Q4 2022 Tidewater Inc Earnings Call
Thank you for standing by at this time I would like to welcome everyone to the Tidewater Inc. Q4, 2022 earnings call. All lines had been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply.
Fresh star followed by the number one on your telephone keypad. If you would like to withdraw your question again press Darwin. Thank you West Coacher, Vice President of Finance and Investor Relations you may be getting your conference. Thank.
Cheryl Good morning, everyone. Welcome Detar orders full year Q4, 2022 earnings conference call.
Drawing on the call. This morning by a president and CEO , Courtney, our Chief Financial Officer, Sam Rubio.
President sales and marketing beers Middleton.
During today's call will make certain statements that are forward looking and referring to our plans and expectations. There are risks and uncertainties and other factors that may cause the company's actual performance to be materially different from that stated or implied by any comment that we make during today's conference call. Please refer to our most recent form.
10-K for additional details on these factors. These documents are available on our website at T V. W. Dot com or through the SEC U S E C dot Gov.
Information presented on this call speaks only as of today February 20th 2023.
Therefore, you're advised at any time since some information may no longer be accurate at the time of any replay.
Also during the call will present, both gap in non-GAAP financial measures.
Reconciliation will get out to non-GAAP financial measures can be found on our website at T. E. W. Dot Com is included in yesterday's press release now with that I'll turn the call over to Clinton.
Thank you <unk> good morning, everyone and welcome to the fourth quarter of 2022 Tidewater earnings Conference call.
I'd like to start today is call by reflecting on the difference a year can make in our industry and the improvements in our business during the course of 2022.
2022, Mark belong or waited inflection point in the offshore vessel market.
Revenue increased nearly 75% compared to 2021, driven by a major acquisition, but also a significant rise in average day rates.
Average day rates improved over $2400 per day for the full year.
Piece of improvement we have not seen during the past once your ears, and we expect the 20th twenty-three will reflect a full year improvement of over $3000 per day.
On a quarterly basis throughout 2023, we expect average day rates to be increasing quarter over quarter and although it's too early to comment on the full year day rate increases for 44, we see nothing stopping the day rate of acceleration.
To put this in perspective historical upcycle year over year de Vries improvements were approximately $1500 per day.
Special operating margins increased by over 10 percentage points a year over year, our adjusted EBITDA nearly quadrupled as compared to 2021, we generated positive net income in the third and fourth quarters of 2022, we close to an integrated a major acquisition over the past year by all measures 2002.
22 was assembling ear for Tidewater and we're very pleased to report on the successes of 2022.
I'm going to let Pearson Sam give you more details on the performance of the individual regions as today I wanted to spend some time on a handful of non routine topics.
I want to take a moment to explain the process. We go through when we provide forward guidance, which many of you will notice we resume this quarter.
I want to describe our current capital allocation philosophy, which is going to become an important topic as we continue to January increasing levels of free cash flow.
And then related to capital allocation a bit more on consolidation in the industry and then I wanted to finish up with some comments on the Jones at Lawrence and merger acquisition a merger integration.
Some of you are new to the Tidewater stories. So I wanted to take a moment to discuss an internal process is critical to how we run our business and how salmon I have been running companies in this industry over the past 12 15 years.
We re forecast our business every week.
Years ago, we developed a system to capture on a weekly basis changes in Dayrates expected over the next 12 months new contracts that have been added changes to forecasts utilization levels unplanned expenses general price level increases and literally everything in between every week, we review and evaluate these changes to the outlook over the next.
12 months.
Been told many times that the sounds extreme mostly by people inside the company associated with this activity, but outside of the company as well.
But for US, it's an important tool to assist us in developing our chartering strategy.
They reached in this industry have historically been quite volatile and to us that volatility take take a high sampling frequency here.
<unk> is mentioned on past calls and you will hear it again today, how we are charter insured and our confidence and taken in maintaining this position comes from closely monitoring the movement and day rates around the world Sam was going to speak to you about some mobilization costs, we incurred during the fourth quarter and our confidence in relocating vessels from one region to another.
