Q1 2024 Tidewater Inc Earnings Call
Dee: Thank you for standing by. My name is Dee, and I will be your conference operator today. At this time, I would like to welcome everyone to the Tidewater First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
Thank you for standing by my name is D and I will be your conference operator today at this time I would like to welcome everyone to the Tidewater first quarter 2020 for earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Dee: 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 press star followed by the number one on your telephone keypad. If you would like to enter a question, please press star 1 again. Thank you. I would now like to turn the call over to West Gotcher, Senior Vice President for Strategy, Corporate Development, and Investor Relations. Please go ahead.
Speaker Change: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one again. Thank you I would now like to turn the call over at the West Culture Senior Vice President of strategy corporate development and Investor Relations. Please go ahead.
West Gotcher: Thank you, D. Good morning, everyone, and welcome to Tidewater's first quarterly earnings conference call. I'm joined on the call this morning by our President and CEO, Quintin Kneen, our Chief Financial Officer, Sam Rubio, and our Chief Commercial Officer, Piers Middleton. During today's call, we'll make certain statements that are forward-looking and refer 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.
Speaker Change: Thank you Dean good morning, everyone and welcome to tie water's first quarter.
West Gotcher: Please refer to our most recent Form 10-K and Form 10-Q for additional details on these facts. These documents are available on our website at www.tdw.com or through the SEC at www.sec.gov. Information presented on this call speaks only as of today, May 3rd, 2024. Therefore, you're advised that any time-sensitive information may no longer be accurate at 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 on our earnings press releases located on our website at www.tdw.com.
Speaker Change: 2024 earnings Conference call I'm joined on the call. This morning by our President and CEO Quintin Kneen, our Chief Financial Officer, Sam Rubio, and our Chief commercial Officer appears Middleton.
Speaker Change: During today's call, we'll 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 were making during todays conference call.
Please refer to our most recent Form 10-K and Form 10-Q for additional details on these factors. These documents are available on our website at T. D. W dot com or through the SEC at SEC Gov Infor.
Speaker Change: Information presented on this call speaks only as of today may three 2024, therefore, you're advised that any time sensitive information may no longer be accurate at the time of any replay.
Speaker Change: Also during the call.
Speaker Change: Both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP financial measures can be found in our earnings release Press release earnings Press release is located on our website at T V. W. Dot com and now with that I'll turn the call over to Glenn.
Quintin V. Kneen: Thank you, Wes. Good morning, everyone. Welcome to the first quarter of 2024 Tidewater Earnings Conference Call. First quarter revenue and gross margin meaningfully exceeded our expectations. Both day rate and utilization outperformed our expectations. We are certainly pleased with the performance, as the first quarter of a given calendar year is typically the slowest from an activity perspective. Given the typical seasonal factors impacting a few of our operating regions, we take advantage of this period to front-load the dry dock schedule, which serves to prepare our fleet for a busier work season later in the year.
Glenn: Thank you Wes good morning, everyone welcome to the first quarter of 2020 for Tidewater earnings Conference call.
Glenn: First quarter revenue and gross margin meaningfully exceeded our expectations, both day rate and utilization outperformed our expectations. We are certainly pleased with the performance as the fourth quarter of a given calendar year is typically the slowest from an activity perspective, given the typical seasonal factors impacting a few of our operating regions.
Glenn: We take advantage of this period to Frontload, the Drydock schedule, which serves to prepare our fleet for a busy year works through some later in the year.
Quintin V. Kneen: This first quarter not only exceeded our expectations, but it exceeded the fourth quarter, and the fourth quarter exceeded the third quarter. This sequential improvement through the typical slow period is the strength of the cycle overwhelming the calendar year seasonality. The seasonality is still there, but the increased average day rate from contracts rolling onto higher rates more than offsets the effect.
Glenn: This first quarter, not only exceeded our expectations, but it exceeded the fourth quarter and the fourth quarter exceeded the third quarter. The sequential improvement through the typical slow period is the strength of the cycle overwhelming the calendar year seasonality. The seasonality is still there, but the increased average day rate from contracts rolling off.
Glenn: Higher rates more than offsets the effects.
Quintin V. Kneen: Day rate momentum during the first quarter was broad-based, with each of our vessel classes posting strong sequential growth, particularly in our large class of anchor handlers. Day rate momentum for this class of vessel was consistent across multiple regions, with the composite rate for this class up about 27%. Large anchor handlers are primarily used to support the mobilization and movement of drilling rigs and typically benefit from the most busy or more seasonable favorable periods in the second and third quarters.
Glenn: Day rate momentum during the first quarter was broad based with each of our vessel classes posting strong sequential growth, particularly in our large class of anchor handlers day rate momentum for this class of vessel was consistent across multiple regions with a composite rate for this class up about 27%.
Glenn: Large anchor handlers are primarily used to support the mobilization on movement of drilling rigs and typically benefit the most busy year more seasonable favorable favorable periods in the second and third quarters.
Quintin V. Kneen: The first quarter results also indicate that the supply of large anchor handlers is persistently tight and that the continued rolling of all vessels onto new leading-edge contracts will continue to drive up the printed quarterly average date rate. During the quarter, we repurchased 3.5 million shares on the open market, and subsequent to the end of the first quarter, we repurchased an additional 12.5 million shares on the open market. In addition to the open market repurchases, we used $28.5 million of cash to buy shares from employees so that they could then pay the associated tax benefit with a vesting of their equity compensation in lieu of those employees just issuing those shares into the open market, to reduce their share count by about 492,000 shares.
Glenn: The first quarter also results.
Glenn: This quarter results also indicate that the supply of large anchor handlers is persistently tight and that the continued rolling up all the vessels onto new leading edge contracts will continue to drive up the printed quarterly average day rate.
Glenn: During the quarter, we repurchased $3 5 million of shares on the open market and subsequent to the end of the first quarter, we repurchased an additional $12 5 million of shares on the open market and.
Glenn: In addition to the open market repurchases, we used $28 $5 million of cash to buy shares for employees. So that they can then pay the associated tax benefit with divesting of their equity compensation in lieu of those employees just issuing no shares into the open market. So year to date, we've used $44 5 million of cash.
Glenn: Cash to reduce the share count by about 492000 shares.
Quintin V. Kneen: We remain opportunistic on share repurchases and will continue to weigh the merits of share repurchases against other capital allocation opportunities, both relative to our view of the intrinsic value of the shares and against other capital allocation opportunities that may present themselves. We continue to pursue acquisitions, but thus far, share repurchases have been the most value-added use of capital. Our focus for acquisitions remains on companies located in North and South America, but we remain opportunistic in all geography.
Glenn: We remain opportunistic on share repurchases and we will continue to weigh the merits of share repurchases against other capital allocation opportunities both relative to our view of the intrinsic value of the shares and against other capital allocation opportunities that may present themselves, we continue to pursue acquisitions, but thus far our share.
Glenn: Repurchases have been the most value added use of capital.
Glenn: Our focus for acquisitions remains on companies located in North and South America, but we remain opportunistic and all geographies.
