Q2 2022 Tidewater Inc Earnings Call
some of our regions and vessel classes, but in short, the most important indicator in the strength of our business day rate increased by nearly $1900 per day sequentially.
With 107 to working vessels, that's a big move for one quarter. You may recall that we've discussed an increase over an entire year during a typical upcycle of about $1,500 per day.
This sequential quarterly uplift is the most indicative signal as to the step change we're experiencing in the market today.
During the second quarter, we closed on the acquisition of SWIRE Pacific Offshore, which you may hear us refer to as SPO. I'm pleased to say that the integration of the acquisition is going well with some early successes realized and that the SPO 3 contributed 43.2 million of revenue during the second quarter. Post-closing of the transaction and that it generated vessel level cash margins in line with our consolidated vessel level cash margin of 38%.
For the quarter of the Lexi Spote, GNA total approximately 3.9 million, which would be 5.2 million on a full quarter run rate. Total GNA burden for Lexi Spote in 2021 was about 35 million. We are confident that we will achieve our target a goal of 20 million in GNA synergies over the next nine months. And more broadly, we'll achieve total targets energies, inclusive of both GNA and ObEx synergies of our approximately 45 million over the next 12 months.
I want to thank both the Legacy Expo employees and our Legacy Title I employees for all of the effort thus far in ensuring this acquisition and integration is a success.
Turning back to the second quarter, revenue increased meaningfully in the second quarter, up 55% compared to this first quarter. Total revenue increased to $163.4 million in the second quarter compared to $105.7 million in the first quarter.
And of course that included the contribution from the acquired spore vessels beginning in late April .
Looking at this on a normalized basis, revenue per active vessel was up approximately 18% sequentially, while average day rate was up about 17% sequentially, with the increase in revenue almost fully attributed to the move in day rates. The move in day rates.
That's the level cash margin expanded over 4th percentage points to 38.2%. Nicely in excess of the 30% target we've talked about in recent quarters, and up nearly 11 percentage points from the second quarter of last year. And up nearly 11 percentage points from the second quarter of last year.
Looking across the world at our various regions, we experience broad-based momentum in all of our operating regions.
My intention is to stay with a professional view of the business to eliminate any dysplorations from the absolute impact of the Spowe acquisition, but Sam will give me more detail on the absolute changes in his commentary.
Our fleet in Europe Mediterranean led the way with a 30% sequential improvement in day rates with significant improvements across the UK and more away in Egypt. And more away in Egypt.
The second quarter is usually one of the strong quarters in this segment, particularly in North Sea given the nicer weather in the spring and early summer.
Vessel level cash margin improved considerably during the quarter, up 14 percentage points sequentially to nearly 41 percent and up nearly 20 percentage points since recent lows at the end of 2021.
Utilization slipped modestly sequentially, which is more a reflection on our decision to stay in the spot market rather than any weakness in the market itself. The spot market has more frictional unemployment and you try to more than offset that with quicker day rate increases. We've opted to enter the spot market a bit more aggressively than in prior periods given the relative strength of the market, which can be seen in the day rate achieved and the associated margin expansion.
Additionally, we have one more vessel on average working during the quarter.
West Africa continues to show strong momentum during the quarter. As you may recall, we essentially double the size of our OSV fleet in Africa via the spell acquisition. They reached improve 21% sequentially to about 10,700 per day. Well and excess of anything we've seen in recent memory. vessel level operating margin mostly improved to 42%. Sequentially as this region was the largest recipient of the new spell vessels and their existing cost structure.
Given the scale of operations from the legacy spoke fleet in West Africa, much of the AMEX energy achievements we have targeted will ultimately accrue this region and help support continued margin expansion.
Average active utilization continued to move up, nearly 4 percentage points to 83% in the second quarter. The legacy spoke fleet was consistently highly utilized speaking to the quality of the vessels in that fleet, and we expect to continue to dry utilization and margin expansion with the expected up-ex energies in the region.
Turning to our Middle East region, I first want to point out that this segment has historically been titled Middle East and Asia Pacific and was inclusive of a limited number of vessels we had operating in Asia Pacific prior to the acquisition of Spone. Turning to the acquisition of Spone.