<unk> is based on the relative Derate development, we see in the regions in which we operate.
But another benefit of this detailed weekly forecasting processes that over time and through refinement. We have developed a relatively high degree of confidence in our ability to forecast the business.
The guidance Sam is going to provide you later in the call is based off of these reports. It's the same reports we provide to our board. The guidance is neither deliberately conservative and we're optimistic as our current standards assessment for the year.
We provide counter your guidance with a range and we tighten up that range. As we proceed through the year. We will update you every quarter and we feel confident that the information we are providing the best possible outlook for our business at the time, but just give them.
As you reflect on the out or for 2023, you will quickly conclude that the business is poised to generate a substantial amount of free cash flow over the next several years and as mentioned in the press release, we're already virtually unlevered. So it's appropriate to discuss our capital allocation philosophy. It's also <unk>.
Fairly easy to see that the amount of cash that will be generated over the next several years. If our outlook is correct is of such a magnitude that value accretive mergers acquisitions dividend share repurchases all will be considered in the ultimate allocation of capital.
First and foremost we will not be putting any new vessels on the water.
[noise] fleet has been reactivated we have no material reactivation cost remaining.
Mergers and acquisitions can be used to increase our overall longterm return on capital.
He attribute we look for in mergers and acquisitions is the ability to increase our span of control or vessels currently on the water provide.
Provided those vessels maximize the duration of our fleets, earning potential and or contribute to the individual profitability of each vessel through economies of scale.
Increasing hour span of control over vessels only makes sense when the price per vessel is accretive to our equity holders.
Not interested in adding vessels to the fleet just to add vessels to the fleet.
This company can make a tremendous amount of money with the vessels. It already has it can make disproportionately more money with more vessels. If they are the right vessels purchase at the right price and when we find consolidated opportunities like that we certainly pursue them but.
But they're the exception.
Even as fragmented as our industry is I do not expect that we could deploy all of the cash we are forecasted to generate over the next several years and such value accretive acquisitions, which means that in addition, we will return money to shareholders through dividends and share repurchases.
Now.
With all that said, we also need to ensure we are properly structured from a debt capital perspective as reflected by our net debt position to $9.6 million. We are under leveraged at this point in the cycle. So we should also use leverage to inappropriate degree to maximize value to our equity holders leveraging the business means having even more <unk>.
To allocate and we need to move the leverage overtime as the capital mortgage permit too long duration to compatible with our industries volatility.
And last but not least we have a restriction in our current bond issue. The 175 million issue that matures in November of 2026 that restricts the timing and amount of cash that we can return to shareholders. This is a restriction that can be dealt with.
Appropriate to mention.
You will recall that we issued 8.1 million Jones at Orange and this wire Pacific offshore acquisition all of those warrants have now been converted into common shares. This was done during the second half of 2022, none of those warrants remain because an overwhelming majority of the common shares issued and the two weren't exchange.
Actions were issued to you citizens, we now have room for foreign owners, the hold time water common equity.
So if you happen to be holding the relatively small amount of credit or warrants that were issued in 2017, please contact us to convert those into common shares.
Remember that those warrants will not receive a cash dividend when and if the common shares too.
As it relates to consolidation I think it's accurate to say that we have been in Han stopped due diligence over the past five or so years.
It's been an enjoyable experience getting such a comprehensive understanding of our competitors around the world, but I just want to caution everyone that in those nonstop to fill it since over the past five years or so we've only close to major deals with discipline in our acquisition strategy and additional consolidation may or may not happen.
S. I think about the potential for future consolidation. The one perspective that I would suggest to you that has changed from those first two deals. We did is that our willingness to use equity is very low.
Due to the outlook for cash generation and Unlevered stayed with the company I am more focused on those opportunities for the right vessels at the right price that can be purchased for cash again those deals are the exception and not the rule.