Quintin V. Kneen: In summary, we are very pleased with the performance of the business during the first quarter, and we remain optimistic about the continued pace of offshore activity acceleration as a result of the constructive leading indicators we observed during the first quarter, coupled with the persistent tightness in vessel supply and lack of new build activity. We will remain focused on driving pre-cash flow generation and will continue to deploy capital into those alternatives that maximize shareholder value. And with that, I will turn the call back over to Wes for additional commentary and our financial outlook. Thank you, Quintin.
Glenn: In summary, we are very pleased with the performance of the business during the first quarter and we remain opportunistic excuse me optimistic on the continued pace of offshore activity acceleration as a result of the constructive leading indicators we observed during the first quarter, coupled with the persistent tightness in vessel supply and lack of newbuild activity.
Glenn: We will remain focused on driving free cash flow generation and will continue to deploy capital into those alternatives that maximize shareholder value.
And with that let me turn the call back over to Wes for additional commentary and our financial outlook. Thank you Quinn to provide some additional context on our share repurchase program. We are pleased to announce that our board of directors has authorized an additional $18 $1 million of share repurchase capacity.
Wes: To provide some additional context on our share repurchase program, we are pleased to announce that our Board of Directors has authorized an additional $18.1 million of share repurchase capacity. This incremental authorization, combined with our remaining authorization from the last announced authorization, provides for a total of $50.7 million of authorized share repurchase capacity. The outstanding and authorized share repurchase program represents the maximum amount permissible under our existing dedication.
Glenn: This incremental authorization combined with our remaining authorization from the last announced authorization provides for $57 million of authorize authorized share repurchase capacity.
Wes: Outstanding and authorized share repurchase program represents a maximum amount permissible under our existing debt agreements to date, our capital allocation philosophy has been governed by our free cash flow generation, our beyond the intrinsic value of our shares relative to where our shares trade on the market, our current debt capital structure and competing capital allocation.
Wes: To date, our capital allocation philosophy has been governed by our free cash flow generation, which is beyond the intrinsic value of our shares relative to where our shares trade on the market, our current debt capital structure, and competing capital allocation opportunities. Our current debt capital structure is reaching a point at which we believe there is an opportunity for us to evaluate steps to establish a long-term debt capital structure more appropriate for a cyclical business and to allow for additional shareholder return capacity. Irrespective of the complexion and flexibility of our capital structure, the guiding principles of our capital allocation philosophy will remain consistent.
Wes: <unk> opportunities.
Wes: Our current debt capital structure is reaching a point at which we believe there is an opportunity for us to evaluate steps to establish a long term debt capital structure.
Wes: More appropriate for a cyclical business and to allow for additional shareholder return capacity.
Wes: Irrespective of the complexion and flexibility of our capital structure, the guiding principles of our capital allocation philosophy will remain consistent we will remain rigorous and evaluating the relative merits of each opportunity. We look at to pursue the most value accretive uses of our capital. In addition, we will remain mindful of our balance sheet, maintaining a <unk>.
Wes: We will remain rigorous in evaluating the relative merits of each opportunity we look at to pursue the most value-creative uses of our capital. In addition, we will remain mindful of our balance, maintaining a clear line of sight to a net cash position in about six quarters for any capital allocation decision. During the first quarter, leading-edge day rate momentum continued to improve nicely to $30,641 per day. We entered into 19-term contracts during the quarter with an average duration of about nine months.
Wes: Clear line of sight to a net cash position in about six quarters for any capital allocation decision we make.
Wes: During the first quarter, leading edge day rate momentum continued to improve nicely to $30641 per day.
Wes: We entered into 19 term contracts during the quarter with an average duration of about nine months.
Piers: We anticipate that we will continue to seek continued improvement in leading-edge day rates as we progress through the year, given the persistent tightness in vessel supply and increasing chartering activity as we approach the busier quarters of the year. We remain confident that we can achieve average day rates of improve by approximately $4,000 per day on a year-over-year basis. Looking to the remainder of 2024, we reiterate our full-year guidance of 1.4 to 1.45 billion dollars of revenue and a 52% gross margin.
We anticipate that we will continue to seek <unk>.
Wes: The improvement in leading edge day rates as we progress through the year, given the persistent tightness in vessel supply and increasing chartering activity as we approach the busier quarters of the year.
We remain confident that we can achieve average day rate to improve by approximately $4000 per day on a year over year basis.
Looking to the remainder of 2024, we reiterate our full year guidance of one $4 billion to $145 billion of revenue and a 52% gross margin.
Piers: As we progress through the year, we now anticipate revenue to increase slightly in the second quarter due to better than anticipated revenue performance in Q1, and to the pull-forward of some dry docks, the mobilization of a few vessels, and some on-plane maintenance in the second quarter. We still anticipate a meaningful step up in revenue in the third quarter and continued strength into the fourth. Similarly, we anticipate relatively flat gross margins in Q2 due to the factors previously described, but we expect about 7 percentage points of margin expansion in Q3, and maintain our expectation of a Q4 gross margin exit rate of 56% in the fourth quarter, setting us up well for continued margin expansion as we enter what is expected to be an even stronger market in 2025.
Wes: As we progressed through the year, we now anticipate revenue revenue to increase slightly in the second quarter due to better than anticipated revenue performance in Q1 and to the pull forward of some dry docks the mobilization of a few vessels and some unplanned maintenance in the second quarter.
Wes: We still anticipate a meaningful step up in revenue in the third quarter and continued strength into the fourth quarter.
Wes: Similarly, we anticipate relatively flat gross margins in Q2 due to the factors previously described but expect about seven percentage points of margin expansion in Q3, and maintain our expectation that Q4 gross margin exit rate of 56% in the fourth quarter.
Wes: Setting us up well for continued margin expansion as we enter what is expected to be an even stronger market in 2025.
Piers: Our backlog currently sits at about $930 million in revenue for the remainder of 2020, with 74% of available vessel days contracted for the remainder of the year, with our largest classes of PSVs and anchor handlers having the most exposure to contract repricing opportunities throughout the remainder of. With that, I'll turn the call over to Piers for an overview of the commercial landscape.
Wes: Our backlog currently sits at about $930 million of revenue for the remainder of 2024 was 74% of available vessel days contracted for the remainder of the year with our largest classes of <unk> and anchor handlers, having the most exposure to contract repricing opportunities throughout the remainder of the year.
Wes: With that I'll turn the call over to Pierce for an overview of the commercial landscape.
Piers: Thank you, Wes, and good morning, everyone. This quarter, I will talk a little about what we're seeing in each of our regions as we look ahead for the rest of the year and into 2025. Overall, the outlook for the OSV market remains strong, with the ongoing upturn in project investment expected to continue to drive additional incremental demand out beyond 2026, while the limitations and supply of any additional OSVs to the global fleet will further exacerbate the tightness in the OSV space.
Thank you Wes and good morning, everyone. This.
Pierce: This quarter I will talk a little about what we are seeing in each of our regions as we look out to the rest of the year and into 2025.
Pierce: Overall, the outlook for the OSV market remains strong with the ongoing Uptown and project investments expected to continue to drive additional incremental demand out beyond 2026.
Pierce: While the limitations in the supply of any additional OSV to the global fleet will further exacerbate the tightness in the OSV space.
