Tidewater Inc.

To ask a question, you may press star, followed by the number one, and to withdraw your question, please press star one again. I will now turn the call over to Wes Culture, Senior Vice President of Strategy, Corporate and Development and Investor Relations. Sir, please go ahead.

Thank you, Janine. Good morning, everyone, and welcome to Tidewater's fourth quarter and full year 2024 earnings conference call. I'm joined on the call this morning by our President and CEO, Quentin Neen, our Chief Financial Officer, Sam Rubio, and our Chief Commercial Officer, Piers Middleton. During today's call, we'll make certain statements that are forward-looking and referring to our plans and expectations. There are risks and uncertainties and other factors that may cause the company's actual performance to be materially different from that stated or implied by any comment that we're making during today's conference call. Please refer to our most recent form 10-K for additional details on these factors. These documents are available on our website at tdw.com or through the SEC at sec.gov. Information presented on this call speaks only as of today, February 28, 2025. Therefore, you're advised that any time-sensitive information may no longer be accurate at the time of any replay. Also during the call, we'll present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures can be found in our earnings release located on our website at tdw.com. And now with that, I'll turn the call over to Quentin.

Thank you, Wes. Good morning, everyone, and welcome to the Tidewater Fourth Quarter and Full Year 2024 Earnings Conference Call. In my prepared remarks this morning, I'll touch on some of the notable achievements Tidewater realized during 2024 and how the company has continued to evolve. I'll then spend some time looking at 2025, addressing our views on capital allocation, the state of the vessel market, and lastly, our outlook on demand for 2025 and the interplay between vessel supply and demand as we move forward. 2024 proved to be a year of significant financial improvements. Revenue grew 33% year over year. Average day rates increased by nearly $4,500 per day. Net income nearly doubled. Adjusted EBITDA grew by nearly 50%. Free cash flow tripled. Net debt was lowered by $149 million, and we reduced our share and share equivalents by 1.7 million shares. The position we hold today in the offshore market and our financial performance during 2024 is a product of a multi-year effort to dispose of older, lower-spec vessels, pursue a disciplined acquisition strategy to bring into the fleet younger, higher-spec vessels, and to leverage the investments we have made by maximizing the scalability of our global shore-based infrastructure. This strategy, combined with an improving offshore activity environment, drives this success. But the critical element is daily execution across the entire organization. So as happy as I am with the financial results we post for 2024, I am equally as grateful to the entire Tidewater team globally for the continuous effort to build Tidewater into the safest, most sustainable, most reliable, most profitable by specification offshore energy support vessel fleet in the world. 2024 also marked the first full year that Tidewater actively returned capital to shareholders since 2015. We commenced our share repurchase program in the fourth quarter of 2023 and actively repurchased shares in the open market each quarter of 2024. We repurchased $91 million of shares in the open market during 2024, and when combined with cash in exchange for the payment of employee taxes, used $119 million of cash to manage down the number of shares outstanding. In addition, we used $103 million of cash to pay down the required amortization on our debt, and added 51 million of cash to the balance sheet. We ended the year with right at 310 million of net debt. With the cash we expect to generate in 2025, we will have more than paid down the Solstead fleet acquisition in just under 30 months. We have discussed our philosophy on leverage, the balance sheet, and capital allocation on prior calls. And I believe the Solstead example I just referenced is an illustration of that philosophy. We look for value-free of acquisitions with a keen eye on free cash flow generation. We will contemplate additional balance sheet leverage for the right acquisition and look to quickly deliver afterwards to a reasonable level and in the interim, look for additional ways to deploy free cash flow to shareholders. Our philosophy has not changed and we remain focused on prosecuting the strategy. We remain active in evaluating acquisition targets but have found that the recent volatility in the markets and the shifting sentiment over the past few quarters has made deal dynamics more challenging. During the fourth quarter, we leaned into share repurchases more than we have previously as our view on the relative value of our shares as compared to the relative value of target fleets was more compelling. We view the share repurchase mechanism not only as an effective way to return capital to shareholders, but also a way that allows us to capitalize on vessel value and efficiencies relative to target acquisition valuations. We continue to weigh the relative merits of share purchases and M&A, and we believe that there are a number of fleets globally that would fit well under the time and water umbrella, but we will remain disciplined on both fronts, particularly as we weigh the timing of establishing a long-term capital structure more appropriate for a cyclical business such as ours. As Wes, Sam, and Piers will discuss, the business continues to do well and is expected to do slightly better in 2025. In Q4, we saw significant improvements in West Africa and the Middle East, offset by a pullback in Asia Pacific and the Americas, although on a consolidated basis, revenue, gross margin, and utilization were all up. The mix of performance in our various regions is emblematic of a tight vessel market reshuffling due to differences in regional demand, and it's why we continue to develop and pursue geographic diversifications. I'd now like to take some time to discuss our outlook and the state of the vessel market. We held off on providing guidance on our Q3 call, given some of the uncertainty and lack of visibility on the growth of offshore activity for 2025. Since then, we have spent a considerable amount of time constructing our internal view on 2025 through our budget and weekly forecasting processes. The growth in offshore drilling activity appears to be more muted throughout 2025 as compared to what was anticipated earlier in 2024. We anticipate fewer offshore rigs working in 2025 as compared to 2024, which will have an impact on demand for offshore vessels. However, we are encouraged by what we hear from our customers and other offshore service providers as to the pipeline of activities into 2026 and 2027, particularly the subsea sector. But deceleration and drilling demand does have an impact on our ability to push day rates. because drilling demand is the most service-intensive vessel activity, and it is the demand factor that allows us to push day rates to their highest possible level. The demand for offshore vessels is at an early point in a relatively inelastic stage on the demand curve, which leads to substantial day rate improvements when the market is tighter, but works the other way when demand is softer. Subsea demand remains very strong, with a continued stream of FIDs announced in recent months and growing backlog at the large subsea surface providers, foretelling future offshore activity for the build-out of subsea infrastructure. We see subsea demand providing an avenue for growth this year, particularly weighted towards the back half of the year as projects continue to progress to the point of requiring increased vessel support. Production-related work remains robust. FPSO activity and delivery backlog remains an exciting growth driver for the offshore vessel demand. with 15 FPSOs expected to be installed during 2025 and more firm deliveries in the pipeline and many more discussions for delivery in future periods. We anticipate that the combination of our reacceleration and drilling activity as we progress beyond 2025, coupled with a growing subsea demand and material FPSO deliveries, will generate a material increase in demand for offshore supply vessels. such that it will allow us again to push day rates upwards at the pace we saw in 2023 and 2024. As such, we remain confident in the long-term fundamentals of our business. We remain confident that vessel supply will be unable to keep up with demand. There has been some new-build vessel announcements over the past few quarters. While we still believe that current day rates and contract terms don't justify new-build ordering, we have seen orders from a few vessel owners. New-build PSVs represent roughly 3% of existing PSV supply, and we believe that natural vessel attrition over the coming years will likely offset the expected additions to the global fleets. It's worth noting that for vessels that were ordered in conjunction with a tender and contract award in Brazil, day rates approach $60,000 per day for long-term contracts, with equivalent vessels currently in Brazil at day rates of approximately $40,000 to $45,000 per day. These new rates are an indication to us of an appropriate commercial relationship and indicative of the percentage increase in day rates we see as possible as the offshore upslope continues. We watch new build activity very closely, and we will continue to do so, but remain of the view that current shipyard capacity, prevailing global day rates and contract terms, the state of the financing markets and vessel technology considerations make large-scale new building programs unlikely. Before I turn the call over to Wes, I want to reiterate that 2024 marked one of the best years in Tidewater's history. We are excited for another year of substantial free cash flow generation through which we continue to pursue value accretive actions to enhance shareholder value. And with that, let me turn the call back over to Wes for additional commentary and our financial outlook.

