Tidewater Inc. Price & Performance (TDW)

Good morning, everyone, and welcome to Tidewater's fourth quarter and full year twenty twenty four earnings conference call. 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 forward looking and referring to our plans and expectations. Risks and uncertainties and other factors that may cause the company's 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 ks for additional details on these factors These documents are available on our website at tvw.com or through the SEC at sec.gov. Information presented on this call speaks only as of today, 02/28/2025. Therefore, you're advised that any time sensitive information may no longer be accurate the time of any replay. Also during the call, we'll present both GAAP and non GAAP financial measures. Reconciliation of GAAP to non GAAP financial measures can be found in our earnings release located on our website at ttw.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 twenty twenty four earnings conference call.

In my prepared remarks this morning, I'll touch on some of the notable achievements Tidewater realized during 2024 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. [indiscernible] 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 net income nearly doubled Adjusted EBITDA grew by nearly 50% free cash flow tripled net debt was lowered by $149,000,000 and we reduced our share and share equivalents by 1,700,000.0 shares. The position we hold today in the offshore market and our financial performance during 2024 is the product of a multiyear 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 but the critical element is daily execution. Across the entire organization. So as happy as I am with financial results we posted for 2024, I am equally as grateful to the entire Tidewater team globally for the continuous effort to build Tidewater Tidewater safest most sustainable, most reliable, most profitable high 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 twenty twenty three and actively repurchased shares in the open market each quarter of twenty twenty four. We repurchased $91,000,000 of shares in the market during 2024 and when combined with cash in exchange for the payment of employee taxes, used $119,000,000 of cash to manage down the number of shares outstanding. In addition, we used $103,000,000 of cash to pay down the required [indiscernible] We ended the year with right at $310,000,000 of net debt, with the cash we expect to generate in 2025, we we will have more than paid down the Solstad fleet acquisition in just under thirty months. Have discussed our philosophy on leverage, the balance sheet and capital allocation on prior calls, And I believe the Solstad example I just referenced is an illustration of that philosophy. Accretive 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 delever 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 market 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 return capital to shareholders, but also a way that allows us to capitalize on vessel value inefficiencies relative to target We continue to weigh the relative merits of share purchases and M and A and we believe that there are a number of fleets globally that would fit well under the Tidewater 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. 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.

It's why we continue to develop and pursue geographic diversification. 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 five 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 a deceleration in drilling demand does have an impact on our ability to push day rates. 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 sub sea 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 in an exciting growth driver for the offshore vessel demand. And 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 in drilling activity activity as we progress beyond 2025 coupled with the growing subsea demand and material FPSO deliveries, we 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 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 newbuild vessel announcements over the past few quarters. While we still believe that current day rates and contract terms don't justify newbuild ordering, we have seen orders from a few vessel owners. Newbuild PSVs represent roughly 3% of existing PSV supply and we believe that natural vessel attrition over the coming years will likely offset expected additions to the global fleets. It's worth noting that for vessels that were ordered in conjunction with the tender and contract award in Brazil, day rates approached $60,000 per day for long term contracts. With equivalent vessels currently in Brazil at day rates of approximately $40,000 per day. These new rates are an indication to us that when appropriate commercial relationship and indicative of the percentage increase in day rates we see as possible as the offshore upslug coke continues. We watch newbuild 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 newbuilding 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 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 $331,000,000 of free cash [indiscernible] Over the same time frame, we used $119,000,000 of cash to reduce our share count through our open market repurchase program and our internal program to allow forfeiting of employee shares to pay their cash tax liability on vesting. In addition, we used $103,000,000 of cash on the for a total of a total of $222,000,000 or 67% of free cash flow allocated directly to equity enhancing uses. We have repurchased the maximum allowance of shares in the open totaling $126,000,000 We are pleased to announce that our Board of Directors is off Based on the language in our outstanding debt that governs our share repurchase allowance, have full access to the $90,300,000 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 set down to $65,000,000 in 2025 versus $103,000,000 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 to stab We remain opportunistic on pursuing a potential refinancing we have no near term maturities and no immediate need to access to 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 twenty twenty eight unsecured Nordic bonds issued in connection with the acquisition of PSVs from Solstad in 2023. [indiscernible] make whole associated with these bonds lapses in July of twenty twenty five.