Piers: So far, this tight supply-demand balance has been reflected positively in our rates for Q1 2024 by pushing our feet composite day rate up by almost $1,497 per day compared to Q4 2023. And furthermore, based on our outlook for the market, we see no need to move away from our current short-term chartering strategy that we've been very vocal about over the last few years.
Pierce: So far this tight supply demand balance has been reflected positively in our rates for Q1 2024 by pushing our feet composite data readout I almost $1497 per day compared to Q4 of 2023 and.
Pierce: And Furthermore, based on our outlook for the market, we see no need to move away from our current short term chartering strategy that we've been very vocal about over the last few years and again. This has been reflected in Q1 with our average charter length for new contracts remaining in the nine month period, which was the same as we saw in Q4 2023.
Piers: And again, this has been reflected in Q1, with our average charter length for new contracts remaining in the nine-month period, which was the same as we saw in Q4 2023, working through our various regions and starting with Europe. The North Sea Spot PSV market has been a little slow to pick up in the first few months of the year, which is not unusual for Q1. However, that was offset by stronger demand on the term side of the business, both in the UK and Norwegian sectors for PSV, with charterers coming to the market early in the year to make sure they have the necessary cover over the busy summer periods and through Q3 and Q4.
Pierce: Working through our various regions and starting with Europe.
Pierce: The North sea spot PSV market has been a little slow to pick up in the first few months of the year, which is not unusual for Q1.
Pierce: However that was offset by stronger demand on the term side of the business both in the UK and Norwegian sectors for PSP.
Pierce: With charters coming to the market early in the year to make sure they have the necessary cover over the busy summer periods and through Q3 and Q4.
Piers: On the large anchor handlers, we saw rates reported hitting above the £120,000 per day mark during Q1, and with indications that a number of projects that were delayed to 2023 are now planned to start in 2024, which bodes well for our large anchor handlers for the remainder of the year.
On the large anchor handlers, we saw rates reported taking about 120000 pounds per day, Mark during Q1, and with indications that a number of projects that were delayed 2023, and now plan to start in 2024, which bodes well for our large anchor handlers for the remainder of the year.
Sam: In Africa, even with the busy dry dock schedule in the region, we had a strong Q1, predominantly led by increased drilling activity in Angola, Namibia, and Senegal, which required the support of our larger anchor handlers and PSVs in the region. We expect some slowdown in Q2 and drilling demand in the region as rigs reposition to different countries in Africa. We'll see drilling restarting in full force again as we move into the second half of 2024 and out into 2025.
Pierce: In Africa, even with the busy dry dock schedule in the region. We had a strong Q1 predominantly led by increased drilling activity in Angola, and it may be in Senegal, which required to support our larger anchor handlers and <unk> in the region.
We expect some slowdown in Q2 and drilling demand in the region as rigs repositioned to different countries in Africa with sea drilling Resourcing in full force again, as we move into the second half of 2024 and out into 2025.
Sam: In the Middle East, with the recent news in Saudi Arabia, we may see some short-term demand slowdown, specifically related to work in the kingdom. However, we continue to see significant demand requirements from other countries in the region, as well as from the contractors supporting projects already ongoing in the Kingdom, that we expect will more than offset any near-term slowdown that we may experience from a rig count reduction in Saudi Arabia. In the Americas, as mentioned on our last call, demand in Brazil remains strong, led by Petrobras, as they still try to fill their long-term vessel requirements.
Pierce: In the Middle East with the recent news in Saudi Arabia, We may see some short term demand slowdown specifically related to work in the kingdom.
Pierce: However, we continue to see significant demand requirements from other countries in the region as well as from the contracts is supporting projects already ongoing in the kingdom that we expect will more than offset any near term slowdown that we may experience from a rig count reduction in Saudi Arabia.
Sam: And with tonnage from other areas of the world slowly being sucked into Brazil, we expect to see further tightening in already tight regions. The U.S. Gulf of Mexico had a relatively soft quarter with a limited number of new requirements in Q1. But with the majority of our Jones Act fleet already fixed through 2024, we haven't been affected by this dip in demand as some others might have been in the region. Lastly, in Asia-Pacific... Taiwan and Australia were the key drivers of demand in the region in the current quarter, with several new contracts signed up to support drilling activity in Australia that will kick off in Q2 and should go all the way through into 2025.
Pierce: In the Americas as mentioned on our last call demand in Brazil remained strong led by Petrobras as I still try to fill that long term vessel comments and with tonnage from other areas of the world slowly being sucked into Brazil, we expect to see further tightening in already tight regions.
Pierce: The U S Gulf of Mexico had a relatively soft quarter with a limited number of new requirements in Q1, but with the majority of our Jones Act fleet already fixed through 2024, we haven't been affected by this dip in demand as some others might have been in the region.
Pierce: Yes.
Pierce: Lastly in Asia Pacific.
Pierce: Taiwan, and Australia with the key drivers of demand in the region in the current quarter.
Pierce: With several new contract signed up to support drilling activity in Australia that will kickoff in Q2 and should go all the way through 2025.
Sam: Looking further out into 2026, we're also starting to see several of the other NOCs in the broader region getting organized to increase drilling activity starting at the end of 2024 all the way out to 2026, which bodes well for the region going forward. Overall, we're very pleased with how the markets continue to move in the right direction in Q1, and we fully expect that positive momentum to continue through the year and into 2025. And with that, I'll hand over to Sam. Thank you.
Pierce: Looking further out into 2026, we're also starting to see several of the other nics in the broader region getting organized to increased drilling activity starting end of 2024, all the way out to 2026, which bodes well for the region going forward.
Pierce: Overall, we're very pleased with how the market has continued to move in the right direction in Q1, and we fully expect that positive momentum to continue through the year and into 2025.
Pierce: And with that I'll hand over to Sam Thank you.
Sam: Thank you, Piers, and good morning, everyone. This time, I'd like to take you through our financial results. My discussion will focus primarily on quarterly results for the first quarter of 2024 compared to the fourth quarter of 2023. As noted in our press release filed yesterday, we reported net income of $47 million for the quarter, or $0.89 per share. In the first quarter of 2024, we generated revenue of $321.2 million compared to $302.7 million in the fourth quarter of 2023, an increase of 6.1 percent. However, active utilization was essentially unchanged at 82.3 percent in the current quarter and 82.4 percent in Q4.
Samuel R. Rubio: Thank you Paris and good morning, everyone. This time I would like to take you through our financial results My discussion will focus primarily on quarter to quarter results.
Sam: Average day rates increased by 8.3 percent from 18,066 per day in the fourth quarter to 19,563 per day in the first quarter, which was the main driver for the increase in revenue. Our gross margin percentage for Q1 increased to 47.5% from 47.2% in Q4. Gross margin in Q1 was $152.5 million compared to $142.8 million in Q4. Adjusted EBITDA was $139 million in Q1 compared to $131.3 million in Q4. A positive result as the first quarter is traditionally the weakest quarter in our fiscal year due mainly to seasonal weakness. However, average day rate more than offsets its effect.