I'm also pleased to relay that the most recent acquisition of Swire Pacific offshore was fully brought into the Tidewater infrastructure on January 1st.
Integrations are always tough we had over 50 separate projects running throughout the eight month integration period to affect this integration. It was a herculean effort by a very talented group of people and I'm happy to relate the newly integrated business went through the first monthly closed process without a hitch.
We are on track with the realisation of our synergies and as you may recall from the Gulf work integration.
This is when begin to accelerate.
The realisation of cinergy because.
We've reduced the redundant systems in certain processes are unlimited and we anticipate the full realization of the synergies will occur by the end of the third quarter.
Free cash flow for the quarter was $53.3 million compared to free cash flow of 22.2 million in the third quarter, representing a $31.1 million improvement sequentially I'm quite pleased with the free cash flow generation in the quarter and the sequential improvement realized the sequential improvement is principally a function of our efforts to reverse their working <unk>.
Capital investment incurred during the first three quarters of 2022.
Further the absolute level of free cash flow generation is indicative of the inherent operating leverage of this business. We have now reached the point, where our total fleet operating cost of leveled off and we are in a position to generate meaningful incremental free cashflow S utilization in day rates increase we do expect to continue to make proportional.
Investments in working capital as the business continues to grow and we will continue to manage working capital safely as we do any other capital expenditure.
We originally anticipated by the end of 2022 that we would have sold a reactivated all of our remaining stacked in assets help for sale.
We didn't get quite get all of them Douglas as of now we have a total of eight vessels remaining we are in various stages of negotiating the sale of four of the remaining eight vessels and are working to resolve the remaining four over the first half of 2023.
And with that let me turn the call over to peers for an overview of the global markets and the company's performance with it.
Thank you <unk> and good morning, everyone.
Before I took by the marketing, but some of Clinton's comments about tide will just performance into wider global context, I wanted to mention that will be releasing all set sustained us you pull to the end of the week and just to reiterate that allow cool E. S. G. Something that has always been and always will be an extremely important cause tide waters DNA and it's <unk>.
<unk> with our latest sustainable cheerful, we continue to showcase to all stakeholders historical as well as our future commitment to S. T.
He's a guy for the report when it is released.
Before Sam goes through our numbers in greater detail I wanted to talk to some of the themes, we still developing crystallize in 2022.
And what Tidewater achieved during the year and what we see happening is going to be 2023 and beyond during this also upcycle period.
The big screen in 2022 was the market's realization that was and is limited lsp's apply to meet the increase of demand.
Oh S V supply. According to <unk> research was down 4% since 2068 and 2022 in the middle scope for any additional underlying growth and 23 or 2024.
Due to both the limited order book and remaining suboptimal stacked fleet, we don't expect to see any future advice and see supply for some time.
On the demand side sentiment continued to strengthen 2022 with overall global demand sees increasing 8% during 2022.
Also broke is projecting a further 10% demand increase in 2023.
On the <unk> side in 2022, we continue to see the increase in demand and shortness and supply impact rates positively throughout the year.
With classes reset reporting new global <unk> largest P c's.
At $24501 per day levels compared to $15131 per day in 2021, and one year time Joshua rates for large H T. S is averaging $33456 per day compared to $23427 per day and <unk>.
N 221.
All positive indicators that the market as a whole is being disciplined and continued to push rates to in 2022.
During 2020 to one of our key tenants was to stay disciplined when bidding for new wood with a focus being pushed day rates by keeping to a shorter time shopping strategy to last a rohloff vessels as quickly as possible up to new contracts onto high rates.
The team has remained very just engine has been very successful at pushing a composite fleet right from $10583 per day, and two 420 21 to $13554 per day, and two 420 22, an increase of more than 28% across the whole fleet small smallest crew bites to our largest vessels.
And almost double what we've seen achieved in previous out cycles.
Working throughout various regions and starting with Europe .