Thank you, Quentin. During 2024, Tidewater generated $331 million of free cash flow. Over the same time frame, we used $119 million of cash to reduce our share count through our open market repurchase program and our internal program to allow the forfeiting of employee shares to pay their cash tax liability on vesting. In addition, we used $103 million of cash on the required amortization of our outstanding debt for a total of $222 million, or 67% of free cash flow, allocated directly to equity enhancing uses. We have repurchased the maximum allowance of shares in the open market since the inception of the buyback program in Q4 of 2023, totaling $126 million. We are pleased to announce that our Board of Directors has authorized an additional $90.3 million of share repurchase capacity. Based on the language in our outstanding debt that governs our share repurchase allowance, we have full access to the $90.3 million of capacity as of today. The new authorization represents the maximum amount permissible under our existing debt agreements. The required amortization on our outstanding debt steps down to $65 million in 2025 versus $103 million in 2024, allowing for additional cash flow after debt service for us to evaluate capital allocation opportunities. We remain committed to allocating our free cash flow to enhance shareholder value. We also continue to evaluate the best path to achieve our goal of establishing a long-term, unsecured debt capital structure, along with a sizable revolving credit facility. We remain opportunistic on pursuing a potential refinancing, so we have no near-term maturities and no immediate need to access the debt capital markets. One of the primary considerations of the timing of a refinancing of our outstanding debt is the call premium associated with calling debt early. particularly on our 2028 unsecured Nordic bonds issued in connection with the acquisition of PSVs from Solstead in 2023. The make-hold associated with these bonds lapses in July of 2025. The make-hold premium decreases with time. Therefore, as we approach July, the frictional cost to refinance these bonds dissipates. To the extent market conditions appear favorable in the debt capital markets, along with the bank markets to support our desired revolving credit facility, we will opportunistically weigh the relative cost benefit of pursuing a refinancing ahead of the May co-lapsing. Turning to our leading-edge day rates by vessel class, which were posted in our investor materials yesterday, we did see some pressure on leading-edge day rates across our vessel classes during the fourth quarter as seasonal factors, along with some regional specific factors, contributed to the pressure. During last quarter's call, we discussed the adjustment to the regulatory and tax structure in the U.K., and the subsequent impacted demand in this region likely leading to pressure on day rates. A combination of lower demand, along with the fourth and first quarters typically representing the least favorable seasonal periods of the calendar year, impacted day rates materially in this region and on our reported leading edge day rates. Outside of the UK, during the fourth quarter, we entered in term contracts for our largest PSDs in various other regions. with a contracted day rate showing resilience from prior period leading-edge day rates. We experienced very similar regional bifurcation in our mid-sized PSPs as well, with rates under pressure in the U.K. but resilient across most other markets. To this point, we've generally seen disciplined behavior from our competitors, recognizing that a mid-cycle pause in drilling activity does not justify seriously competing on price given the constructive intermediate to long-term outlook for demand. Having said that, depending on the duration of offshore driller activity deceleration, we could see modest pockets of price pressure. Most importantly, although leading-edge day rates have come under pressure in the UK, and we could potentially experience pockets of pricing pressure in the earlier parts of 2025, there is still a meaningful amount of room between our printed day rates and prevailing leading-edge day rates, allowing for the continued uplift in rates as we roll older contracts to new contracts, enabling us to continue to benefit from a healthy day rate environment. Looking to 2025, we are initiating our full-year revenue guidance of $1.32 to $1.38 billion and a full-year gross margin range of 48% to 50%, with our average printed day rates up approximately $850 year-over-year. We expect first quarter revenue to decline by approximately 6% as compared to the fourth quarter. with day rates contributing about two percentage points to the decline due to seasonal weakness in certain of our markets and a relatively slow start to the year globally, with a gross margin of about 46% due to the expected reduction in revenue. As we progress through 2025, we anticipate that the second quarter will look similar to the first quarter, with a material uplift in utilization in the third quarter and sustaining into the fourth quarter, delivering similar revenue levels. is expected subsidy and production vessel support activity increases. And we experienced a reduction in dry dock days, driving both revenue uplift and margin expansion from first half levels. The midpoint of our revenue guidance range is approximately 81% supported by January revenue, plus firm backlog and options for the remainder of the year. Our firm backlog and options represents $973 million of revenue for the remainder of 2025. Approximately 68 percent of available days are captured in firm backlog and options. The bigger risks to our backlog revenue is unanticipated downtime due to unplanned maintenance and incremental time spent on dry docks. With that, I'll turn the call over to Piers for an overview of the commercial landscape.

