Q3 2025 Tidewater Inc Earnings Call
Our current leveraged position is such that. We feel comfortable in potentially using a substantial amount of cash, in an m&a, transaction, and our comfortable, adding leverage to the business provided that we have confidence that the near-term cash flows provide the ability to quickly deliver back to below. 1 times net debt to ibida, very similar and consistent with what we have done in our prior acquisitions.
Importantly, given our current balance sheet future, cash flow, generation and liquidity position m&a and BuyBacks are not necessarily in either or a proposition. However, how certain m&a discussions progress, and whether or not, they ultimately, come together can shift our Cadence and immediate tactics and executing share repurchases, but I don't want to leave you with the impression that we are limited in the long, run on our ability to execute on both.
Much of the commentary for offshore activity during 2025 has been on the pace and amplitude of the recovery from a relatively muted period of tendering for near-term offshore Journal projects.
We believe that there are a number of factors that have precipitated this white space Dynamic. Not the least of which have been macro, uncertainties OPEC production and a relatively tepid commodity price environment and supply chain bottlenecks for critical offshore infrastructure.
File accounts including observations by the drilling contractors recent public commentary and conversations with our customers. It appears that the next few quarters represents a shoulder period of drilling activity ahead of an uptick towards the end of 2026 with increasing conviction on the state of drilling activity into 2027 and Beyond.
Carbon supply curve that will be in a slight Surplus in 2026, moving to a meaningful deficit thereafter. This should result in capital expenditures to bring on new production ahead of this shortfall. Providing further confidence to the uptick and drilling activity, that appears to be developing as evidenced by the recent tendering activity, for offshore drilling units,
In the intervening period high water is in the advantageous position compared to many in the offshore sector and that we are the beneficiary of a wide variety of offshore activities, all of which remain robust.
Production support is a critical piece of our business comprising, roughly 50% of what we do today.
The space level of demand remains steady and is supported by current commodity prices. The continued proliferation and deployment of incremental. Fpso units is providing additional vessel demand.
Fpso, support has always been a component of our business but the volume of units that are de delivering and expected to deliver over the coming years is fairly unique in the history of the offshore industry. In addition, many of these fpso are being deployed into Frontier areas that have limited shipping infrastructure and are in challenging weather and wave conditions, which should ultimately disproportionately benefit our larger vessel classes.
On the epci and offshore construction segment of our business. Our observation has been that backlog for beef projects. Usually have a few years lead time before converting into vessel demand. We've seen that backlog, begin to convert into a meaningful increase in demand and based on customer conversations, that demand is set to further strengthen in 2026 and in 2027,
These demand drivers are important components of our business and help mitigate some of the near-term softness. We see in the drilling market and the longer term, the structural growth in these markets will continue to put added strain on vessel Supply. And when drilling activity growth does resumed in Earnest vessel Supply will be that much more constrained by the growth in these other sectors providing even more leverage to vessel owners than what we saw in the 2022 to 2024 period.
As important as these factors are particularly in straining vessel Supply in a Drilling and Recovery in the near term. These factors don't adequately offset the absence of additional drilling activity to Brightest, the ability to aggressively push up day rates. However, we do expect this, non-drilling demand to help us retain our utilization and day rates. Next year, to the extent. Drilling activity comes in a bit stronger than what we are. Guiding today, we would expect some additional benefit to our 2026 financial performance.
We continue to believe a tight vessel Supply will remain a Tailwind for the sector and that the structural limitations that impact. New build investment decisions will limit any significant new. Build vessel programs for the foreseeable future.
In summary, we are pleased with the cash flow that our business is generating. We are optimistic about the long-term outlook for the offshore vessel industry, and remain exceptionally. Well, positioned to drive earnings and free cash flow generation over the coming years. Initially, we are in the fortunate position of having a significant amount of capital to deploy and we remain committed to deploying this Capital to its highest and best use for our shareholders.