This region had a very strong your overall with significant day rate increases across all vessels losses with average day right jumping from it come sit feet right of $11917 per day in Q4 2021 to $15364 per day in Q4 2022.
During the year is mentioned on previous calls so record high spot right. So 173750 pounds per day for large in Kansas, and they'll say market, which in turn drive <unk> de rights June 2022.
And as we look at 220 23 and beyond.
The traditional Lois season periods of Q4, and Q1, where you can expect to see strong demand in this region to lodge a C. S. As in P. S. These longer term with forward rates continue to improve throughout 2023 for all vessels classes.
<unk> and no way, where we so $27.2 billion offshore oil and gas project Capex being approved some 2022, new projects and work out beyond 2025.
Moving to Africa, where we have our largest fleet we saw a significant increase in activity across all the countries that we operate in during the course of 2022.
Which in turn it to an increase in on constant feet right of.
Of $9052 per day in queue for 2021.
Jumping to $12272 per day in queue for 2022, which is a 35% increase.
During Q4 20, twenty-two we saw leading edge day rates from <unk> in excess of $27000 per day, and our largest HTS winning work on rates in excess of $32000 per day.
As we look forward to 2023, we see no less often activity in the region.
Both by unexpected increase in such a demand through 2022, four but also by a number of announcements to lodge subsea construction projects in the region out beyond 2025.
All of which which will require additional OSV supply in the region.
<unk> well for sustained upcycling, the off shore and Osv's space.
In the Middle East the market continues to tighten but as we've mentioned on <unk>. This is a very large and competitive market with over 500 active vessels in the region, but which still continue to see strong levels of tendering from the Nrc's June 2022 that enabled us to drive on <unk> fleet right to the region.
$8217 per day in Q4 2020 $129498 per day in Q4 2022.
Leading edge day, right straw smaller specialist loss of H T S in the region, where in excess of $7000 per day.
Again looking out to the rest of the year, we're still seeing significant tendering activity from <unk> as well as significant demand from the construction companies to support new projects in the region.
Lost out beyond 2025 cents.
Similar to other areas of the World, we are seeing no signs of any slowdown in the region.
And the Americas, we against or a significant improvement 2022 with a fleet come sit dayrate jumping from $14603 per day in Q4 2021 to $18271 per day in Q4 2022.
Outside of the Jones Act, we saw a day rates for our largest PSV class in excess of $35000 per day during Q4, 2022 and rates in excess of $35000 per day for our largest class of H, yes during the same quarter.
July 20th 22, we so <unk> in excess of $40000 per day in the Gulf of Mexico, and Brazil, We saw a steady influx of foreign cytologist being allowed to work in the country due to lack of available presenting flag punished for projects in the country.
A very positive indicator had delicate the supply demand balance is not just in Brazil, but also too I believe.
Demand in your region is expected to stay strong in 2023 and beyond with further exploration slated in all countries in which we currently operate in the region and supply being served exacerbated by several significant construction projects in the region, primarily led by Brazil.
Lastly in Asia Pacific 2022 started off a little slower than some of the other reasons, but during the second half the year, we start to see a pickup in demand, which we really expect to see blossom during 2023.
But we were still able to push complicit feet rates from $10693 per day in Q4, 2021 to $17868 per day and.
242022, 67 per cent increase most of which just use the acquisition despite fleet earlier in the year.
And two full we achieve leading a state of race in excess of $40000 per day for a medium size and kept happening to us in Australia and rates in excess of $30000 per day for our largest philosophy PSP in Asia.
In 2023, we are seeing a strong uptick in demand in Taiwan, Taiwan to support wind farm projects, which we are well placed with our presence in the country, which way to cloth swatch transaction.
And then the second half of the year, we're already starting to see a much higher level of tendering activity throughout the whole region.
<unk> projects in Australia, Malaysia, and Indonesia.
Again as with all the other regions in which we operate some very positive signs of demand for the longer term.