Given the sizable presence in the acquisition brings to type water, in Asia-Pacific, we made the decision to split the Middle East into its own segment and establish Asia-Pacific as a new distinct segment due to the relative scale of the two regional businesses and to provide additional disclosure on the two sizable screen markets.
Turning to the quarter, perhaps one of the most interesting signals as it relates to global tightness in the supply vessel market is the pricing improvements we saw in the Middle East this quarter.
Historically, the Middle East market has proven a consistent market in which to work a large number of low-to-medium specification vessels. But generally, somewhat challenging to realize day-redecreases given the roles of oversupply of this specification of vessels. The Middle East market has proven a consistent market in which to work a large number of low-to-medium vessel. The Middle East market has proven a consistent market
However, during the second quarter average day rate improved by 16% to about 9500 per day. Meaningfully, a higher day rate average compared to what we've seen in the past several years. Best will cash margin approach 30% up on those 4% and well in excess of anything we've seen in recent memories.
Turning to the America segment, average day rate improved about 7% sequentially, although there was some regional mix that obscures the improvements during the quarter and some of the more interesting markets within that segment.
The Caribbean portion of the Americas continues to show significant momentum with average day rate up about 25% sequentially. The average day rates in Mexico, which at times shares some similar characteristics with a Middle East market in that it is relatively small vessel market with a dominance data on customer, so nearly double digit percentage increase.
The U.S. Gulf of Mexico was roughly flat due to the limited number of vessels we have in the area, while the average day rate improvement for the American segment was somewhat modest on a relative basis. The operating leverage inherent in all of our businesses began to manifest itself in this segment during the second quarter. Utilization improved by nearly 11 percentage points in addition to the day rate increase. We increased revenue by about $9 million sequentially, $6.5 million of which dropped to vessel, and
cash margin which was up 9 percentage points sequentially to 43%, nearly double from the year ago quarter.
Lastly, I'd like to turn to our new Asia Pacific segment. About 30% of the Lexi's low-sleeve was comprised of vessels in the Asia Pacific geography, principally working in Southeast Asia and Australia. At the end of the quarter, 17 vessels were active in the Asia Pacific region. The financial results are somewhat difficult to compare this time on this sequential basis, given the sizable increase in the vessels and the mix of the vessels in this broad region. However, we're pleased to enhance our presence in this region and believe that the momentum will...
3.9 million of sposed related GNA expense I referred to earlier. Excluding fees and expenses associated with the transaction, GNA came in right about 20.5 million for the quarter. This compares to a pre-acquisition normalized GNA of 17 million in the first quarter. We continue to expect GNA burden associated with the added vessels and their new regional office in Singapore, via the SPO acquisition to level out next year at about 2.5 million per quarter.
Cash flow for the quarter was, free cash flow for the quarter was negative 14.9 million. As we mentioned on the prior two calls, we anticipated free cash flow in the first half of 2022 to be weighed down by a significant dry dock expense and vessel reactivations during the first half of which we spent approximately 33 million during the first half of 2022, including the newly acquired vessels we expect to spend about 21 million in dry dock expense in the second half of 2022.
We're experiencing a continuation of working capital build during the second quarter, part of which was the natural working capital build you'd expect to see in a quarter with a significant revenue growth and a sizable acquisition. But we also continue to have customers to lay payments contributing to about 15 million of the working capital build. Motorcycle
We anticipate collections picking up in the third quarter and as we indicated on last course of the call we expect the SO to normalize by the end of the year.
We remain confident that market conditions will result in our entire fleet working by the end of 2022, a combination of reactivations and disposing of non-core vessels. We made additional progress during the second quarter in disposing vessels available for sale, disposing of four vessels for total proceeds of $3.5 million.
The end of the quarter with nine vessels remaining in the health-versal category, which includes one spove vessel added as part of the acquisition.