Piers Beattie Piers Thank you, Wes, and good morning, everyone. Before I talk about the market and put some of Quint's and Wes' comments into a wider global context, I wanted to mention that we will be releasing our fifth sustainability report next week. This report is a global team effort, and I'd like to take this opportunity to thank everyone within the Tidewater team for their hard work and commitment helping to put this report together as we continue to showcase to all our stakeholders our historical as well as our future commitment to sustainability. Please look out for the report. Turning back to the offshore space, the overall long-term outlook remains strong, as do the fundamentals for the OSCE market. the sector remains supply size favourable with little prospect of capacity expansion from the stacked fleet or from the order book, which is still quite modest. As Quinton mentioned, we did see a small number of new build orders in 2024, but the order book still remains under 3% of the OSC fleet against an existing total fleet average age close to 20 years old, which compares very favourably to our fleet average age of 12.6 years, which is of particular importance when we see some softening demand as charters always lean towards working with the youngest, safest and most reliable fleets when looking to support their projects, of which Tidewater ticks all three boxes. While we saw demand ease back slightly in the latter half of 24, we still feel that with the favorable supply story and one of the youngest fleets in the industry, we are well-placed to weather any short-term headwinds in 2025 and make further progress in 2026 and 2027, as expected debarmed growth comes back online for exploration and subsea construction project backlog continues to unfold. Turning to our regions and starting with Europe, uncertainty in the UK remains, and as Wes mentioned, this area has seen the most pressure on rates. But to put that into context, PSC term rates still remain healthy for the North Sea. and are still above where rates were in the last up cycle of 2010 to 2014. Looking beyond 2025, we expect rates to pick up again in 2026 as additional decommissioning projects come online and the UK North Sea PSV supply shrinks as vessels move to other markets. In Norway, expectations are still for a robust 2025 for the PSV market. with Equinor rumoured to be shortly releasing a tender for additional long-term PSCs to support drilling activity through the summer and into 2026. In Africa, we had a strong Q4, as a number of delayed exploration projects started up in Namibia, with most of these expected to continue through into Q1 and Q2 of 2025, before drilling activity pauses in the second half of the year. As mentioned on the last call, 2025 visibility in the region related to additional drilling activity still remains opaque. However, the majority of our fleet up and down the coast are mainly committed to supporting production work. But in the last few weeks, we've also started to see some new tenders related to EPCI work, which, while shorter term in length, we will focus on to fill any availability gaps that may come up in the latter half of 2025. The longer term outlook for new drilling activity still remains bullish, commencing the second half of 2026. In the Middle East, the market remains very tight with very limited availability of tonnage in the region, even after so many vessels and rigs were released through 2024 from work in the Kingdom. Most vessels found other work in the region with other NOCs or supporting EPCI contractors in the Kingdom. We expect the region to remain supply constrained in the short to medium term, and the opportunity will be there to push rates as additional demand comes online in 2025. However, as we have mentioned on previous calls, This is a highly fragmented market, and as such, rate increases tend to take longer to push through than in other areas of the world. But we do believe that we'll start to see some acceleration in rates in the second half of the year. In Brazil, demand appears set to remain positive for 25, and as Quinton mentioned, the latest new bill tender from Petrobras would indicate that rates can be further improved, but also show that there is a long-term demand story in the country beyond just the next few years. As mentioned on the last call, Mexico's long-term outlook still remains uncertain, but indications are that the government will be providing clarity around their production growth plans for PMEX and Q2. And until then, we see Mexico as being steady state for the remainder of the year. The US and Caribbean has a soft Q4 and we expect that to continue into the first half of 2025. But we are seeing some positive momentum for long term future work in the Caribbean from the second half of 2025, both for drilling and supporting subsea construction activity in the region. Lastly, in Asia Pacific, Malaysia and Petronas specifically have now resolved their issues in Sabah and Sarawak and tendering activities expected to start again after the Eid holidays. which should mean that the backlog of Malaysian OSEs that have been pressuring rates in the region over the last few quarters will subside as they go back to work in Q3 and Q4 of 2025. This in turn should mean that the supply-demand balance in the region returns to some level of parity in the second half of 2025. For 2025 and beyond, we will of course remain focused and disciplined on continuing to maintain and improve current day rate levels when possible. keep improving contract terms to be more actual. And as we believe in the long-term fundamentals of our business, we will continue with our short-term charging strategy and expectation of an improving market again in 2026. Overall, as mentioned by Quinton, we're very pleased with how our global team both on and offshore performed through 2024. And while we saw some softening in the offshore space in the latter half of 2024, the market still continued to move in the right direction through the year. And we remain positive about how the market will develop during 2025 and into a sustained period of growth for the OSB space into the foreseeable future. And with that, I'll hand it over to Sam. Thank you.