The 2023 and beyond we will of course remain focused and disciplined on continuing to push rates, but we will also be aiming to improve the contract terms that we enter into with our customers to make them more <unk> for both parties are more in line with the realities of the marketplace. We are in today.
Overall as mentioned by Quintan, we're very pleased with how the market continues to move in the right direction during 2022 I'm.
Very positive about how the market would develop during 2023 and into a sustained period of growth for the C space into the foreseeable.
And with that I'll hand, it over to Sam Thank you.
Thank you <unk> and good morning, everyone at.
At this time I would like to take you through our financial results and discuss some key points and make up these results.
I will begin by highlighting the full year activity and turned to the quarterly results for the year, we generate a revenue of $647.7 million.
Compared to $371 million in 2021 and.
An increase of 75%.
The increase in day rates.
The addition of this wire fleet or the main drivers to the revenue increase that's all operating margin for the year was $244.1 million compared to $99.8 million in 2021.
We generate at net income in the third and fourth quarter of 2022 and for the year, We reported a net loss of $21.7 million compared to a net loss of $129 million in 2021.
Operationally average day rates improved almost $2400 per day for the full year and vessel operating margins increase by 10.5 percentage points year over year.
Adjusted EBITDA was 166.7 million for 2022 compared to $34.7 million in 2021, an increase of approximately 380%.
2022 was a quite a year and we are pleased to report to success we achieved.
As noted on our earnings release, we have once again begun to report forward guidance. So as we look to 2023 based on our most recent forecasts. We are estimated revenues to be in the range of $890 million to $910 million.
And our vessel operating margins to be between 49 and 51%.
I would now like to turn our attention to the quarter.
N as in the past my discussion will focus primarily on sequential quarterly results comparing the fourth quarter of 2022.
The third quarter of 2022.
For the fourth quarter, we reported net income at $10.6 million or 20 cents per diluted share compared to net income a $5.4 million or 10 cents per diluted share for the third quarter.
We have now reported can take care of net income for the first time since her emergence from bankruptcy in 2017.
Ah revenue for the fourth quarter was 186.7 million down 5.1 million from the third quarter revenue of $191.8 million.
The decrease results are primarily from the seasonal decline in our North Sea operations into Europe , and that's Reagan region, which normally occurs in Q4 and Q1 of each year and then our Asia Pacific region, we saw vessels come up contracts and vessels transiting out of the area or vessels mobilizing performed a drive outs that impacted our <unk>.
<unk> result.
Active utilization decrease modulate to 82.5% compared to 83.7% in Q3.
Average day rates were essentially flat at 13 554 per day in the fourth quarter compared to 13 six O six per day in the third quarter.
Gross margin percentage for Q4 decreased 37.8% down from 40% 47 per cent in Q3.
Special operating costs for the quarter or $115.5 million, an increase of 2.5 million three P. Three principally driven by higher repair and repair costs and higher fuel costs as we continue to mobilize vessels.
In and out of new contracts to achieve higher vessel margins.
And a quarter, we relocated six vessels to different areas, which add it almost 700000 of fuel costs are operating expense.
The result of the additional cost increase our vessel operating costs for marketing day, approximately 6936 per day in the quarter.
We continue to realise identify operating synergies associated with the spell acquisition.
Our original target was $25 million and to date, you realise approximately $10 million, we anticipate the.
The remaining synergies to be realized by Keith array of 2023.
In the corner, we saw four vessels, who from assets held from sale during the fourth quarter for the net proceeds of $5 million and recorded a net gain of $1.1 million on the sale of these vessels.
We generated operating income of 13.1 million for the quarter compared to $19.1 million in Q3.
The decrease is due primarily to a decrease in revenue coupled with the increase in operating expense.
G&A costs for the quarter was playing 8.6 million 1.4 million higher than Q3.
G&A for the fourth quarter included 5.2 million a transaction costs associated with this full acquisition.
To $4.3 million in Q3.