The make whole 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 coal lapsing. [indiscernible] Turning to our leading edge dayrates by vessel class, which were posted in our investor materials yesterday. We did see some pressure on leading edge dayrates 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 adjustments of the regulatory and tax structure in The UK and the subsequent impact to demand in this region likely leading to pressure on dayrates. A combination of lower demand along with the fourth and first quarters Tidewater representing the least favorable seasonal periods of the calendar year impacted day rates materially in this region and are and on our reported leading edge dayrates. Outside of The UK, during the fourth quarter, we entered in term contracts for our largest PSDs in various other regions with the contracted day rate showing resilience from prior period leading edge day rates.

We experienced very similar regional bifurcation in our midsized PSUs Well, with rates under pressure in The UK, the 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 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 dayrates have come under pressure in The UK, and we could potentially experience pockets of pricing pressure in the earlier parts of '25, There is still a meaningful amount of room between our printed dayrates and prevailing leading edge dayrates 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 $1,320,000,000 to $1,380,000,000 and a full year gross margin range of 48% to 50%. With our average printed day rates up expect first quarter revenue to decline by approximately 6% as compared to the fourth quarter.

With dayrates contributing about two percentage points of 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. As expected, Subsea and production vessel support activity increases and we experienced a reduction in drydock 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 $973,000,000 of revenue for the remainder of 2025. Approximately 68% 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 drydocks. With that, I'll turn the call over to Pierce for an overview of the commercial landscape.

Thank you, West, and good morning, everyone. Before I talk about the market, and put some of Quentin and West's comments into a wider global context, I wanted to mention that we will be releasing our fifth sustainability report next week.

Reports the global team effort 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 of the LSE market. The sector remains supply side favorable little prospect of capacity expansion from the stacked fleet or from the order book. Which is still quite modest. As Quentin mentioned, we did see a small number of newbuild 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 favorably favorably to our fleet average age of 12.6 years. Which is of particular importance when we see some softening in demand as charters always lean towards working with the youngest spacest 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 'twenty four, We did we still feel that with the favorable supply story, 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 demand 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 U. K. Remains. And as Wes mentioned, this area has seen the most pressure on rates. But to put that into context, PSC turn rates still remain healthy for the North Sea and are still above where rates were in the last upcycle of 2010 to 2014. Looking beyond 2025, we expect rates to pick up again in 2026 as additional decommissioning projects come online and U. K. North Sea PSV supply shrinks as vessels move to other markets. In Norway, expectations are still for a robust 2025, the PSV market. With Equinor rumored to be shortly releasing a tender for additional long term PSCs 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 twenty twenty five. 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.

We in the last few weeks, we've also started to see some new tenders related to EPCI work. Which while shorter term in length, will focus on the millennium availability gaps that may come up in the latter half of twenty twenty five. The longer term outlook for new drilling activity still remains bullish commencing the second half of twenty twenty six. In The Middle East, the market remains very tight 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. Expect the region to remain supply constrained in the short to medium term. And that 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 us as such rate increases tend to take longer to push through than in other areas of the world. But we do believe that we will 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 Quentin mentioned, the latest newbuild tender from Petrobras would indicate that rates can be further improved also show that there is a long term demand story in the country beyond just the next few years. Mentioned on the last call, Mexico's long term outlook still remains uncertain. Indications are that the government will be providing clarity around their production growth plans for PMEC. In Q2. And until then, we see Mexico as being steady state for the remainder of the year.

The U. S. And Caribbean had a soft Q4 and we expect that to continue into the first half of twenty twenty five, but we are seeing some positive momentum for long term future work in The Caribbean from the second half of twenty twenty five, 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 Sabo and Sarawak, and tendering activities expected to start again after the Eid holidays. Which should mean that the backlog of Malaysian OSVs that have been pressuring rates in the will subside as they go back to work in Q3 and Q4 of twenty twenty five. This in turn should mean that the supply demand balance in the region returns to some level of parity in the second half of twenty twenty five. 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 equitable, as we believe in the long term fundamentals of our business, we will continue with our short term chartering strategy and expectation of an improving market again in 2026.

Overall, as mentioned by Quentin, we're very pleased with how our global team both on and offshore performed through 2024. And while we saw saw some softening in the offshore space in the latter half of twenty twenty four, 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 OSV 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 twenty twenty four compared to the third quarter of twenty twenty four. As noted in our press release filed yesterday, for the year, we generated revenue of $1,350,000,000 dollars compared to $1,000,000,000 in 2023. An increase of 33%. The increase in average dayrates and the full year effect of the acquired Solstad vessels drivers for the revenue increase. As previously mentioned on the call, we expect 2025 revenue to be between $1,320,000,000 to $1,380,000,000 for the full year.

Gross margin for the year was $649,200,000.0 compared to $449,100,000 in 2023.

In net income, in 2024, our net income was $180,700,000 compared to $97,200,000 in 2023.