Thank you, Pierce. And good morning, everyone. At this time, I would like to take you through our financial results. My discussion will focus first on the full year 2024 compared to 2023. followed by the quarter-to-quarter results from the fourth quarter of 2024 compared to the third quarter of 2024. As noted in our press release filed yesterday, for the year we generated revenue of $1.35 billion compared to $1 billion in 2023, an increase of 33%. The increase in average day rates and the four-year effect of the acquired Solstice vessels were drivers for the revenue increase. As previously mentioned on the call, we expect 2025 revenue to be between 1.32 billion and 1.38 billion for the full year. Gross margin for the year was 649.2 million compared to 449.1 million in 2023. In net income, in 2024, our net income was 180.7 million compared to 97.2 million in 2023. Operationally, average day rates improved almost $4,500 per day for the full year to $21,273. An active utilization decrease by approximately 2 percentage points to 79.2% due to the higher dry dock and idle days. However, the strength in the day rates boosted our gross margin by almost 4 percentage points year over year to 48.2%. For 2025, we expect consolidated gross margin to be between 48 and 50%. We expect our quarterly operating costs for 2025 to increase slightly from Q4 in the first half of the year and to decrease somewhat in the second half of the year as we expect a lower number of dry docks and a lower number of vessel operating in Australia. 72% of our dry dock days are expected to be in the first half of the year. Active utilization for 2025, which excludes stacked vessels, should be lower in Q1 and Q2 than increased during the second half of the year as dry dock days decrease. Adjusted EBITDA was $559.6 million for 2024 compared to $386.7 million in 2023. We also generated $331 million of free cash flow, an increase of 219.6 million from 2023. Overall, 2024 was a good year with strong free cash flow delivery and solid operational execution, and we are pleased to report on the success we achieved. I would now like to turn our attention to the fourth quarter. We reported net income in the fourth quarter of 36.9 million, or 70 cents per share. In the quarter, we generated $345.1 million compared to $344.4 million in the third quarter. Average day rates were essentially flat versus the third quarter despite the strengthening of the U.S. dollar, which negatively impacted our day rate by $243 per day, but also positively impacted our operating costs by $160 per day. We did see a nice increase in active utilization from 76.2% in the third quarter to 77.7% in the fourth quarter, which was the main reason for the increase in revenue. The utilization increase resulted mainly from a decrease in dry dock and mobilization days. In the quarter, we stacked an over 20-year-old vessel due to the declining marketability of the vessel. The gross margin in the fourth quarter was $174 million. compared to 160.8 million in the third quarter. Adjusted EBITDA was 138.4 million in the quarter compared to 142.6 million in the third quarter. In Q4, we recorded a 14.3 million FX loss that negatively impacted our adjusted EBITDA, of which 12.1 million was non-cash. Vessel operating costs for the fourth quarter were 170.4 million compared to 178.7 million in Q3. In the period, we did have a few idle vessels, so we were able to reduce the crew to a minimum manning level. Additionally, we had a couple of vessels operating in Southeast Asia instead of Australia, where mariner cost is lower. A combination of the two factors contributed to a significant decrease in crew salaries and travel costs. Also, we had 384 fewer dry dock and 108 fewer mobilization days, which also reduced our supplies and consumable expense for the quarter. For the year, our total G&A costs was $110.8 million, which is $15.5 million higher than 2023, primarily due to an increase in personnel costs and benefits, stock-based compensation, higher professional fees, and includes the full-year impact of the Solstice acquisition. G&A costs for the quarter was $30.7 million, $2.2 million higher than the third quarter, due primarily to an increase in professional fees and personnel costs, For 2025, we expect our G&A costs to be about $119 million, which includes approximately $15 million of non-cash stock compensation. Dry out costs for the full year 2024 was $133.3 million, which includes $10.2 million of engine overhauls. Full year 2024 dry out days affected utilization by about 6 percentage points. In the fourth quarter, we incurred $17.7 million in deferred dry out costs, compared to 35.5 million in the third quarter. Dry dock days affected utilization by about 5 percentage points during the fourth quarter. Dry dock costs for 2025 is expected to be approximately 113 million, which includes 21 million of engine overhauls. And we are expecting dry dock days to affect utilization by approximately 5 percentage points. Full year 2024, capital expenditures totaled 27.6 million. In Q4, we incurred $4.5 million in capital expenditures related to vessel modifications, ballast water treatment installations, and DP system upgrades. For the full year 2025, we expect to incur approximately $37 million in capital expenditures. The increase year over year is due to an increase in both DP system upgrades, ballast water treatment installations, Also contributing to the increase will be the cost for vessel IT infrastructure upgrades, vessel fuel monitoring systems, and our ERP software upgrade. We generated $107 million of free cash flow in Q4 compared to $67 million in Q3. The free cash flow increase, quarter over quarter, was attributable to an improved gross margin combined with lower dry dock and higher proceeds from asset sales. In the quarter, we sold two vessels for proceeds of $4.5 million. For the full year 2024, we made $100 million in principal payments on our senior student loan and $3 million on our vessel facility agreement. Previous calls, we have mentioned that we have no immediate need to refinance our debt as we have no near-term maturities, and that is still the case. However, as noted earlier, as we get closer to the expiration of call premiums and market conditions are favorable in the debt capital markets, will remain optimistic and weigh the cost benefit of pursuing a potential refinance before the make whole premium expires. During the year, we used $91 million in cash to reduce the number of our shares in the market, $44 million of which was used in the fourth quarter. We conduct our business in five segments. I refer to the tables in the press release and the segment footnote and results of operation discussions in the 10-K for more details of our regional results. In the fourth quarter, consolidated average day rates essentially were flat versus the third quarter. However, results varied by region, with the West Africa day rates improving 9% and our Middle East day rates improving by almost 5%. Revenues increased 13% in West Africa and 10% in the Middle East, while revenues were down in each of our other three regions. Gross margin increased by more than 3 percentage points. from the third quarter, increasing from 47.2% to 50.4% in the fourth quarter, which is our highest gross margin dating back to 2009. All regions except our APAC region experienced an increase in gross margin percentage read by the Middle East, which increased by over 10 percentage points due to higher day rates and higher utilization resulting from lower dried off repair days. In West Africa, we achieved an increase of almost five percentage points to 67% due to an increase in day rates combined with a slight increase in utilization, primarily due to fewer immobilization days. Our Europe and Mediterranean regions saw a gross margin increase of almost one percentage point due to the higher utilization resulting from lower dry dock days and lower operating costs, partially offset by slightly lower day rates. In our Americas region, we saw We saw a slight increase in gross margin due primarily to lower operating costs, despite seeing a small decline in average day rates and utilization. Our APAC region saw an increase in utilization as well as a decrease in operating costs. However, a decrease in day rates due to a higher mix of operating days in Southeast Asia versus Australia offset these positive variances and led to a small decrease in overall gross margins. In summary, we see 2025 improving slightly from 2024, and we expect to continue to generate strong free cash flows and profitability. In the near term, we will continue to invest in our fleet, pursue attractive M&A opportunities, and execute operationally at a high level. We will also continue to pursue share repurchases as an attractive investment and return of capital option for our shareholders. We remain optimistic about the fundamentals of the industry and the opportunities this will provide Tidewater in both short and long term. With that, I'll turn it back over to Quentin.