G&A cost in the fourth quarter was also burden by about $5.8 million associate it with a legacy spoke costs, which continues to be well below our initial expectation of about $8.8 million per quarter.
On an annual basis as a place you approximately $12 million, which is approaching our 20 million synergy target.
We anticipate achieving that targeted by the end of Q1 2023 as a significant part of our synergies will materialize now that we have completed Asap implementation.
For the year totaled G&A cost was 101.9 million, we do expect to incur additional transaction costs in Q1 of 2023. Excluding these costs are getting a cause for 2023 is estimated to be $85 million.
And a quarter waiting for $12.1 million, a day for a drive up costs compared to $12.8 million in Q3.
And a quarter, we incurred 539, drydock days, which affected utilization by three per cent.
For the full year, where we encourage $56 million in dry dock cost.
Cost for 2023 is expect it to be about $77 million.
And T for we also incurred about $449 million in capital expenditures related to vessel modifications, including battery installations, and I T upgrades, including fuel monitoring systems.
For the full year, we're encouraged 16.6 million capital expenditures and we expect to incur approximately $14 million in 2023.
We generate at $53.3 million, a free cash flow this quarter, which more than double the Q3 amount driven by strong cash from operating activities, including increased accounts receivable collections.
We began to monetize working capital, resulting from prior quarter revenue increases.
We do expect to invest in working capital as revenue continues to grow. However, we have to continue to manage this as tightly as possible.
242019, we began reclassifying vessels on our balance sheet from property and equipment to assets held for sale. We have since run 88 vessels through this program.
At the end of two 422.
Had eight vessels remaining in assets held for sale and a value of $4.2 million.
The fourth quarter, we sold two vessels from assets held for sale for proceeds with $3.3 million.
November Ah redemption of this burnt orange we.
We completed our invention of this bow orange with a public.
Common stock offering for approximately 4 million shares to redeemed equal number of Orange remaining.
In total for 2022, we have redeemed all 8.1 million warrants that were issued as far as part of the acquisition.
I would not like to focus on the performance of the regions are Americans region reported operating income of 3.2 million for the quarter compared to the operating income of $3 million in Q3 of 2000 2022.
The region reported revenue of $41.8 million and <unk>, <unk> Q4, compared to 39 for $1 million in Q3 <unk>.
The region operate at 31 average vessels in the quarter.
Which was unchanged from Q3 active utilization for the quarter was 80%.
Also the same as prior quarter. Additionally, dayrates increased 8.1% to 18271 from 16901 per day in Q3.
Improvement in operating income was due primarily to the increase in revenue.
For the fourth quarter of the Asia Pacific Region reported an operating loss of 800000 compared to an operating profit of $3.3 million in Q3 <unk>.
<unk> reported revenue of 19.1 million for the fourth quarter.
Compared to $23.9 million in the prior quarter.
The region operate at 14 average vessels, which was down one vessel on average compared to Q3.
Revenue decreases were principally influenced by the expiration of contracts the movement of one vessel out of the region and dried oxy for in the quarter.
Active utilization decrease to 79.5% in the quarter compared to 91.4% in Q3.
De rates declined slightly to 17868 per day in Q4 compared to 18530 per day in Q3.
Revenues, partially offset by decreases in operating costs as we operate it one less vessel in the quarter.
For the fourth quarter of the Middle East region reported an operating profit of 492000 compared to an operating profit of 605823.
The region remains steady quarter over quarter and reported revenue of $30.6 million in the fourth quarter compared to $31.2 million in the prior quarter.
The region operate at 43 vessels, which was one vessel higher than Q3 active utilization remain the same at 83 per cent in the quarter.
<unk> declined slightly to 9498 per day in queue for compared to 9781 per day in Q3.
The creation operating income was due primarily to the decrease in revenue.
Ah Europe , and the Mediterranean region reported operating income of $3.9 million in Q4 compared to operating income of $13.1 million in Q3.