Vessel Wave costs or $700,000 in the second quarter, down by about half quarter of a quarter, and costs associated with COVID-19, and also continuing to fall down to 800,000 in the second quarter. Vessel Wave costs or $700,000 in the second quarter,
In summary, we are very pleased with the second quarter results. So we believe that the remainder of 2022 will continue to be strong with another leg up and demand moving into 2023, and what has become an increasingly supply vessel constrained environments. There's not just a new stand in the
With that, let me turn the call over to Pierce for an overview of the global market and the company's performance within it. And the company's performance within it.
Thank you, Quintin, and good morning, everyone.
Last quarter, we talked about some of the supply issues we're seeing that are affecting the global OSC market today. And why with our modern larger fleet of PSCs and HTSs, we are well placed to take advantage of this continuing upturn in the market.
These larger vessel classes are where we believe the supply demand balance is almost in parity. And all those vessels are still stacked. They have been for over five years and or over 20 years old. And in our view, we'll find it difficult, if not impossible, to come back into the market. Especially as we're still seeing limited dry docking space globally and significant long lead times for major equipment items.
which we believe will further exacerbate the already tight supply demand balance in these larger of best in classes.
This quarter, I would like to focus more on the demand side globally and how that is affecting obviously day rates for the first half of 2022.
Overall, the market remains very positive.
In total, we see full year projected capital commitments for 2022 of $86 billion, which is up around 20% on the four-year average.
which bodes well for future years.
Rig demand continues to improve with utilization levels across the floaters and jackups, almost touching 85% levels and termed a rates for ultra deep water units almost at $450,000 per day, all of which tried the basic fundamentals of the RSV space and parlayed nicely into our own fleet.
Specifically on the OSV side, we've started to see the increase in demand and shortness and supply impact rates positively on the upside.
With Clarkson's research reporting global one-year time charter rates for the largest PSVs at $22,000 per day levels compared to $15,000 per day levels in 2021. And one-year time charter rates for large ATSs averaging circa $31,000 per day compared to $23,000 per day in 2021. All very positive indicators that the market is pushing rates in the right direction.
Working through our various regions and starting with Europe , we've seen a very strong rebound in the North Sea and Mediterranean markets, with a significant uptick in demand. And even previously mothball projects like Jack Doran and the North Sea, being greenlit by Shell and the UK government, it again boasts well the future of the region.
The large HTS Marklin North Sea hit record high spot rates of £173,750 per day during June , as supply for larger HTS's remain tight.
Our own recently reactivated large HGS was able to also take advantage of this tightness in the North Sea market.
In the European market, which includes the med, where the majority of the fleet appears. We were able to push rates for new contracts award in Q2 2022.
across all sizes of assets in the region by nearly 40% compared to Q1 2022. So an average new leading day rate in excess of $17,000 per day across all vessel classes.
which compares favorably to the Clarkson's global OSV rate index.
which saw only an 18% rise in the first half of 2022.
Moving to Africa, which is now our biggest region with the acquisition of Swire, we again are seeing rising demand across the whole continent, but with particular focus in Angola, Congo, and Sanegal, and with the added expectation of a significant increase in the floating rig count and the region by the end of 2023. The floating rig count and the region by the end of 2023.
Across the whole continent we have a good cross-section of vessel classes from our largest 16,000 BHP plus anchor handlers.
to our smallest crew boats.
So the reason is a good indicator of where we see rates going globally for all of our vessel classes.
The good news is that for new contracts awarded in Q2, across the whole fleet we were able to again push rates by circa 84% compared to Q1, with average new leading day rates in excess of $21,000 per day.
In the Middle East, Aramco remains the dominant player in the region as well as one of our key customers.
but we are also seeing an uptick in tendering activity in Qatar as the region races to bring more production on stream.
Arampico has been very public about bringing significantly more Jackups into the Kingdom and in turn came out for a large 20 plus OSV tender in Q2 to support this uptick in activity.
all of which will not only tighten supply on the smaller vessel classes.
will create an opportunity to continue to push rates and margin in the area.
Most of our fleet in the regional on the smaller HTS and PSV classes, but we were still able to push rates for new contracts across the fleet nearly 60% compared to last quarter....
In the Americas, we saw continued high demand and reserving Q2 driven by Petrobras and expect this to continue throughout the year. And whilst we currently have a small footprint in the country, their requirement for larger, volatile AHTSs and larger 900 square meter dex-based PSC,
sucks up supply elsewhere in the globe helping to tighten the larger vessel class market globally.
