Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tidewater Inc (TDW, Financial) reported a significant improvement in free cash flow, generating $67 million in Q3 and nearly $224 million year-to-date, which is $174 million more than the same period last year.
- The company has successfully increased average day rates by over 5% in the third quarter, with leading-edge day rates also showing positive momentum.
- Tidewater Inc (TDW) has repurchased approximately $83 million of shares in the open market since the inception of the buyback program, demonstrating a commitment to enhancing shareholder value.
- The company anticipates continued improvement in free cash flow generation over the coming quarters, supported by long-term fundamentals.
- Tidewater Inc (TDW) has a strong outlook for the offshore vessel market, with expectations of leading-edge day rates continuing to increase through 2025 and 2026 due to supply constraints and demand growth.
Negative Points
- Utilization rates decreased slightly in Q3 due to increased idle time and higher-than-anticipated drydock days, particularly in the West Africa and Europe and Mediterranean segments.
- The North Sea market, especially the UK sector, is expected to be weaker due to typical winter seasonality and regulatory and tax program adjustments, which are putting pressure on day rates and utilization.
- The outlook for the timing and pace of growth in offshore vessel activity in 2025 is less clear, with some customers taking a measured approach to executing incremental growth projects.
- Tidewater Inc (TDW) is holding off on providing guidance for 2025 due to lower visibility and uncertainty in the market.
- The company experienced higher-than-expected operating costs in Q3, including increased repair costs, fuel expenses, and penalties due to delays in returning vessels to work.
Q & A Highlights
Q: Can you provide a high-level overview of the factors affecting your guidance for 2025, particularly regarding day rates and utilization?
A: Quintin Kneen, President, CEO & Director: We expect day rates to increase next year, though the magnitude is uncertain. We anticipate a lower drydock year, which should improve cash flow. Overall, we expect 2025 to look better than 2024 on an all-in basis. (West Gotcher, VP of Finance & Investor Relations)
Q: Are current market conditions creating potential M&A opportunities, given the pause in activity?
A: Quintin Kneen, President, CEO & Director: It's too early for that. While uncertainty should encourage sellers to consider deals, people are not as reasonable as expected. We remain patient and confident in repurchasing our shares at current levels, but we are still actively engaged in M&A discussions globally.
Q: For Q4 guidance, you mentioned utilization is expected to be up, but revenue flat. Does this imply a decrease in average day rates?
A: West Gotcher, VP of Finance & Investor Relations: Yes, that's correct. The pressures in the UK sector and project delays in the Americas and Asia Pacific are contributing to these moving pieces within the Q4 guidance.
Q: Can you elaborate on the drydockings in Q3 and how they might affect 2025?
A: Samuel Rubio, Executive VP & CFO: In Q3, we had about 200 excess drydock days, with 150 due to longer durations and 50 due to timing differences. We expect fewer drydock days in 2025, which should improve utilization and reduce operating costs.
Q: What is the current status of new vessel construction, and are there any plans for new builds?
A: Piers Middleton, Executive VP & Chief Commercial Officer: We haven't seen any new PSV construction requests, except for Petrobras tenders. The market remains supply-constrained, with no significant new builds expected soon.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