Sam: Vessel operating costs for the quarter were $167.6 million, compared to $158.6 million in Q4. The increase is primarily due to higher crew costs, as we transferred several vessels into our Australia region, which has a higher operating cost environment. In addition, we incurred higher dry dock and mobilization days that increased fuel consumption, and we also incurred higher than normal crew training costs in the period.
Samuel R. Rubio: The first quarter of 2024 compared to the fourth quarter of 2023.
Samuel R. Rubio: As noted in our press release filed yesterday, we reported net income of $47 million for the quarter or <unk> 89 per share.
Samuel R. Rubio: In the first quarter of 2024, we generated revenue of $321 2 million compared to $302 7 million in the fourth quarter of 2023, an increase of six 1% active utilization was essentially unchanged at 82, 3% in the current quarter.
Samuel R. Rubio: 82, 4% in Q4.
Samuel R. Rubio: Average day rates increased by eight 3% from 18066 per day in the fourth quarter to $19 $5 63 per day in the first quarter.
Speaker Change: Which was the main driver for the increase in revenue.
Speaker Change: Our gross margin percentage for Q1 increased to 47, 5% from 47, 2% in Q4.
Speaker Change: Gross margin in Q1 was $152 5 million compared to $142 8 million in Q4, adjusted EBITDA was $139 million in Q1 compared to $131 3 million in Q4.
Speaker Change: A positive result as of first quarter is traditionally our weakest quarter in our fiscal year due mainly to the seasonal weakness.
Speaker Change: The seasonality is still there, but the increased average day rate more than offset its effect.
Speaker Change: Vessel operating cost for the quarter were $167 6 million compared to $158 6 million in Q4, the increases primarily due to higher crew cost as we transferred several vessels into our Australia region, which has higher operating cost environment. In addition, we incurred higher drydock.
Speaker Change: Mobilization days that increase fuel consumption.
Speaker Change: We also incurred higher than normal crew training costs in the period.
Sam: The increase in operating costs increased our vessel operating costs per market per day to $8,480 in the first quarter compared to $7,894 per day in the fourth quarter. As we look to the remainder of the year, based on our most recent forecast, and as mentioned previously, we continue to estimate total 2024 revenues to be in the range of $1.4 to $1.45 billion and gross margins to be 52%. In the quarter, we sold three vessels from our active fleet for net proceeds of $12.5 million, and we reported a net gain of $11 million on the sale of these vessels.
Speaker Change: The increase in operating costs increase our vessel operating cost per market today to 8480 in the first quarter compared to seven 894 per day in the fourth quarter.
As we look to the remainder of the year based on our most recent forecast and as mentioned previously we continued to estimate totaled 24 revenues to be in the range of one four to 145 billion and gross margins to be 52%.
Speaker Change: In the quarter, we sold three vessels from our active fleet for net proceeds of $12 5 million, we reported in a net gain of $11 million on the sale of these vessels.
Sam: We generated operating income of $81.9 million for the first quarter, compared to $63.1 million in Q4, an increase due primarily to higher revenue and gains on vessel sales, partially offset by increased operating costs. G&A costs for the first quarter were $25.3 million, $600,000 higher than Q4, due primarily to higher personnel costs. For the year, we still expect our G&A cost to be about $104 million, which includes approximately $13.6 million of non-cash stock compensation.
Speaker Change: Generated operating income of $81 9 million for the first quarter compared to $63 1 million in Q4 and increased due primarily to higher revenue and gains on vessel sales, partially offset by increased operating costs.
Speaker Change: G&A costs for the first quarter was $25 3.600 million higher than Q4, due primarily to higher personnel costs.
Speaker Change: For the year, we still see we still expect our G&A cost to be about $104 million, which includes approximately $13 6 million in noncash stock compensation.
Sam: In the first quarter, we incurred $40 million in deferred dry dock costs compared to $24.1 million in Q4. It's going to be a heavy dry dock year, with the first half of the year being the heaviest.
Speaker Change: In the first quarter, we incurred $40 million in deferred drydock costs compared to $24 1 million in Q4.
Speaker Change: This is going to be a heavy drydock year with the first half of the year being the heaviest.
Sam: In the quarter, we incurred 1,101 dry dock days, 68 days more than in Q4, and this affected utilization by 6%. Drydock costs for the full year 2024 are expected to be $129 million. In Q1, we also incurred $10.9 million in capital expenditures related to vessel modifications, ballast water treatment installations, IT, and DP system upgrades. For the full year 2024, we expect to incur approximately $25 million in capital expenditures. We generated $69.4 million of free cash flow this quarter, which is $8.4 million more than Q4.
Speaker Change: In the quarter, we incurred 1101 dry dock days 68 days more than in Q4, and this affected utilization by 6%.
Speaker Change: Drydock costs for the full year of 2024 is expected to be $129 million.
Speaker Change: In Q1, we also incurred $10 9 million in capital expenditures related to vessel modifications ballast water treatment installations.
Speaker Change: And DP system upgrades for the full year 2024, we expect to incur approximately $25 million in capital expenditures.
Speaker Change: We generated $69 4 million of free cash flow this quarter, which is $8 $4 million more than Q4. The free cash flow was primarily attributable to cash generated from operating activities or $10 9 million in capital expenditures was more than offset by our $12 5 million and vessel sales proceeds.
Sam: The free cash flow was primarily attributable to. The cash generated from operating activities, and our $10.9 million in capital expenditures was more than offset by our $12.5 million in vessel sales proceeds. Working capital increased during the first quarter as receivables increased because of the higher revenue. Working capital will grow as revenue continues to grow throughout the year, but we will manage this investment as tightly as possible. Cash taxes paid for the quarter were $15.6 million, compared to $7.3 million in the prior quarter.
Working capital increased during the first quarter as receivables increase because of the higher revenue working capital will grow as revenue continues to grow throughout the year, but we will manage this investment as tightly as possible.
Speaker Change: Cash taxes paid for the quarter were $15 6 million compared to $7 3 million in the prior quarter.
Sam: The increase is due to the increase in activity, but also final tax payments were made on the prior year tax returns filed in Q1. We spent $3.5 million to repurchase shares under an announced share buyback authorization, and subsequent to the end of the first quarter, we purchased an additional $12.5 million in shares on the open market. We spent $28.5 million in cash to pay taxes on behalf of employees in lieu of issuing shares of stock relating to the best-in-stock compensation.
Speaker Change: The increase is due to the increase in activity, but also a final tax payments were made with prior year tax returns filed in Q1.
Speaker Change: We spent $3 5 million to repurchase shares under our announced share buyback authorization and subsequent to the end of the first quarter with purchase an additional $12 five 5 million shares on the open market.
Speaker Change: We spent $28 5 million in cash pay taxes on behalf of employees in lieu of issuing shares of stock relating to the vesting stock compensation.
Sam: Year-to-date, we have used $44.5 million of cash to reduce the number of shares in the market, and that has reduced the count by approximately 492,000 shares. We expect our cash flow performance to continue to improve as the business continues to accelerate. We'd now like to focus on the performance of the regions.
Speaker Change: Year to date, we have used $44 $5 million of cash to reduce the number of shares in the market and that has reduced account by approximately 492000 shares.
Speaker Change: We expect our cash flow performance to continue to improve as the business continues to accelerate.