In Mexico, we're starting to see PMEX starting to ramp up.
and expect them to be a few courses away from really getting going.
In the US, Guyana and Suriname, we continue to see very strong demand for rigs and vessels, both in the first half of the year and going forward.
Most of our America's fleet is PSVs and we were able to push rates in Q2 for new contracts across the whole fleet by almost 50% compared to Q1 2022. So a blended average new leading data rate nearly US$18,000 per day.
These bear in mind that as we mentioned in my last quarterly call, that we have seen and continue to see charter rates for a large class of death.
in this region in the mid 30s to mid 40s range.
Lastly, in Asia Pacific, Malaysia is one of the key drivers of demand in the region. However, we have started to see the whole region starting to play catch up in the latter half of Q2, with gas projects being sanctioned in Australia, new licensing rounds in Indonesia, and an uptick in new wind farm projects expected to come online in Taiwan, where we have a significant presence after the Soire acquisition.
Similar to Africa, we have a good cross-section of the fleet operating in the region, from the large 16,000 bhp class of AHTSs and 900 m2 decks of PSVs all the way down to the smaller 4,000 to 8,000 bhp class of AHTSs.
The market is quarter or two behind other areas. We are starting to see rate increases coming through on the larger vessel classes close to other regions.
Expect Asia Pacific to be in line rate wise with the rest of the world by end 2022.
Overall, as mentioned by Quinton, we are very pleased with how the market has continued to move in the right direction in Q2. And we expect that positive momentum to continue into subsequent quarters.
Lastly, we are really starting to see solid rate improvements across the whole fleet with new contracts in Q2 averaging nearly 50% more than in Q1 2022, or equivalent to blended average rate of about $17,000 per day across the whole fleet.
With that, I will hand over to Sam. Thank you.
Thank you, Pierce, and good morning, everyone.
Now I would like to take you through our financial results and discuss some key points and make up these results.
My discussion will focus primarily on quarter to quarter results, comparing the second quarter of 2022 to the first quarter of 2022. I'm pairing the second quarter of 2022 to the first quarter of 2022.
As noted, on our press release filed yesterday, we reported a net loss of $25.6 million, or $0.61 per share.
From an operational perspective, we showed meaningful revenue improvement quarter to quarter.
Our revenue for the second quarter of 2022 was 163.4 million. This is 58 million or approximately 55% increase from the first quarter of 2022.
The sequential revenue uplift benefited from the addition of the SBO vessels from April 22nd of this year, which contributed 43.2 million of revenue during the quarter.
Utilization was roughly flat sequentially with active utilization of 82.5%.
However, day rates improved 17% to 12,544 per day in the second quarter from 10,687 per day in the first quarter. The second quarter from 10,687 per day in the first quarter.
Overall, gross margin for Q2 increase nicely to 38% from 35% to Q1.
vessel operating cost for the quarter was $100.3 million, an increase of $31.7 million from Q1, principally driven by the addition of the Spowe vessels.
Spoil vessel operating costs totaled $26.7 million for the remainder of the quarter post-closing of the transaction.
vessel operating costs for market at day in Q2 was approximately 6,300 per day.
That may increase some more I can Q3 until we begin realizing our synergies beginning in the second half of this year and accelerating through the first half of next year.
And which time we would anticipate our operating costs for market today to decrease to close to 6,000 per day.
We sold four vessels during the second quarter for net proceeds of $3.5 million and recorded a combined net loss of $1.3 million on the sale of these vessels. b Emirates
We generated operating income of 1.8 million for the quarter and improved with a 9.2 million driven by higher revenue and improved margin performance, mainly driven by the day rate increases.
Included in operating income is a $1.3 million loss associated with asset dispositions.
GNA cost for the quarter was 27.8 million, up about 9.6 million from Q1.
GNA for the second quarter included 7.3 million of transaction expenses associated with the SPO acquisition.
Q2GNA Cost was also burdened by about 3.9 million associated with the legacy Spoke Cost.
which implies a full quarter run rate of 5.2 million, which is already well below our expectations of about 2.8 million per month.