All right. Sam, thank you very much. Let's go ahead and open it up for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star one on your touchstone phone and you will hear a prompt that your hand has been raised. Should you wish to withdraw, please press star one again. If you're using a speakerphone, please flip the handset before pressing any keys. Our first question comes from the line of Jim Rolison from Raymond James. Sir, please go ahead.

Hey, good morning, guys. maybe taking a step back from kind of some of the near-term noise and just thinking of a bigger, longer-term question for you. If you look at the way the market has kind of been playing out, you know, we started out last year talking about rate increases and where this all leads to the potential long-term need for new builds and obviously what rates you require there. And then as we went through the year, you kind of ran into a bit of a buzzsaw with the white space picking up and And obviously that drove kind of the splattish year over year guidance. As you think out based on what we're saying today, you know, over the next two, three, four years, has your view of where the market ends up going changed because of this pause? Or is this just kind of become a timing question? I'm just kind of curious how your big picture thinking has changed over the past few months.

Hey, Jim. It hasn't changed. I mean, I wasn't anticipating this pullback. I thought we were going to drill through, you know, the rest of 24 into 25. But, you know, on reflection, seeing some of the things that were happening in West Africa from a supply chain perspective, as well as the regulatory issues in the UK, it doesn't surprise me. But the fact is, demand for hydrocarbons, as we talk to our customers, our NOCs and our supermajors and so forth, is very strong as we look out through 26 and 27. The amount of vessels that are out there is limited and is going to be decreasing as we go through the next two or three years just from attrition. So I'm very confident in the business over the next couple of years. I just see this as a sideways movement in 25 versus another leg up.