Sam: Our Americas region reported operating income of $10.1 million for the quarter, compared to operating income of $16.2 million for Q4. The region reported revenue of $64 million in Q1 compared to $68.4 million and Q4. The Americas region operated 35 vessels in the quarter, which was two fewer than in Q4 due to vessel transfers to other regions.
Speaker Change: I would now like to focus on the performance of the region. Our Americas region reported operating income of $10 1 million for the quarter compared to operating income of $16 2 million for Q4.
Speaker Change: The region reported revenue of $64 million in Q1 compared to $68 4 million.
Speaker Change: In Q4.
The region operate at 35 vessels in the quarter, which was two fewer than Q4 due to vessel transfers to other regions.
Sam: Active utilization for the quarter was 76.5%, 4.5 percentage points lower than Q4 due to an increase in dried-off activity. Day rates increased 5.6% to $25,894 per day from $24,524 per day in Q4. The decrease in operating income was due primarily to lower revenue driven by two fewer vessels operating in the region, slightly higher operating costs due to unplanned repairs, and a decrease in utilization resulting from a higher number of dryouts.
Speaker Change: Active utilization for the quarter was 76, 5% four five percentage points lower than Q4 due to an increase in drydock activities.
Speaker Change: Day rates increased five 6% to 25 894 per day from 25 24.
Speaker Change: Five four per day in Q4.
Speaker Change: The decrease in operating income was due primarily to the lower revenue driven by two fewer vessels operate in the region slightly higher operating costs due to unplanned repairs and to the decrease in utilization, resulting from the higher number of Drydocks.
Sam: For the first quarter, the Asia-Pacific region reported an operating profit of $14.8 million, compared to an operating profit of $11.3 million in Q4. The region reported revenue of $47.8 million in the first quarter compared to $38.6 million in the prior quarter. Utilization slipped slightly from 86.6% in Q4 to 84% in Q1. This may lead to higher dry dock activity and higher mobilization days as we moved a couple of vessels into the area.
Speaker Change: For the first quarter of the Asia Pacific Region reported an operating profit of $14 8 million compared to an operating profit of $11 3 million in Q4.
Speaker Change: <unk> reported revenue of $47 8 million in the first quarter compared to $38 6 million in the prior quarter.
Speaker Change: Utilization slipped slightly from 86, 6% in Q4 to 84% in Q1.
Speaker Change: Mainly to the higher drydock activity and higher mobilization days as we move to a couple of vessels into the area.
Sam: The region operated 21 active vessels, which was up two vessels on average compared to Q4. Average day rates significantly increased by 18.6% from $25,378 per day in Q4 to $30,101 per day in Q1. The higher operating income is due to the increase in revenue partially offset by the increase in operating costs due to the two vessels added to the region. For the first quarter, the Middle East region reported an operating profit of $1.5 million compared to an operating profit of $2.1 million in Q4. The region remained steady quarter over quarter and reported revenue of $37.9 million in the first quarter compared to $38.1 million in the prior quarter. The region operated 43 vessels, two fewer than in Q4.
Speaker Change: The region operate at 21 active vessels, which was up two vessels on average compared to Q4.
Average day rates significantly increased by 18, 6% from 25 378 per day in Q4 to 30101 per day in Q1.
Speaker Change: The higher operating income was due to the increase in revenue, partially offset by the increase in operating costs due to the two vessels added to the region.
Speaker Change: For the first quarter for Middle East region reported an operating profit of $1 5 million compared to an operating profit of $2 1 million in Q4, the region remains steady quarter over quarter and reported revenue of $37 9 million in the first quarter.
Speaker Change: Paired with $38 1 million in the prior quarter.
Speaker Change: Region operate at 43 vessels two fewer than Q4.
Sam: Active utilization increased slightly from 85.6 in Q4 to 86.6 in Q1. However, day rates decreased to 11,108 per day in Q1 compared to 10,855 per day in Q4. The increase in day rates and utilization helped maintain revenue close to the prior quarter level. However, operating income decreased primarily due to an increase in R&M costs due to unplanned repairs and higher than normal crew training costs. Our Europe and Mediterranean region reported operating profit of $14.8 million in Q1 compared to operating income of $13.8 million in Q4.
Speaker Change: Active utilization increased slightly from 85 six in Q4 to 86 six in Q1.
Speaker Change: Day rates increased I'm, sorry decreased 11, one <unk> per day in Q1 compared to 10855 per day in Q4.
Speaker Change: The increase in day rates and utilization help maintain revenue closer to prior level prior quarter level. However, operating income decreased due primarily to the increase in R&M costs due to unplanned repairs and higher than normal crew training costs.
Speaker Change: Our Europe and Mediterranean region reported operating profit of $14 8 million in Q1 compared to operating income of $13 8 million.
Speaker Change: In Q4 typically in Q1, we see a drop in activity in the area. However, we saw an increase in day rates from 19061 per day in Q4 to 19763 per day in Q1.
Sam: Typically, in Q1, we see a drop in activity in the area. However, we saw an increase in day rates from 19,061 per day in Q4 to 19,763 per day in Q1. Utilization did decrease by approximately 2 percentage points to 87.1% from A9 and Q4 due to higher dry docks and unplanned maintenance days. Despite the decrease in utilization, day rates helped outpace their typical seasonality, as we saw revenue decrease by only $300,000 to $80.4 million, compared to $80.7 million in Q4.
Speaker Change: Utilization debt decreased by approximately two percentage points to 87, 1% from 89 in Q4 due to high write offs and unplanned maintenance days.
Speaker Change: Despite the decrease in utilization day rates helped outpaces the typical seasonality as we saw revenue decrease by only $300000 to $80 4 million.
Speaker Change: Impaired to $80 7 million in Q4.
Sam: The region operated 51 vessels in the quarter, the same as Q4. The increase in operating profit for the quarter was mainly driven by lower depreciation in operating costs, as revenue and operating costs essentially remained flat. West Africa reported operating profit of $41 million in Q1 compared to operating profit of $27.4 million in Q4. The market in this area remains very strong.
Speaker Change: The region operate at 51 vessels in the quarter the same as Q4.
Speaker Change: The increase in operating profit for the quarter was mainly driven by lower depreciation operating cost as revenue and operating costs essentially remained flat.
Speaker Change: Our West Africa region reported operating profit of $41 million in Q1 compared to operating profit of $27 4 million in Q4.
Speaker Change: The market in this area remains very strong revenue for Q1 increased by 18, 8% to $88 7 million compared to $74 6 million in Q4.
Sam: Revenue for Q1 increased by 18.8% to $88.7 million compared to $74.6 million in Q4. The region operated 67 vessels on average in Q1, same as in Q4. Active utilization increased to 78.3% in Q1 from 74.8% in Q4. The region incurred 214 fewer dry dock days and 43 fewer mobilization days in the quarter, which contributed to the increase in utilization. Day rates continue to increase impressively, as we saw a 14.3% increase to 18,687 per day in Q1, from $16,356 per day in Q4.
The region operate at 67 vessels on average in Q1 same as Q4 active utilization increased to 78, 3% in Q1 from 74, 8% in Q4.
Speaker Change: The region incurred 214 fewer dry dock days in 43 fewer mobilization days in the quarter, which contributed to the increase in utilization.