We have achieved some early synergy success and anticipate to realize the remainder of the GNA's energies over the next nine months or so. The GNA's energies over the next nine months or so.
We expect our overall G&A run rate on a market-at-day basis to eventually level out at around $1,300 per day once all transaction costs have been incurred and synergies have been realized.
In the quarter, we incurred $18.5 million of deferred drydock costs, compared to $12.6 million in Q1. In the quarter, we incurred $18.5 million in Q1.
As expected Q2 was a heavy dry dot quarter due to regularly scheduled dry dot and vessel reactivations which also included a few vessels associated with the spoke both lead. Q2 was a heavy dry dot quarter due to regularly scheduled dry
In the quarter, 20 dry docks were in process, and we incurred 733 dry dock days compared to 547 in the first quarter.
which negatively impacted our overall utilization by about five percentage points.
We expect to incur approximately $23 million to the remainder of the year, bringing the total to about $54 million for the full year 2022.
In the corner we also incurred about 4.2 million in CapEx.
We expect CAPEX for 2022 to be about 13 million, including 2 million on SPO vessels, as we execute vessel modifications related to new contract requirements and technology initiatives.
ReCashflow was negative 14.9 million this quarter. You primarily to the heavy dry-out spend and the build in working capital. As it relates to working capital, we had an actual build up of AR given by the sequential uplift and revenue. However, we did have some customers delay payments and contributed to about 15 million to the build up in AR. And contributed to about 15 million to the build up in AR.
pushing our DSO up beyond where we typically target.
We anticipate DSO to normalize by the end of the year, when in combination with lower dry ox spend and continued financial improvement, should yield a meaningful improvement in free cash flow in Q3 and Q4.
Also included in the 14.9 million or 4.2 million of legacy Spod Tax payments.
As we've discussed in the past, we maintain an ongoing dialogue with Pemex as it pertains to our outstanding AR.
At the beginning of the quarter, we had about $13 million of AR outstanding with Pemex. During the quarter, Pemex commenced a unique bond offering focusing on reducing its trade accounts payable up to its vendors.
We exchanged $8.6 million of past UAR for a June 2029 8.75 bond priced at par.
We expect to monetize this bond sometime in the second half of 2022, at which point we realized the associated HR exchange.
They are exchanged.
In Q4 2019, we began reclassifying vessels on our balance sheet.
for property and equipment to assets health or sale.
We have since run 86 vessels through this program.
at the end of Q122.
We had 12 vessels, help or sail at a value of 8.6 million.
During the second quarter, we sold four vessels for proceeds of $3.5 million and added one spoke vessel to the acid helper sale list. Leaving our vessels helper sale at nine and a value of $6.9 million.
In June , we amended the share purchase agreement with Swire to modify a provision that inadvertently created a derivative out of the Jones-Att warrants.
And we recognize they lost on a marked market adjustment related to the warrants.
The charge is a one-time non-cash charge totaling $14.2 million.
I would now like to focus on the performance of the region.
Are America's regions operated?
reported operating income of 5.9 million for the quarter compared to operating loss of 82,000 and Q1.
The Regional Report at Remini, 37.5 million in Q2 compared to 28.4 million in Q1.
The region operated 29 vessels in the quarter.
which was an increase of two from Q1, one of which was a result of the SBO acquisition.
Active utilization for the quarter was 87%.
which was about 76, up from 76% in the prior quarter. Additionally, day rates increased to 16,569. Additionally, day rates increased to 16,569. Additionally, day rates increased to 16,569.
from 15,000 fiber one per day in Q1.
The increase in operating income was due to an increase in revenue attributable to the increase in day rates, the increase in utilization, and the increase in operating vessels in the region.
Turning to our new segment, Asia Pacific, I want to remind everyone that we've split our Asia Pacific region from the Middle East region into its own standalone segment and is no longer combined with the Middle East.
For the second quarter, the Asia Pacific region reported an operating loss of $899,000 compared to operating income of $2.2 million in Q1.
The region reported revenue of $16.4 million in the second quarter, compared to $4.9 million in the prior quarter as a result of the additions of the spoke vessels in April .