Gotcha. And maybe if I zoom back into kind of 25, You know, when you look at your start to last year with guidance, which I think we all thought were hoping was conservative and it proved out to be the opposite a little bit as things developed in the second half of the year. How comfortable or confident are you in guidance this year, given kind of your commentary around a little bit softer start to the year? You know, normally when you get farther out in the year, you have less visibility, but some of your comments seem to indicate maybe you have a decent amount of visibility in the back half year, but just trying to understand kind of your confidence level in guidance for 25 based on where you sit today.

Yeah, no, it's a great question. You know, when we initiated guidance for 24, we came out at 1.4 to 1.45 billion, and the year came in at 1.35 billion. So, yeah, and that's, I think, about 6% down from where we were hoping to be. And you take lessons from that, right? You know, one of the reasons that we didn't provide guidance on the Q3 call was that we wanted to double up our efforts on looking at 25. We wanted to get another three months into the forecast horizon. We wanted to have at least one and a half months under our belt before we gave the guidance. So, I do feel good about the guidance. Obviously, we've got about 81% covered from backlog. A lot of the open contracting to do is in the latter part of 25, but those conversations have already begun.

Got it. That's helpful. I'll turn it back and maybe get back in the queue. Thanks. Thanks, Jim.

Thank you. Our next question comes from the line of Greg Lewis from BTIG. Sir, please go ahead.

Yeah, thank you, and good morning, and thanks for taking my questions. I did want to follow up a little bit on the last question. More around utilization. Wes, I can appreciate, I think you kind of said roughly 68% of revenue is related or is in backlog for this year. My kind of question is, is there any way to kind of think about how that flows throughout the year? And I guess it's a two-part question, so I apologize. How it flows throughout the year, where I imagine Q4 is maybe 50% covered through backlog. And really what I'm trying... And so that's the first part of the question. And then the second part of the question... Are there any basins that are more exposed, i.e., is a basin like West Africa have more renewals this year than maybe, say, Asia? Just so we can kind of think about how we want to model utilization, you know, by region, you know, that would be helpful. Thanks.

Hey, Greg, it's Wes. Good morning. Just to be clear on the coverage, so about 81% of our revenue is covered. The 68% was the amount of days, available days, that we have contracted within that backlog. So we actually have some more capacity, if you will, on the available day side to go secure more revenue. So just to be clear as to what we were characterizing there. You know, the second part of your question, I think, in terms of I guess the cadence, if you will, the background coverage, certainly in the near term, we have more coverage and I don't think that should be surprising given the shorter term focus on contracting that we've done over the past few years. So, the near term is going to have more, um, backlog coverage, then, you know, call it Q3 or Q4 of this year. And then lastly, from a regional perspective, I'd say, you know, there's a reasonably tight range, if you will, around the amount of coverage we have by region. I'd say where we probably are on the lighter end would be in the Americas. And then on the higher end, probably Africa and Asia.

Okay, super helpful. And then just because it is, I guess I'll add a balance sheet question. It looked like receivables kind of ticked up in Q4, and I'm just kind of, and I guess I'm not a big working capital person, but I guess DSOs were up a couple days. As we think about what is driving that, is that kind of a year-end timing issue? I know there's been some conversations. We know you have work in Mexico. Just kind of try any kind of color around that uptick in the receivables and maybe when that could reverse. Thanks.

Hey, Greg, this is Sam. Yes, receivables that go up in Q4, and that's mainly driven by Mexico, as you can imagine. Pemex kind of drove that. You know, we haven't been paying a lot from Pemex. But, you know, hopefully we get paid here soon and you'll start seeing the days come down. The DSO did go up, I think, like two or three days, quarter over quarter. So, yes, MX was kind of the main driver. We do have some other areas in Africa. Other, you know, some of our other customers went a little bit long in Q4, but have since kind of caught up over the last couple of months.

Okay, super helpful. Thank you very much.

Our next question comes from the line of David Smith from Pickering Energy Partners. Sir, please go ahead.

Hey, good morning. Thanks for taking my question.

Morning.

I wanted to circle back to Sam's prepared remarks. The 2025 dry dock schedule representing 5% of vessel days. So I had thought that 23 and 24 were a pretty big concentration for the five year survey schedules. So, I wanted to ask if there were any delays of 2024 project plans that were pushing into 2025. If there's something disproportionately impacting the dry dock days beyond regulatory work, or maybe I was just mistaken on the survey concentration for 2023 and 2024.

Yes, so Dave, good morning. Yeah, I mean, 2023, we didn't have a lot of push into 2024, but we did have some We do have a few carryovers from 24 going into 25. I think 24 overall days impacted utilization by 6% or so, and we're seeing 25 come down a little bit. I mean, what does impact dry dock a little bit also is the amount of engine overhauls that are happening, which is a little bit higher in 25 than we had in 25.