Day rates continue to increase impressively as we saw a 14, 3% increase to 18687 per day in Q1.
Speaker Change: From $16 $3 56 per day in Q4, the increase in operating income from Q4 resulted primarily from the higher revenue coupled with lower operating costs due to the lower number of guide ups in the quarter.
Sam: The increase in operating income from Q4 resulted primarily from higher revenue coupled with lower operating costs due to the lower number of dry docks in the quarter. In summary, we're pleased with our Q1 results. Q1 results are normally lower due to seasonality, but the increase in day rates and solid utilization through this period have more than offset the effects of this typical seasonality. We remain encouraged by the leading educators we observe in the quarter, and we will remain focused on free cash flow generation and profitability. With that, I'll turn it back over to Quintin.
Speaker Change: In summary, we're pleased with our Q1 results Q1 results are normally lower due to the seasonality, but the increase in day rates and solid utilization through this period has more than offset the effects of this typical seasonality.
Speaker Change: We remain encouraged by the leading indicators, we observed in the quarter and we will remain focused on free cash flow generation and profitability with that I'll turn it back over to Glenn.
Quintin V. Kneen: All right. Well, thank you, Sam. And Gee, let's go ahead and open it up for questions.
Alright, well, thank you Sam and Gee, Let's go ahead and open it up for questions.
Dee: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question or listen via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Thank you we will now begin the question and answer session. If you have <unk> like to ask a question. Please press star one on your telephone keypad you raise your hand in China Q. If you would like to withdraw your question simply press Star. One again is that called upon to ask questions and listening via loud speaker on your device. Please.
Dee: We do request for today's session that you please limit to one question and one follow-up. Again, press star 1 to join the queue. And your first question comes from the line of Jim Rollyson from Raymond James. Please ask your question.
Speaker Change: The comprehensive and ensure that your phone on mute when asking your question. We do a question for todays session that you. Please limit to one question and one follow up again press Star one to China Q and your first question comes from the line of Jim Rollyson from Raymond James Please ask your question.
James Michael Rollyson: Good morning, gents. Impressive results given the normal seasonal factors you've highlighted. Quintin, when you look at your leading edge contract rates, obviously, they keep moving up. In the last two quarters, the rate of improvement has slowed, which I guess seasonally is probably pretty typical. But the way things are kind of setting up to pick up over the balance of the year, especially during the busy season, I'm curious about your view on how we should think about the kind of rate of change of leading edge rates given what activity is doing, just the seasonality impact, et cetera.
James Michael Rollyson: Hey, good morning, Gents impressive results given the normal seasonal factors you've highlighted.
James Michael Rollyson: Clinton on the when you look at your leading edge contract rates, obviously, they keep moving up.
James Michael Rollyson: Last two quarters kind of the rate of improvement has slowed which I guess seasonally it's probably pretty typical but the way things are kind of setting up two to pick up over the balance of the year, especially during the busy season I'm curious your view on how we should think about the kind of rate of change of leading edge rates given.
James Michael Rollyson: With activities doing just the seasonality impact et cetera.
Quintin V. Kneen: Hey Jim, thank you. It is somewhat muted as you go through Q4 and Q1, because those are just the weakest periods of the year globally. And so it doesn't surprise me that the rate of acceleration has leveled off a little bit as we go through these last It's always hard to know, but generally, and we saw this last year and the year before, I anticipate that we'll see a ramp-up in Q2 and Q3.
Speaker Change: Hey, Jim Thank you.
James Michael Rollyson: It is somewhat muted as you go through Q4 and Q1, because those are just sort of the weakest periods of the year globally and so it doesn't surprise me that the rate of acceleration has leveled off a little bit as we went through these last two quarters.
James Michael Rollyson: It's always hard to know.
James Michael Rollyson: But generally and we saw this last year and a year before.
James Michael Rollyson: <unk>, we will see a ramp up in Q2 and Q3.
Quintin V. Kneen: There probably is a limit to what that number will go to over time. It's certainly grown substantially over the past eight to ten quarters, but I would look for more meaningful increases as we go through Q2 and Q3. What we've been seeing at this pace for the last couple of years is it started out about $3,000 a year improvement in overall day rates, and then it's been moving up to four. Now it's kind of on pace for five, right? So it has been accelerating by about $1,000 a year on average over the last two or three years. And it wouldn't surprise me to see that in 24 and into 25.
James Michael Rollyson: There probably is a limit to what that number goes to over time.
James Michael Rollyson: It has certainly grown substantially over the past eight to 10.
James Michael Rollyson: 10 quarters.
James Michael Rollyson: I would look for more meaningful increases as we go through Q2 and Q3.
James Michael Rollyson: What we've been seeing.
James Michael Rollyson: At this at this pace last couple of years as we started out at about $3000 a year improvement and overall day rates.
James Michael Rollyson: And it's been moving up to for now is kind of on pace for five right. So it has been accelerating in about a $1000.
James Michael Rollyson: Year on average over the last two or three years and it wouldn't surprise me to see that in 'twenty, four and into 'twenty five as well.
James Michael Rollyson: Got it, that's helpful. And as a follow-up, Piers, you kind of went through what's going on geographically. And we obviously hear, you know, similar things in some of the different regions. I'm curious, as you look out over the next two or three years, where do you anticipate the biggest growth regions to come from?
Speaker Change: Got it that's helpful and as a follow up peers, you kind of went through what's going on geographically and we obviously here.
Speaker Change: Similar things and some of the different regions I'm curious as you look out over the next two or three years, where do you anticipate the biggest growth regions to come from at this point.
Piers: I think, um... Not much different from what we sort of say. I think all the areas are looking very positive. I think Asia-Pacific looks like it'll be strong going forward. We tend to see, you know, the NOCs in that region have been a little bit slower to pick up, but they're starting to talk about that. So I think that's one area. Obviously, Brazil has continued to be, has been strong, and Petrobras continues to, you know, putting out their numbers looking out to 2030.
Speaker Change: I think.
Speaker Change: It's not much different from what we saw the SaaS I think all the areas are looking very positive.
Speaker Change: I think Asia Pacific looks.
Speaker Change: Like it will be strong going forward.
Speaker Change: We tend to see the nics in that region have been a little bit slower to pick up but that's starting to talk about that so I think thats one area, obviously, Brazil has continued to be.
Speaker Change: Has been strong and Petrobras continues to.
Speaker Change: Putting out.
Speaker Change: That number is looking out to 2030, so that it looks like we will continue to be a strong area as well.
Piers: So that looks like it will continue to be a strong area as well. And I think it's all positive. So those are the sort of two standard areas. And Africa continues to look very positive as well, down in southern Africa in particular. There's a lot of work going on down there as well. So there are no bad spots at the moment, is how I would leave it. Great. Thank you.
Speaker Change: I think it's all positive. So those are the sort of two standout areas in Africa continues to look very positive as well down in southern Africa in particular, as well Theres a lot of work going on down there as well so.
Speaker Change: There is no bad spots at the moment is how I would leave it.
Speaker Change: Great to hear I appreciate the time guys. Thanks.