The region operated at 18 average vessels, which was up 13 vessels on average compared to Q1.
Revenue and average vessels increased will principally influence by the addition of the 16 small vessels in the region.
Active utilization decreased by approximately 29 percentage points to 70 percent in the quarter.
compared to 99% in Q1, as we had a handful of vessels come off higher as contracts expired. 99% utilization is highly usual and it's simply that these vessels were all unterm contracts.
Having said that, they reached improved to 13,748 per day in Q2 compared to 10,975 per day if you want.
Operating income was impacted by the additions of the Spode vessels which brought along the legacy cost structure and combined with the exploration of the contracts. It's by the exploration of the contracts.
We anticipate the Asia-Pacific region to be one of the beneficiaries of our targeted synergies moving forward.
Turning to our Middle East region, similar to the Asia Pacific segment, the Middle East is now its own standalone segment.
No longer combined with Asia Pacific.
The sequential comparisons I provide will retain to the revised segment reporting.
For the second quarter, the Middle East region reported an operating loss of 307,000 compared to an operating loss of 1.9 million in Q1.
The region reported $28.4 million in the second quarter as compared to $28.2 million in the prior quarter.
The region operated 41 vessels, which was up 8 vessels compared to Q1.
The increase in average active vessels is attributable to a relocation of vessels from our West Africa and Europe regions to the Middle East, along with the effect of the addition of seven vessels attributable to the SBO acquisitions.
Active utilization decreased by approximately 3 percentage points to 81 percent in the quarter compared to 84 percent in Q1 as this was one of the heavy dry dock regions.
However, day rates improved meaningfully to 9,040, 90 per day in 22, compared to 8,160 per day in Q1.
The improvement in operating income was due primarily to the increase in day rates and the addition of the spoke vessels partially offset by lower utilization.
Are you up in the Minister Ray and Region reported operating income of 4.3 million in Q2 compared to an operating loss of 2.4 million in Q1? We saw a revenue increase to 32.5 million compared to 23.9 million in Q1.
The region operated at 25 vessels in the quarter, which was an increase of one vessel from Q1 as we added one spell vessel. Active utilization decreased slightly to 88.1%, compared to 91.3% if you want.
We did see an uptick in day rates of 15,776 per day compared to 12,124 per day in Q1.
The improvement in operating income for the quarter was mainly driven by the increase in revenue, driven by the increase in day rates.
Our West Africa region reported operating income of $9.3 million in Q2 compared to operating income of $3.2 million in Q1. The market in this area has continued to improve as we've seen revenues increase steadily for six straight quarters.
Revenue for Q2 was $47.4 million compared to $26.4 million in Q1.
The region operated 17 more vessels on average in Q2 and active utilization increased to 82.9% in Q2 compared to 79.1% in Q1.
Day rates increased significantly to 10,721 per day in Q2 from 8,834 per day in Q1.
The increase in operating income from P1 resulted from an increase in revenue, resulting from an increase in day rates and higher utilization, along with the effect of the addition of 25 vessels.
from the acquired spouse fleet.
In summary, we encourage to see increase in revenue.
Driven by the newly acquired Spowe vessels in higher day rates, and we are encouraged to see the continued positive signs and market activity.
We anticipate both layup costs and COVID-related costs continue to decrease through the remainder of 2022. We expect layup costs to cease by the end of 2022 and anticipate modest costs moving forward related to COVID-related issues. We expect layup costs to cease by the end of 2022.
We're pleased with the Q2 results and our encourage with the leading indicators we see for the remainder of 2022 and 2023. With that, I'll turn it back over to point.
Thank you, Sam. In closing, I would like to remark on what we see for the remainder of 2022 and into 2023.
On last quarter's call, I expressed our confidence that the back half of 2022 would bring a meaningful uplift compared to the first half of the year.
On the heels of the strong second quarter, our confidence in the second half of 2022 has not changed. Our confidence in the second half of 2022 has not changed.
We remain confident in the continued progression of day rates and utilization improvements throughout the remainder of the year.