Operationally, average day rates improved almost $4,500 per day for the full year to twenty one thousand two hundred and seventy three and active utilization decreased by approximately two percentage points to 79.2% due to the higher dry dock and idle days. However, the strength in the dayrates boosted our gross year over year to 48.2%. For 2025, we expect consolidated gross margin to be between 4850%. 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 drydocks and a lower number of vessel operating in Australia. 72% of our drydock days are expected to be in the first half of the year.

Active utilization for 2025, which includes stacked which excludes stacked vessels should be lower in Q1 and Q2 than increase during the second half of the year as drydock days decrease. Adjusted EBITDA was $559,600,000 for 2024, compared to $386,700,000 in 2023. We also generated $331,000,000 of free cash flow, an increase of $219,600,000 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 $36,900,000 or $0.7 per share. In the quarter, we generated 345,100,000.0 compared to $340,400,000 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 drydock and mobilization days. In the quarter, we stacked an over twenty year old vessel due to declining marketability of the vessel. The gross margin in the fourth quarter was 174,000,000 compared to $160,800,000 in the third quarter. Adjusted EBITDA was $138,400,000 in the quarter compared to 100 and and $42,600,000 in the third quarter.

In Q4, we recorded a $14,300,000 FX loss that negatively impacted our adjusted EBITDA, of which $12,100,000 was non cash.

Vessel operating costs for the fourth quarter were $170,400,000 compared to $178,700,000 in Q3. In the period, we did have a few idle vessels So we were able to reduce crude to a minimum manning level Additionally, we had a couple of vessels operating in Southeast Asia instead of Australia. Where Mariner cost is lower. The combination of the two factors contributed to a significant decrease in crew salaries and travel costs. Also, we had three eighty four fewer drydock and 108 fewer mobilization days, which also reduced our supplies and consumable expense for the quarter. For the year, our total G and A costs was $110,800,000 which is $15,500,000 higher than 2023.

Primarily due to an increase in personnel costs and benefits, stock based compensation, higher professional fees and that includes the full year impact of the Solstad acquisition. G and A costs for the quarter was $30,700,000 $2,200,000 higher than the third quarter due primarily to an increase in professional fees and personnel costs For 2025, we expect our G and A costs to be about $119,000,000 which includes approximately $15,000,000 of non cash stock compensation. Dry out costs for the full year 2024 was 133,300,000.0 which includes $10,200,000 of engine overhauls. Full year twenty twenty eight-twenty twenty four drydock days affected utilization by about six percentage points. In the fourth quarter, we incurred $17,700,000 in deferred drydock costs compared to $35,500,000 in the third quarter. Drydock days affected utilization by about five percentage points during the fourth quarter product costs for 2025 is expected to be approximately $113,000,000 which includes $21,000,000 of engine overhauls. And we are expecting drydock days to affect utilization by approximately five percentage points. Full year 2024 capital expenditures totaled $27,600,000 In Q4, we incurred $4,500,000 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 $37,000,000 in capital expenditures The increase year over year is due to an increase in both DP system upgrades balanced 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 $107,000,000 of free cash flow in Q4 dollars dollars in Q3. The free cash flow increase quarter over quarter was attributable to improved gross margin, combined with lower drydock and higher proceeds from asset sales. The quarter we sold two vessels for proceeds of $4,500,000 For the full year 2024, we made $100,000,000 in principal payments on our senior secured loan and $3,000,000 on our vessel facility agreement. Previous calls, we have mentioned that 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 to the expiration of call premiums and market conditions are favorable in the debt capital markets we'll remain optimistic and weigh the cost benefit pursuing a potential refinance before the make whole premium expires. During the year, we used $91,000,000 in cash to reduce the number of our shares in the market 44,000,000 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 ks for more details of our regional results.

In the fourth quarter, consolidated average day rates essentially were flat versus the third quarter. Iver results varied by region with the West Africa dayrates 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 three percentage points. Experienced an increase in gross margin percentage led by The Middle East which increased by over 10 percentage points due to higher day rates and higher utilization resulting from lower drydock 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 mobilization days. Our Europe and Mediterranean regions saw a gross margin increase of almost one percentage point due to the higher utilization resulting from lower drydock days and lower operating costs. Partially offset by slightly lower day rates. 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 higher mix of operating days and Southeast Asia versus Australia offset these positive variances and led to a small decrease in overall 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 and A opportunities and exceed 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 Tidewater. In both short and long term. With that, I'll turn it back over to Quentin. All right. So Sam, thank you very much. Let's go ahead and open it up for questions.