Typical seasonality occurred in Q4 as you saw revenue decreased at $33.5 million compared to $39.7 million in Q3.
The region operate at 27 vessels and a quarter, which was an increase of one vessel <unk> Q3.
Active utilization decreased to 87.8% compared to 95.2% in Q3.
The decrease in utilization was due to the she's analogy is there is less activity in the winter months. In addition, we had a couple of dry dots in a process that affected overall utilization.
We also saw a 12% decline in day rates to 15364 day compared to 17436 per day in Q3.
You may recall, the Dayrates in Q3 increased significantly due to the leading edge day rates of change by our anchor handler in the North Sea.
And does that the decline in operating income for the quarter was mainly driven by the decrease in revenue coupled with higher operating cost as we transferred and operated one extra vessel in the region.
Our West Africa region reported operating income of 18.3 million Q4, compared to operating income of $12.3 million in Q3.
The market in this area has continued to improve as we have seen revenues increased steadily for H breaks borders.
Revenue for T. Four was $60.2 million compared to $56.3 million in Q3.
The region operated two less vessels on average in queue for active utilization increased to 81.7 per cent in queue for from 79.4% in Q3.
De rates continue to increase as we saw a 7% increase to 12272 per day in queue for from 11467 per day in Q3.
The increase in operating income from P. Three resulted from higher revenue coupled with low lower operating costs is to less vessels operating in the region.
In summary, we are pleased with our queue for results Q for results will typically be below G. Three which is expected as seasonality occurs in the north sea.
And a quarter, we also relocated vessels to areas to areas and had a high number of dried off days that affected overall results.
Courage to see revenue increase throughout the year driven by the increase in Dayrates and the newly acquired its bow vessels in the second half of the year.
We also reactivate it many of our previously stacked or Underutilize I underutilized legacy Tidewater vessels.
Which will not put us in a strong position to take advantage of the upturn into in in the industry. As we remain encouraged by the leading indicators, we see for 2023 and beyond.
Finally, I do want to thank our teams for a successful implementation from the legacy spoke Oracle ERP system S. A T.
This was a lot of hard work, but we have a very talented group of individuals that made this possible and eight short months.
Yes, if Eagle alive was January 1st 2023, 2023, and we have since had our first month and clothes, which we accomplished in four and a half days without a problem.
With that I'll turn it back over to <unk>.
Thank you Sam.
Commercial momentum continues as our customers plan for what by all accounts appears to be another like up an offshore activity in 2023 and into 224.
We continue to be committed to our commercial chartering strategy say insurance should take advantage of fries and they reached in all regions and all bustle classes. We continue to view. This is the best strategy to drive earnings and free cash flow generation over the coming quarters.
And with that Cheryl we will open it up for questions.
Thank you to ask a question please <unk>.
Question is from <unk>.
Please go ahead.
[noise] yeah. Thank you can you perhaps provide see color on how much of the fleet in terms of percentage is committed on contracts in in 2023 and 2024.
Yeah.
Yeah, how do we will hold on one second will give you an idea of what the what that is.
Sam was looking up some of the numbers right adhere to give you a better number. However, I will tell you that you know because we're going short our contention is to minimize the number until we get it soon.
Comfortable locking up longer term.
Yeah.
Maybe it perhaps.
<unk> you you gave some guidance on 2023, but if he.
If you need to to 24 do you do you have the the backdoor number there or for next year.
Yeah I mean.
Yeah, So Hudson in percentage wise, we have 2070 per cent of 2023 contracted.
And 2000 or 40, 45%.
Okay perfect.
And then in terms of [noise] the.
The backlog value of those 45 per cent and 24, you have nothing wrong.
Yes windows.
23 is 586 million in 2024 is $385 million.
Perfect.
And then.
In terms of.
I guess.
I'm 24, if you if you compare 24 hours.
223, they think that.
Do you think revenue and EBITDA could increase as much.
On an annual basis.