But the remainder of 2022, our revenue backlog stands at 327 million, representing fleet contracted coverage of approximately 77%. Contract coverage is fairly evenly split across all of our vessel classes with our largest class of PSVs, having the most exposure to the spot market opportunities.
As we move into 2023, revenue backlog stands right at 400 million, representing wheat and fractured cupboards of approximately 52%.
Our largest class of PSVs have current contract coverage in 2023 of about 50 percent, representing the considerable opportunity to continue to deliver our largest class of vessels in a market environment currently experienced substantial operating improvements.
to put the strength of our day rate increase in perspective.
During the second quarter, 24 of our vessels entered new contracts of various durations that will ultimately provide a nearly 50% aggregate uplift in day rates as compared to their previous aggregate contracted day rates. This compares to the 16 vessels that entered into new contracts during the first quarter that realized just over 20% of price improvement.
While there are some mixed issues, it's worth noting that for our largest class of PSVs, pricing on new contracts entered into during the second quarter was in excess of 80% uplift as compared to their prior contracts.
Candidly, the market is moving faster than we anticipated.
And with that Chantelle, we will open it up for questions.
At this time, I would like to remind everyone, in order to ask a question, please press star one. We'll pause for just a moment to compile a Q&A roster.
Again, if you would like to ask a question, please press star one.
Our first question comes from Hanflund with Clarkson, your light is open.
Hi, thank you so much for taking my question. Just the first question from my side, just to clarify, you said that the average day rate for the entire fleet was around 17,000.
boulders per day while it's at around 12 and a half thousand and report you just clarify those numbers.
The rollover contracts, so the contracts that rolled over during the quarter were just over 17,000, but they're all in rate for all of us.
Silence.
Okay, perfect.
Speaking of de-rate, we talked about this in the past. I mean, the solid quarter half.
Where can we kind of, or do you have a view of where you...
expect to see the average date they were sending up at the end of 2022.
Well, we don't have a public view that we're going to express on that at this point, but clearly we're excited about the ramp up that we're seeing. And we definitely have exposure to turnover, our large class of our vessels, especially the larger vessels, because we move into the end of 22 and in 23. The ramp up that we're seeing is the ramp up that we're seeing.
Okay, thank you. Regarding your balance sheet with, in my opinion, pernago leverage and sound cast position, has your view changed potentially adding more gearing to your balance sheet? How should you kind of, you know, your cast position going forward are in?
paying out dividends more relevant now than it was before. Are you looking out for less of the opportunities? Thank you.
Okay, well, around that please.
Yeah, yeah, sure. You know, I've made no bones about it. I believe businesses are made to build cash and return that cash to shareholders.
As it relates to our, I agree, we are under levered for a capital intensive company.
However, we are a capital tons of company coming out of a severe contraction in our industry and we are still preserving what we might call a drive powder for additional creative acquisitions but also just making sure that we have the right liquidity until this industry is firmly established in more of a mid to up cycle. So, appreciate that we're under leveraged, look for reasons to deploy that capital into constructive acquisitions to the extent that that's appropriate for us strategically.
have no issue returning money to shareholders and they're excited about the opportunity to do that with the time is right.
Kof, thank you. Thank you for being here. Thank you for being here. Thank you for being here.
Our next question comes from Patrick Majler 2020. Le?ry Mullin is open. you
Hi, thanks for taking the questions. I wanted to ask about...
You know, how much um...
How much will reactivations from competitors impact the supply signs? How much will reactivations from competitors impact the supply signs? How much will reactivations from competitors impact the supply signs? How much will reactivations from competitors impact the supply signs?
for OSVs and going forward. I get that.
Spot markets tight right now, it sounds like. But, you know, is there a lot of spare capacity that can be reactivated relatively cheap that's gonna put a hindrance on how much day rates can go up in the future?
Well, I'll give a start to answer any question. Then I'm going to hand it over to Pierce to see if he's got any on the ground tactical perspective. But the economics are such that a vessel that's been laid up, as long as the vessels that remain in layup today have been laid up mean that I think that it's very unlikely.
that any high end vessel gets reactivated. We're definitely seeing reactivations on the low end and that market was generally more oversupplied for high end boats.