James Michael Rollyson: Great to hear, I appreciate the time guys, thanks. Thanks, Jim.
Speaker Change: Thanks, Tim.
Fredrik Stene: Our next question comes from the line of Fredrik Stene from Clarkson Securities. Please go ahead.
Speaker Change: Our next question comes from the line of Frederic <unk> from Clarksons <unk> Securities. Please go ahead.
Fredrik Stene: Hey Quintin and team, hope you are well. I want to touch upon two themes, starting with capital allocation and capital structure. You've talked about getting a more streamlined debt structure, and in my head, that would typically entail that you're grouping all your current facilities together for a larger, more long-dated bond. Is that something that has changed, or has your own thinking around what an ultimate cap structure would look like changed since last time?
Quintin V. Kneen: Hey, Fredrik, thanks for the question. It's good to hear from you.
Quintin V. Kneen: I'm going to kick it over to Wes, because you've been doing a lot of strategic thinking for us from a debt capital structure perspective. But, you know, one of the things that we're certainly focused on is creating a debt capital structure that's consistent with the needs of Stiglitz for business. So, Wes, want to update them on the current thinking on that? Yeah, sure.
Wes: Thank you. Yeah, sure. Hey, Fredrik, good morning or good afternoon to you.
Wes: I appreciate the question. So I guess the way we're thinking about it today is, you know, certainly, the debt capital structure today has been kind of pieced together here over the past few years through refinancings and acquisitions, and what we'd like to get to is a more appropriate debt capital structure for the cyclical business that we're in. So we're in a position today where we feel we have the, I guess, flexibility to be opportunistic and evaluate ways to shape the capital structure going forward based on what we can observe in the market. The debt capital markets both here in the U.S. as well as in your home market appear to be relatively constructive.
Wes: We aren't facing any near-term maturities or anything of that nature, so we want to be thoughtful and judicious about how we approach that, but we do believe that we are approaching that time when it makes sense to give some real thought to it. So the ultimate shape and complexion of that debt capital structure, of our debt capital structure, I still think remains to be seen, but it is an environment that we feel is supportive of our efforts to begin to evaluate that.
Fredrik Stene: That's a very helpful caller, and on the back of that, I think, as you alluded to in your prepared remarks, One of the ultimate goals here is to have more flexibility around how you spend the cash that you are generating or going to generate, at least on my numbers. But I see that you didn't, during Q1, fully utilize the share repurchase agreement. You accelerated a bit now in the second quarter.
Fredrik Stene: But I was wondering if you think now that the share price has actually approached $100 per share, that that's one of the regions where you would think that you would, you know, switch to dividends, for example, instead of doing share buybacks. So have you done any thinking around how you would allocate capital between dividends and share repurchases under the baskets that you're allowed to use currently?
Quintin V. Kneen: Yeah, well, I don't want to give anybody any indications of what we think our intrinsic value is, but it's certainly higher than where we're currently trading today. And then, obviously, we're very optimistic about the outlook based on just the EBITDA growth and cash flow generation that is. But you're right.
Frederic: Hey, Glenn <unk> Hope you are well.
Quintin V. Kneen: Yeah, there's a point when the value that you see from repurchasing shares is limited, but I also see the potential for acquisitions. So, right now, I've been more focused on repurchases because those have been more valued than acquisitions. However, acquisitions may become more attractive as we go through the next several quarters, so we'll maintain a focus on all of those things. So, I would say that if I had my druthers, I would still focus on value-added acquisitions, but there's going to be so much cash coming off of this business in the next couple of years that share repurchases, acquisitions, and dividends will all play a role
Fredrik Stene: Super, and final one, quick one from me. The first quarter was very good and, I think, ahead of everybody's expectations, which means that the step up in the second quarter is going to be a bit less, maybe than what we previously anticipated. But on the back of this strong first quarter performance, do you think that there's a chance that we could go above and beyond your guidance or that we're now tilted at least to the high end of that guidance range?
Wes: Hey, Fredrik, it's West again. You know, look, there are certainly variables within the year, as you're particularly aware of, and we'll see with anger handlers and so forth. But, you know, look, we spend a lot of time on our internal forecasting. I think we've recounted that in prior calls and the kind of robust, bottoms-up approach that we take to that. So, at this juncture, you know, what we communicated on today's call is what we feel comfortable committing to and articulating to the market.
Fredrik Stene: That's absolutely fair. Thank you for taking my questions, and have a good day. Thank you, Frederick.
David Smith: Our next question comes from the line of David Smith from Pickering Energy Partners. Please go ahead.
David Smith: Hey, good morning. Thank you for taking my question. Sir. Good morning.
David Smith: Sorry if I missed the details in the prepared remarks, but I wanted to make sure I heard the guidance correctly for relatively flat vessel margin minimal, Vessel Margin Improvement, and the second quarter, but then a 700 business point step up to margin in the third quarter. And if I did hear that correctly, you know, was that largely due to the timing of contract rollovers? Is it more, you know, downtime and costs that disproportionately impact Q2 versus Q3? Just any color behind that ramp in the second and third quarter, please? Yeah, so
Wes: Yeah, so hey Dave, it's Wes. Good morning.
Wes: I appreciate the question. I think you, yes, to answer your question directly, that is how we characterize the margin progression from a Q2 and Q3 perspective. There are a variety of, you know, items that, you know, I guess, impact that. Certainly, the rolling of contracts is definitely an impactful one. You know, we did talk about some dry docks coming forward into Q2, which we tried to do as early in the year as we could to prepare for the busier seasons, a couple of vessels that are mobilizing, and a little bit of unplanned maintenance.
Wes: So I think a combination of some of those items alleviating and the continued rolling of contracts as you get into Q3, when you look at those combined, that has a pretty material impact from a margin perspective.
David Smith: You got it. Thank you very much. That's all I have for now.
Josh Chee: Our next question comes from the line of Josh Chee from Daniel Energy. Please go ahead.
Josh Chee: Thanks. Maybe first, you talked about the Gulf being sort of a little bit soft in Q1, not necessarily Tidewater specific, but just from the conference calls of the drillers so far, it seems over the next 18 to 24 months, the Gulf of Mexico should be a pocket of strength, just with respect to rig activity and going forward. Would you agree with that also, and how are you thinking about that market over the next 18 to 24 months?
Piers: Yeah, I think there's, that's probably, if the drillers are saying it, they're probably right. We're certainly seeing, I think there was a slowdown in Q1, which we'll probably see knocking through into Q2 as well a little bit. I think there's an organizational piece with some of the drillers that we're seeing to get the rigs in the right place. So we're certainly not negative about the gulf. Sometimes you see this in certain regions; you'll get a sort of slight slowdown as people reposition rigs into areas.
Piers: So yeah, no, we're positive going forward. I think it's just a couple of quarters where it slowed down a little bit and there's not been quite as much activity as perhaps people had expected. I mean, it's not, as we said, affecting us so much as we sort of saw that coming a little bit. So we stuck around a little bit longer in this area than we have done normally, but we don't expect the gulf to be slowing down long-term. It's more of a short-term issue.