Okay, I appreciate that color. And if I could ask one more, just regarding the leading-edge contract slide from the investor presentation, can you give us any color about the average duration for the new PSV term contracts in Q4? Or at least, you know, is that extending versus earlier quarters? Because I was just curious with, you know, demand growth on POS, at least in the first half, you know, how you're thinking about the trade-off of seeking longer-term, you know, duration with what looks like lower lead and edge rates.

Hey, Dave, it's Wes. I'll answer the first part of your question, and then I'll let maybe Piers speak to the contracting philosophy that we're contemplating these days. So what I can tell you is for the quarter across all the fleet, we entered into 31 new term contracts, and the average duration of those contracts was about 12 months.

Yeah, so Dave, I'll just add a few thoughts around that. I mean, obviously there's some longer term contracts that we put in place that we foresaw some of the, maybe a little bit of that softness. But I think, as I said in my comments, in contracting strategy, we still believe in this market. So we're still ostensibly going short. We look forward because we think there's a lot of opportunities still in 26 and 27 going forward. So we don't want to lock everything up. But yeah, Q4, we did take a few longer term contracts to get us through 25.

That is helpful context. Thank you very much.

Thank you. Our next question comes from the line of Frederick Steen from Flex and Securities. Sure, please go ahead.

Hey, Quinten and team, hope you're all well. Thank you for the commentary, as always. I wanted to, you know, 2035, I think it's been well covered here already, but as we think about 2026 and 2027, you know, I think I share your remarked view about grilling activity recovering at some point in 2026, etc., But are you able to share some color in terms of contract coverage for 2026 already? Or are you with the new contracts that you are going into right now? Are there any of those that actually start up as far out as 2026? And how confident can you be at this stage that we could potentially see another leg up in 2026 versus 2027? 5 on financial performance.

Hey, Frederick, it's it's West. I'll answer the 1st part. I think we're comfortable to give the 2025 backlog coverage for now as we've done in prior calls kind of the current year backlog and we'll hold off on providing the outer year backlog. And then as it relates to the timing of contracts, perhaps out into 26, again, I'll let Piers speak to the current contracting activity.

Yeah, thank you. Hi, Frederick. Yeah, we are starting to see discussion starting with some of our oil and gas companies about 2026 in various regions. So it does give us confidence that there is a good demand a spike going to be coming in 26 and 27 and that's across all regions. I mean, even in the UK as well, there's, as I mentioned, some discussions we're having around decommissioning projects as well. So, you know, I think it's, you know, there's a confidence level internally that we're going to start seeing a real uptick in 26 and we've started some of those sort of pre discussions with customers about availability of vessels and stuff like that for 26 and 27 as well. So they haven't turned into firm tenders yet, but there's definitely a lot of inquiry coming from the oil companies, making sure we have availability and looking at the market, which is pretty common, and more than we saw perhaps last year. So that gives us a lot of confidence about the future.

Yeah, well, thank you. And then second question, I want to turn it to the supply side a bit. Quint, I think you mentioned some, you know, that you're always looking for creative M&A transactions, but that such transactions aren't necessarily easily to get through from time to time, at least not in markets with high volatility. But if we put M&A aside for a second and we look at your own current fleet, the OSV count, at least among the own vessels, have been sliding with just a couple of vessels every quarter. And I'm sure this kind of relates to maybe selling off some non-core assets, et cetera, but all your assets now are effectively active. I wanted to see if you have any comments around further organic fleet size adjustments. And in general, both for your own fleet and the market as a whole, do you think there are any regions that are more prone to such supply adjustments? Thanks.

Yeah, sure. Sure, Frederick. So, you know, on the supply side, clearly, you know, buying in bulk is easier for us. So, you know, if we can pick up fleets of 20 or 30 vessels, Normally, we can get a better price on average as opposed to going to the secondary market and picking up busts here and there. Because generally, when you're acquiring a company, there's some lifting that you've got to do. And you get some cats and dogs along with it, and you solve somebody else's problem, whether it's a capital structure problem or somebody's just looking to get out. And so it's a lot easier for us to move the needle. when we're doing fleet acquisitions. And so we look to that route more than just one-off vessel acquisitions, but we're not against one-off vessel acquisitions at all as well. On the attrition side, you know, we've got a fleet of 200 boats, and like everybody in the world, and similar to the attrition comments that we had on the entire fleet, you know, you've got fleets, you've got boats that are approaching 25 years old, and they're just not economical to work anymore. So we'll end up scrapping them or selling them into an obscure market where they won't be competing with us going forward. And then on the, just the new bill acquisition, you know, I am certainly very confident in where this market is going to be in 27 and 28. But, you know, I believe the world has got enough vessels. And I still think that there's opportunities to pick up fleets at a discount. And so I'll be looking to invest a little bit more in older vessels than any new vessels at this point.

Super. That's very helpful, as always. Thank you so much. That's it for me. Have a good day. Thanks, Roger.

Thank you. Again, should you have a question, please press star followed by the number one. Our next question comes from the line of John Shane from Daniel Energy Partners. Sir, please go ahead.

Thanks. Good morning. Good morning. First question I had is just could you speak a little bit more on the debt markets? Not just as it relates to Tidewater, but what you're seeing out there. And the reason I ask is why you've talked about finding an acceptable solution long term for your capital structure. I would think that if Tidewater hasn't found something optimal, might cause some challenges for others to do things like build new assets at a fast clip. So to the extent you can, could you speak to what you're seeing out there with respect to capital available to those in the OSC space today?