Here's what's referencing a lot of tenders in the middle east front. And those are generally low to medium-aspect vessels. And so we're starting to see those large tenders from Saudi and Rampo and others, absorbing vessels out of Asia, which have been in layup, really since they delivered. And so that certainly will impact the market on those low-end vessels. But even though it will impact the market, we're still seeing reasonable day rate increases even at almost low end boats. And so.
But let me get over to Pierce and see if these want to add anything. Thanks, Greg. I think just to reiterate, on the larger sizes of our PSC, this is the 700 square meter plus size, we see very single digits of vessels that possibly could come back into the market. And that's similar to the large anchors as well, for the 16,000 BHP glass as well. And then really just to a point and a point, yes, there is potential of some of the smaller classes coming back. But some...
A lot of those vessels when you really go into the numbers, which I don't do here, those vessels have been stacked for five years. There's very long lead items to get parts and maintenance and things like that. So maybe some of them will come back, but it's going to take time just with the supply crunch we're seeing in the market for just getting spares and reactivations in place anyway. So it's not too much of a concern on the lower end vessel either. Certainly not really one on the large classes.
Okay, so, you know, following the offshore rig industry, you see it a lot of contracts that have...
then signed recently, but these are rigs that are not actually working yet. So I would expect the...
you know demand side to continue to improve.
to continue to improve.
I'm in.
I mean, is that your expectation as well?
And that'll help.
Yeah, and then I guess just kind of your thoughts on
David.
If that's kind of a backdrop, you know, where could we see day rates in 23? Yeah.
I agree with you on the demand side. Just to look carefully what I see happening on the demand side over the last couple of years. What we saw in 2019 was an increase in oil price, which got profit people to catch up on maintenance. Oil price starts moving out, people want to start producing more. Their first reaction is to go out to their existing production facilities.
to see that the same dynamic come back at the end of the 21 and into the beginning of the 22. And so what we really see so far in our demand for vessels has been catching up on deferred maintenance and looking for ways to enhance production. The rigs that are now going back to work as well as the offshore wind farms that are being constructed are adding another layer of demand and we're going to see that in 23.
I don't want to speculate where rates are going to go in 23.
I will tell you that in prior peak cycles.
average day rates for the time of water fleet at the time was right about $20,000 a day. The fleet at that time was not as high-graded as the fleet is today. We've done a lot of acquisitions with them.
opposite tier
buying vessels, but we also did the Gulfmark deal, we did the Spodial, and at the same time, we've been...
Carving out the lower end of the boat, subscribing them or selling them into markets that we don't operate in. So the fleet today is a much better and higher spec fleet on average than the Thai water fleet was at the end of the last cycles. I can call it a 2006, 2008, 2012, 2014, that time from. Okay. And so I would suspect that we would see day rates in excess of those peak day rates.
and this is coming from. I don't see anything to your earlier question.
that I believe in the next three years, we'll add considerable supply to the market. There's not enough boats to reactivate. There's not enough people to crew the boats. There's not enough parts to reactivate the boats. The new build economics still are not there to justify a new build. So over the next three years, I see this to be a vessel constrained market.
which will continue to push up favorites.
And then there's the inflation element. You know, that's a little bit of both the cost side and the revenue side, but you know, the inflation element is real and we have to push that through on pricing as well. So those are some...
ways to triangulate where I think it's going to go. But at this point, we are continuing to watch the market, continuing to push rates as aggressively as we can. And, uh, boom.
look forward to updating you.
or Delta in the next several quarters as to where it goes.
Great, thanks. And then you provide a lot of numbers, but just kind of just for clarification, what's like a good run rate GNA per quarter, once energies are realized. Once energies are realized. Once energies are realized.
Yeah.
Probably Patrick I would see brought 28,000 per day per quarter.
20 million, I'm sorry 20 million. Yeah.
Okay, thanks a lot.
We have reached the end of the question and answer session. I'll now turn the call back over to Clinton Team, CEO for closing remarks.
All right, well, thank you, Shenthal, and we look forward to updating everybody again in November . Goodbye.
This concludes this conference call. Thank you. Thank you.