Tidewater confirms the ‘inflection point’ in the offshore support vessel market

Tidewater Inc. says. (NYSE:TDW) of Houston, owner and operator of the world’s largest fleet of offshore support vessels, this year marks an inflection point for the industry as key metrics point to better times ahead.

Tidewater this week announced its financial statements for the second quarter and the first half that showed revenue of $163.4 million and $269.2 million, respectively, compared to $90 million and $173.5 million, respectively, in 2021. Net losses came in at $25.6 million and 37.7 million dollars, which is also an improvement from last year.

But despite the red ink, things are looking better for the offshore support vessel sector as momentum builds on the back of higher oil prices. Average day-date rates in the second quarter rose to $12,544, up 17% from the first quarter and are now at their highest since the third quarter of 2016.

Global fleet usage also increased significantly year-over-year in the second quarter, from 57.0% to 75.5%, while the active number of vessels in the Tidewater fleet increased from 118 to 172, including its acquisition of Swire Pacific Offshore. The acquisition, which ended in April, brought Tidewater’s fleet to a total of 203 vessels, including 174 OSVs as well as crew boats, tugboats and maintenance vessels.

The findings are the latest addition to a growing sense that the offshore oil and gas market is finally turning around after 8 years of pain.

“We believe the second quarter of 2022 marks an inflection point in the industry that we have waited for so long and is now evident in our financial performance,” said Quentin Knin, President and CEO of Tidewater. “Revenue, gross margin, average day rate, and utilization all improved significantly during the second quarter as construction momentum in offshore activity reached critical mass.”

While Kneen notes that second-quarter results reflect the impact of Tidewater’s Swire Pacific Offshore (SPO) acquisition, some key metrics reveal that “the improvement is clear.”

“The average daily price has improved by about $1,900 per day sequentially, which is more than the improvement we would normally expect to see over a full year in a normal market cycle,” Kneen said. Ship-level cash margin improved to 38%, up about four percentage points and continuing to purposefully outperform the 30% target we’ve discussed in recent quarters. These improvements during the quarter, particularly the movement in today’s rates, indicate continued demand growth as offshore activity continues to increase and as ship supply fundamentals continue to work in our favour given the lack of vessels available in the market today.”

Looking ahead… “We expect activity to continue to improve over the remainder of 2022 with another possible increase in 2023,” Kneen said.