Josh, it's West. Yeah, absolutely. And it's a good question. And I think there's maybe a couple different ways you can look at it. So, you know, For Tidewater, we're in a fortunate position that we have critical mass, we're publicly traded, and we have a very strong balance sheet. And the type of financing we're looking at is really kind of corporate debt, right? And as we've said, we're not really pushed to do anything on the debt capital structure. We'd like to. We're opportunistic. There's a point in time where that makes sense. And as we evaluate the debt capital markets and the bank markets, they appear to be constructive. But again, in our particular position with the make-hold and some of the frictional costs that I described earlier in my comments, we want to be judicious about how we approach that and weigh that relative cost-benefit. There's a difference between corporate level debt, debt capital markets, bank markets for a decent sized US public company as compared to perhaps what the project finance market or an equivalent market may look like for new build financing. And over the past few years, I should say, Based on our understanding and conversations within the market landscape, to understand what the appetite is, that appetite still seems to be relatively limited. There have been a number of banks or private financing vehicles or different silos of capital Uh, that had a very unpleasant experience in the last down cycle and I think there's still some scar tissue there as it relates to contemplating new bill financing. So I think for the marginal, um. perspective vessel builder, the appetite in those financing markets is still fairly limited. And what else I would say, and Pierce has talked about this a lot over time, we collectively have talked about this a lot over time, that the day rates and the contract terms still do not really support the new build concept, and that the raw economics, in our belief, do not support it, and contract terms do not really support it. So, in order for a financing party to get comfortable with that arrangement, the commercial terms would have to be appropriate to protect them from a downside perspective. There are some differences, I think, in terms of what we're looking at as it relates to debt capital and, again, what perhaps the marginal vessel builder may be looking at. And we're fortunate that that situation is more palatable than for others. But we do think there are still some challenges out there as it relates to new bill financing.

Okay, thanks. And then just as my follow-up, return on capital is something that Tidewater's been pretty aggressive on over the last 24 months, essentially maxing out the buyback allowed under the current capital structure that we've referenced. Longer term, could you speak to how you plan on handling this? Is there a long-term percentage of free cash flow you're thinking about from a return to shareholder perspective? I'm just curious how you're thinking about it over the intermediate to long term.

So under the intermediate term, what I want to do first is just get a better long-term capital structure in blips and know what's possible and know what the revolver capacities are. So then we can figure out how low we can bring our cash balances down. And then, of course, just get a better assessment on the cycle. So I don't have any percentages for you today. But the indications of what we did in 24 should be a good guide as what we're comfortable doing as we move forward. The only thing that I don't want to do is put any sort of financial distress or concern on the company.

Understood. Thanks. I'll turn it back. Thanks, Josh.

Our last question comes from the line of Don Chris from Johnson Riser. Please go ahead.

Good morning, gentlemen. Hope you all are doing well. I wanted to ask about Asia Pacific and in specificity Malaysia. If I remember correctly, back late last year, the tax disagreement had a framework in place, and we're moving forward to resolve that tax dispute amongst the states. And just didn't know if there was any update to that. And if I remember correctly, you had six vessels that were on pretty high day rates in the area. Any visibility on to when those could go back to work?

Yeah, hi, Donald Spears. So I sort of mentioned a little bit earlier. So Malaysia has resolved or Petronas has resolved those. We'll come to an agreement with Sarawak and Sabah now. So what we expect to happen is that after the Eid holidays, they'll start putting vessels back on. It tends to take a little bit longer in age Pacific to get things done, but I think during Q3 and Q4 we expect the vessels that have been sort of sitting around not doing much coming back on stream as Petronas comes back and retenders from that side. And in turn that will allow us to tighten up our own vessels. We have a, you know, the fleet we have there is focused on the larger size Again, it's supporting the drilling there. So, yeah, we would expect in the second half of this year we'll start putting our, you know, if they're available, some vessels back into Malaysia as well. So, yeah, it's a positive that's been resolved.

I appreciate that. And just one question on kind of the current administration that just took over and their energy policies kind of in the Gulf of America. I mean, obviously this year is going to be a little bit weak with Mexico, et cetera, in that region. But as you look out to 26, are you getting increased calls for vessels to go back to work in the Gulf of America as we look to 26 and 27?

Yeah, we've seen actually a couple of calls. Tenders in the last few weeks for some additional vessels on top of what is already here and an expectation of some maybe one or two extra rigs coming in. But that was also talked about last year as well. So it's difficult to tell how much is down to the new administration or what was already planned by the IOCs. But we certainly know some of the tenders to the vessels. We expect some uplift in the Gulf of America into 2026. But yeah, we're seeing a little bit of change. It's still too early as well, I think, to really get a full read as to how it will really affect the region.

I appreciate the color. I'll turn it back. Thanks, Gus.

Thank you. That concludes our Q&A session. I will now turn the call back to Quintin Neem, our CEO, for closing remarks.

All right. Well, thank you, everyone. We will update you again in May. Goodbye.

That concludes our conference call for today. Thank you for joining, and you may now disconnect.