<unk> and 20th reverse the 2022.
So I guess what.
What I'm asking if the <unk> yeah, right. So yes, I do and in fact, I think profitability will include keeping disproportionately Ah so.
As we were talking about earlier as a call the the year over year increase the risk of receiving for 2023 or approximately $3000, maybe just a little over $3000 worth of that's implicit in the guidance of things related to you.
C de Vries accelerating and we still have some.
Clothes that are on charter at a lower rate that we're dumping. Unlike 19, <unk> 21 that are gonna be rolling all okay. So my anticipation is that in 24 will see even more than a 3000 dollar rate increase year over year, which means that essentially the percentage increase would be just as much or hunter.
Okay Perfect and then just just last night he palm touched upon it but just in terms of <unk> for 2023 did you say that you expect.
You need to come in at about $85 million, that's correct yes.
And then dry docks are expected to be 77.
<unk> 77, that's correct.
Perfect.
Alright. Thank you that's it for me I'll just jump back into your <unk>. Okay. Thank you.
Your next question is from.
Please go ahead with your line is open.
Hello, everyone.
Thank you for taking my question I.
I was thinking <unk>, just <unk>, but what about the overall costs what <unk> three cause we have we have had like <unk> Oh nice here no way they were talking like Mark is getting tighter, but also to cough and information <unk> talking to.
So I just want to do too.
He could give us a call at all let's see how much <unk> <unk> <unk> <unk>.
It's four thank.
Thank you.
So you know we mentioned.
And the range of 49% to 51% is a margin for 2023.
Yeah, I think implicit in that is there's a couple of things happening. There certainly are general price level increases that we're experiencing as everybody else is for flavor on other things and that's in that 5% to 8% range, but we also have synergies rolling through on the.
This one specific transaction that are gonna bring that down so if you're looking at the overall dollar magnitude you know on a per.
<unk> vessel basis as in two to three per cent orange.
Right.
Okay 433.
Thank you for.
So it's 24, it's just too early to tell.
I don't want it.
You know if.
The nice thing about the the fact that supply is constrained is that it actually doesn't put more pressure on our supply channel so on laborers and others. So once the all the votes are working essentially you know there's no pressure to lift weights commeasure with increases in day rates. So my hope is that we'll see that stabilized twenty-four but.
We'll give you a better guidance as we could closer to them.
Okay. Thank you and just like you mentioned it.
<unk>.
<unk> T for the next two years.
Well I definitely sees increasing but let me break it down to you on where I see the the limitations on it you know so and the utilization you'll have to think about it over a reasonable time period. So you know if you give me a month I could give you 100% utilization, but if you talk about a year you know there's always going.
B, 3% to 3.5% that go for drive actually so that's gonna be that's gonna Kathy Rob there's always gonna be about three to 3% to 5% down for repairs right. So you're you're theoretical maximum as in 93 per cent range right. Now there's also gonna be some frictional unemployment and things like that so my belief is a as <unk>.
See the the besides continuing to strengthen we're gonna move out of the high eighties and into the low nineties, but do I think it will ever go over 93 per cent for a year I certainly hope so.
But I don't I don't anticipate that to be the case.
Thank you and I.
It'd be correct to you and that should take care of <unk> D. C. Like US we are happy to just shrunk summer season at least here in N Y C. D C more vessels moving towards each weekend.
I think with.
Obviously see where the market goes I mean, the market's very strong in certain areas. So we'll move vessels accordingly as long as we're getting paid off mobilization fees no demobilization fees.
Will be.
Gunn go into work with of vessels required where we can push the eyes grapes, yes.
<unk> <unk> <unk>.
Open to going anywhere as long as we're paid paid.
Properly.
Okay. Thank you.
No further questions at this time I will now turn the call.
Closing remarks.
Thank you Cheryl. Thank you everyone and we look forward to updating you again and May goodbye.
This concludes today's conference call. Thank you for your ticket you.
You may now disconnect.
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