for sale, and whether fleet valuations require further impairment.