Ladies and gentlemen, we will now begin the question and answer session. Should you wish to withdraw Our first question comes from the line of Jim Rolison from Raymond James. Sir, please go ahead.

Hey, good morning, guys.

Quentin, maybe taking a step back from kind of some of the near term noise and just thinking a bigger longer term question for you. If you look at the way the market has kind of been playing out 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 flattish year over year guidance. As you think out based on what traditionally you're saying, over the next three, four years, has your view of where the market ends up going changed because of this pause or is this just kind of a become a timing question? I'm just kind of curious how your big picture thinking has 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 the rest of 24 into '25. But on reflects seeing some of the things that were happening in West Africa from supply chain perspective as well as the regulatory issues in The UK.

It doesn't surprise me. But the fact is, demand for hydrocarbons is talk to our customers, our NOCs and our super majors and so forth. Is very strong as we look out through 2026 and 2027. Amount of vessels that are out there is 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 sideways movement in 2025 versus another leg up.

Got you. And maybe if I zoom back into kind of '25, When you look at your start to last year with guidance, which I think we all thought were hoping where it was conservative and it proved out to be the opposite a little bit things develop in the second half of the year.

How comfortable or confident are you in guidance this year given kind of that your commentary around a little bit softer start to the year, Normally, when you get farther out in the year, you have less visibility, but some of your comments seem to indicate maybe you have decent amount of visibility in the back half of the year. But just trying to understand kind of your confidence level And guidance for '25 based on where you sit today?

Yes.

No, it's a great question. When we initiated guidance for 2024, we came out at $1,400,000,000 to $1,450,000,000 and the year came in at 1.35 So yes, and it's I think about 6% down from where we were hoping to be. And you take lessons from that. Right? 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 point five months under our belt before we gave the guide. 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 2025, but those conversations have already 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.

Yes. 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, West, 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 like Q4 is maybe 50% Okay.

Recovered 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 by region 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. The second part of your question, I think in terms of I guess, the cadence, if you will, of the backlog coverage, certainly in the near term, we have more coverage and I don't think that should be surprising given shorter term focus on contracting that we've done over the past few years.

So the near term is going to have more backlog coverage than call it Q3 or Q4 of this year. And then lastly, from a regional perspective, I'd say 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 after Okay, super helpful. And then just because it's 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 of days. I guess as we think about what is driving that, is that kind of a year end timing issue? I mean, I know there's has 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 We haven't been paying a lot for Pemex. But 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, 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. Wanted to circle back to Sam's prepared remarks.

The 2025 drydock schedule representing 5% of vessel days, So I had thought that '23 and '24 were 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 pushed 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 'twenty three and 'twenty four?

Yes.

So Dave, good morning. Yes, I mean '23, 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 agent overhauls that are happening which is is a little bit higher in 2025 than we had in '24.

Okay.

Appreciate that color.

And if I could ask one more, just regarding the lead in 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 is that extending versus earlier quarters?

Because I was just curious demand growth on on FAS, at least in the first half. How you're thinking about the trade off of seeking longer term duration with what looks like lower lead in edge rates.

Hey, Dave, it's Wes. I'll answer the first part of your question and then I'll let maybe Pierre 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 twelve months. Okay.

Yes. 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 when we look forward because we think there's a lot of opportunities still in 2026 and 2027. Going forward. So we don't unlock everything But yes, Q4, we did take a few longer term 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 Frederic Stein from Clarksons Securities. Sir, please go ahead.

Hey, Quentin and team. Hope you're all well. Thank you for holding at the commentary. As always, I wanted to 2025, I think, has been well covered here already, but we think about 2026 and 2027, I think I share your remark with you about drilling activity recovering at some point in 2026, etcetera. But are you able to share some Caller, 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 and how confident can you be at this stage that we could potentially see another leg up in 2026 versus 2020 on financial performance. Hey, Frederic, it's West. I'll answer the first part. I think we're comfortable to give the 2025 backlog coverage from 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 2026, again, I'll let Pierre speak to the current contracting activity. [indiscernible] Thank you. Hi, Frederic. Yes, we are starting to see discussion starting with some of the oil and gas companies about 2026 in various regions.

So it does give us confidence that there is a good demand spike going to be coming in 'twenty six and 'twenty seven and that's across all regions. I mean even in The U. K. As well there's as I mentioned, some discussions we're having around decommissioning projects as well. So So I think there's a confidence level internally that we're going to start seeing a real uptick in 2026 and we've started some of those pre big discussions with customers about availability of vessels and stuff like that. '26 and twenty seven 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 in looking at the market, which is pretty common. So and more than we saw perhaps over last month from last year. So that gives us a lot of confidence about the future. [indiscernible] And then second question, I want to turn it to the supply side a bit. Quentin, I think you mentioned some accretive M and A transactions, but such transactions aren't necessarily easily to get through from time to time.