Josh Chee: And then the other thing you mentioned about the short-term chartering strategy. I would assume that's not a broad brush when you talk about, you know, nine-month terms and things of that nature across the entire fleet. Could you talk about whether there are opportunities within certain regions for longer-term contracts and how those conversations are ultimately going with your customers and how you view those, et cetera? Yeah, I mean, our customers, you know, there's a lot.
Piers: Yeah, I mean, our customers are still coming out for long-term tenders, and we're not precluding that. I think we've said before, part of the short-term strategy is not only about driving rates, but it's also driving contract terms, which we feel are incredibly important and getting our customers to make more equitable contracts. But no, we're definitely seeing in certain regions, you know, our customers wanting longer term durations; we're just choosing to go a little bit shorter term because we still feel there's a lot of runway in this market globally, and we want to keep our optionality on our side of the fence rather than on our customers' side of the fence, which you tend to do in a lower market.
Sheriff Elma Gravy: Our next question comes from the line of Sheriff Elma Gravy from BTIG. Please go ahead.
Sheriff Elma Gravy: Hey, I'm not gonna like it, so, excuse me, I apologize if my questions have been asked before. In the press release, you called out the Q1 dry dock schedule plus a 60% drag on utilization. How should we think about the case of dry docking for the rest of the year?
Sheriff Elma Gravy: Sorry Sheriff, the line was a bit drunk, but it's about a dry dock question, is that correct?
Sheriff Elma Gravy: Yeah, and the pace for the rest of the year and how that affects utilization.
Sam: Yes, so utilization for the rest of the year, you know, I think we mentioned on the call that we're going to be pretty heavy in the first half of the year, and then it'll drop off in the second half of the year. So, instead of the normal six percent, that'll go down to, you know, four percent, hopefully, depending on the timing on some of these dry docks right to four percent overall utilization.
Sheriff Elma Gravy: Okay, and then I'm going to go a bit more esoteric here. Is there an effect on the supply books from emissions regulations? For example, Europe has rolled out, rolled the maritime trade into its emissions trading scheme, and I'm wondering if that's a consideration when you're looking for new work, or if the cost associated with emissions can be, you know, adding a little extra juice to rates in the North Sea, for example, or if operators are getting a little anxious about securing tonnage.
Piers: [inaudible]
Piers: No, I mean, it's primarily a European issue going into 25 and beyond, and it's for vessels over a certain tonnage size, over 5,000 tons, so most of our vessels don't hit that size, so it doesn't affect us, but I would say, if we're talking esoterics, I think our customer base wants to have the most fuel-efficient vessels, and I was looking all the That's why we have, obviously, 16 hybrid vessels in the fleet, more than anybody else has, so we're obviously looking at it as well as a business on a global basis, but no, we're not seeing a pushback from, and we're not expecting to see anything material from a government perspective globally.
Sheriff Elma Gravy: Okay, thanks for taking my question.
Donald Peter Crist: Our next question comes from the line of Don Crist from Johnson Rice. Please go ahead.
Donald Peter Crist: Morning, gentlemen. Um, I just wanted to ask about the pace of new FPSOs coming out and what your kind of balance is today between drilling rigs and kind of production vessels and how that could skew demand as we kind of move forward throughout the
Piers: Yeah, I mean, we've probably heard we're positive on the amount of FPSOs coming out. I think.
Piers: As we look forward, and I may get the numbers wrong here, but I think Rydstad's come out with numbers of 40-plus, 48-odd FPSOs coming out in the next five-plus years, which is obviously positive. In terms of how our current fleet is, normally we, so I think we say we're around 60-40, so 60% production and 40% drilling type work. I'd say that we're a little bit more skewed towards supporting drilling at the moment from our side. And then we've obviously got some subsea construction in there as well, but I don't know, maybe Quintin has some added color on that as well.
Frederic: It's like a year or so C. In terms of how our current fleet is I mean normally we sort of think we say we're around 60 40, 60% production and 40% drilling type work I'd say, that's a little bit more skewed towards supporting drilling at the moment.
Frederic: But from our side and obviously you got some subsea construction in there as well, but I don't know maybe.
Frederic: Maybe quintin has some added color on on that as well.
Quintin V. Kneen: Yeah, it certainly varies over time, and we don't always have a clean break between the two, because when someone's chartering a vessel, they're not always just focused on drilling. There could be some production support elements in it over its contract life. But it'll vary throughout the cycle. It's moving into a higher allocation towards drilling right now. So Pierce was indicating 60-40, so the 60% production, 40% other, which is generally drilling rigs, FPSOs, offshore construction, and other elements like that.
Quintin V. Kneen: Certainly varies over the time and we don't always have a clean break between the two because when someone's chartering of vessels that are not always just focus on drilling there could be some production support elements an overcoat for its contract life.
Quintin V. Kneen: It will vary throughout the cycle.
Quintin V. Kneen: It's moving into the higher allocation towards drilling right now so I'm curious was indicating.
Quintin V. Kneen: 60, 40, so 60% production 40%.
Quintin V. Kneen: Other which is generally drilling rigs up dsos offshore construction other elements like that.
Quintin V. Kneen: And, you know, a year ago, that was probably 73. In the depths of the pandemic, it was probably 80%. So it definitely weighs higher at this point in the cycle, and it wouldn't surprise me if it stays at that level. It doesn't normally go over 6. So we should be at about the maximum level of allocation.
Quintin V. Kneen: And.
Quintin V. Kneen: A year ago that was probably 70 30, okay.
Quintin V. Kneen: In the depths of the pandemic was probably 80 20.
Quintin V. Kneen: So it definitely weight is higher at this point in the cycle and wouldn't surprise me if it stays at that level. It doesn't normally go over 60 40. So.
Quintin V. Kneen: We should be at about the maximum level of allocation at this point.
Donald Peter Crist: And just from a market demand standpoint, FPSOs, generally speaking, require about the same type of vessel as the bigger offshore drilling rigs, right?
Quintin V. Kneen: And just from a market demand standpoint, Fps rose generally.
Quintin V. Kneen: He can.
Quintin V. Kneen: Require about the same type of vessel.
Quintin V. Kneen: The bigger offshore drilling rates right.
Piers: Yes, it depends on the regions, but yes, generally. I mean, you're looking at some PSVs and, depending on where you are, some anchor handlers to support the FPSOs as well sometimes.
Speaker Change: Yes, it depends on the regions.
Speaker Change: Yes, generally I mean, youre looking at some <unk> and some.
Speaker Change: Depending way awesome, some anchor handlers to support.
Speaker Change:
Speaker Change: PSS as well sometimes.
Donald Peter Crist: I appreciate the color. Thanks. I'll turn it back.
Speaker Change: I appreciate the color thanks, I'll turn it back.
Quintin V. Kneen: Thanks, Tom. There are no more questions. I will now turn the conference back over to Quintin Kneen for closing remarks.
Speaker Change: Thanks, Tom.
Tom: Thanks, Tom.
Tom: There are no more questions I will now turn the conference back over to Anthony for closing remarks.
Quintin V. Kneen: Thank you, Dee. And thank you, everyone, for participating in the call today. We look forward to updating you again in August. Goodbye.
Thank you <unk> and thank you everyone for participating in the call today, we look forward to updating you again in August Goodbye.
Dee: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
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