Market at least not in markets with high volatility. But if we put M and A aside for a second and we look at your own current fleet, the OSV count at least among the own vessels have been [indiscernible] with just with a couple of vessels every quarter and I'm sure sure this kind of relates to maybe selling off some non core assets, etcetera, but all your assets now are effectively active.

I wanted to see if you have any comments around further [indiscernible] 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? [indiscernible] [indiscernible] buying in bulk is easier for us. So if we can pick up fleets, 20 or 30 vessels, Normally, we can get a better price on 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 saw somebody else's problem, whether it's a capital structure problem or somebody's just looking to get out. And so 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 acquisition but we're not against one off vessel acquisitions at all as well.

On the attrition side, 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've got fleets and you've got boats that are approaching 25 years old and they 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 Newbuild acquisition, I am certainly very confident in where this market is going to be in 2027 and 2028. But 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 than any new vessels at this point. Super.

That's very helpful as always. Thank you so much. That's [indiscernible] Thanks, Roger.

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 market 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 capital structure. I would think that 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 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.

Yes, absolutely. And it's a good question. And I think there's maybe a couple of 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, across makes sense.

And as we evaluate the debt cap markets and the bank markets, they appear to be constructive. But again, our particular position with the the make hole 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. Now, there's a difference between corporate level debt, debt capital markets, bank markets for a decent sized U. S. Public company as compared to perhaps what the project finance market or an equivalent market may look like for newbuild financing. And over the past few years, I should say, based on our understanding and conversations within the market landscape to [indiscernible] There have been a number of banks or private financing vehicles or different silos of capital. That had a very unpleasant experience in the last down cycle and think there's still some scar tissue there as it relates to contemplating newbuild financing. So I think for the marginal prospective 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 don't really support the new build concept the raw economics in our belief don't support it.

And contract terms don't really support it. So in order for financing party to get comfortable with that arrangement, the commercial terms would have to be appropriate to protect them from a downside perspective. So 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's still some challenges out there as it relates to newbuild financing.

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

So under the intermediate termite, what I want to do first is just get a better long term capital structure in place and know what's possible and know what the revolver capacities are. So we know we can figure out how low we can bring our cash balances down and then of course just give a better assess on the cycle. But so I don't have any percentages for you today. But the indications of what we did in 2024 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 Crisp from Johnson Rice. Sir, Good morning, gentlemen. Hope you all are doing well.

Wanted to ask about Asia Pacific and in specificity Malaysia, If I remember correctly, back late last year, the the tax disagreement was kind of that a framework in place and we're moving forward to resolve that tax dispute amongst states. And just didn't know if there was any update to that and I remember correctly, you had six vessels that were on pretty high day rates in the area. Any visibility onto when those could go back to work? [indiscernible] Donna Spears. So I sort of mentioned a little bit earlier. So Malaysia has resolved or Petrobras has resolved those come from an agreement with Saralak and Sala now. So what we expect to happen is that after the Eid holidays, they'll start putting vessels back on tends to take a little bit longer in Asia Pacific to get things done, but I think during Q3 and Q4, we expect vessels that have been sort of sitting around not doing much [indiscernible] back on stream as Petrobras comes back and retenders from that side. And in turn, that will allow us to tighten up our own vessels. We have a the fleet we have there is focused on the larger size PSCs.

So again, it's supporting the drilling there. So we would expect the second half of this year, we'll start putting up if they're available some vessels back into Malaysia as well.

So yes, it's a positive that's been resolved.

I appreciate that. And just one question on kind of the current administration that that just took over in their energy policies kind of in the Gulf Of America, Any I mean, obviously, this year is going to be a little bit weak with Mexico, etcetera, in that region. But as you look out to '26, so you [indiscernible] increased calls for vessels to go back to work in the Gulf Of America as we look to 'twenty six and 'twenty seven?

Yes, we've seen actually a couple of tenders in the last few weeks for some additional vessels on top of what is already here and the 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're certainly some of the tenders for the vessels, we expect some uplift in the Gulf Of America into 2026, but yes, we're seeing a little bit of change. It's in terms of 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, guys.

Thank you.

That concludes our Q and A session. I will now turn the call back to [indiscernible] for closing remarks. All right. Well, thank you everyone. We will update you again in May.

Goodbye.

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