And with that, let me turn the call back over to West for additional commentary and our financial Outlook.
Thank you. Clinton. At the end of the third quarter, we had 500 million dollars of share repurchase authorization outstanding.
our share repurchase capacity is a function of the refinancing that we completed during the third quarter of 2025,
Under the bonds, we are Unlimited in our ability to return Capital shareholders, provided our net debt to ebit to OS, less than 1 and a quarter times performing for any share. We purchase under the new revolving credit facility. We are also Unlimited in our ability to repurchase shares provided that net debt debit dot does not exceed 1 times.
Under the revolving credit facility metric to the extent that we exceed 1 times. Net leverage. We still retain the flexibility to continue returns. To shareholders. Provide the free cash flow generation is an excess of cumulative, returns to shareholders.
Our net debt to ebit do ratio at the end of the third quarter. Was 0.4 times, specific discussions of these limitations can be found in the respective agreements filed with the SEC.
Our philosophical approach to leverage remains consistent.
Whether it be for m&a, or share repurchases or litmus tests is that so long as we can return to net debt zero on about 6 quarters, we are comfortable to proceed with a given outlay of capital from time to time we may exceed this threshold only for m&a depending on the visibility and durability of the acquired cash flows. But this is our general approach
SRO is important to keep in mind as we navigate the opportunities before us and also informs how we evaluate a combination of m&a and share repurchases.
Leverage sake would rather to deploy Capital while maintaining the strength of our balance sheet.
We remain opportunistic on sheer repurchases. And we'll look to execute. Share, repurchase transactions on suitable. M&a. Targets are not available.
Turning to our Leading Edge day rates, I will reference the data that was posted in our investor materials yesterday.
Broadly, our weighted average leading edge day rate for the fleet was down marginally in the third quarter compared to the second quarter, primarily a function of our midsize PS and West Africa, and larger PSVs in the North Sea.
Rates for these vessels were resilient elsewhere around the world. We did see a nice uplift in our largest class of anchor handlers with contracts in Africa and the Mediterranean, and a bit of a movement up in our smallest PSVs.
During the quarter, we entered into 34 term contracts with an average duration of 7 months as we look to a strengthening market as we progress into the back half of 2026.
Turning to our financial outlook for the remainder of 2025. We are narrowing our full year Revenue guidance to 1.33 to 1.35 billion and a full year. Gross margin range of 49 to 50%.
We've narrowed our range for the remainder of the year, with the revenue outperformance, in the third quarter, bringing up the low end of the range and we've lowered the high end of the range due to a few projects ending earlier than anticipated in the Americas. And as we expect a bit more idle time in West Africa, as we close out the year,
We now expect utilization to be roughly flat sequentially, as the benefit we expected from lower dry docks is now offset by the lighter-than-anticipated activity. I just mentioned.
the midpoint of our Revenue guidance range is approximately 99% supported by year-to-date Revenue. Plus firm, backlog, and options for the remainder of the year.
Turning to the 2026 outlook, we are initiating a full-year 2026 revenue range of $1.32 to $1.37 billion and a full-year 2026 gross margin range of 48% to 50%.
We anticipate a relatively consistent quarterly Cadence of Revenue, generation and margin profile throughout the year.
Our expectation is for a relatively, even year with the potential for uplift depending on the strength of drilling activity, picking up towards the end of the year.
Our firm backlog and options represent $316 million of revenue for the remainder of 2025.
Approximately 78% of available days. So the remainder of the Year captured and firm backlogging options with our larger and mid-size classes of vessels retaining slightly more availability to pursue incremental work as compared to our smaller vessel classes.
Looking to 2026, our firm backlog and options. Represent 925 million for revenue. For the full year, representing approximately 69% of the midpoint of our 2026 Revenue guidance.
our full year Revenue guidance assumes utilization of Approximately 80%
Providing us with 11% of capacity to be chartered if the market tightens quicker than we are anticipating.
Our largest class of psvs retain, the most opportunity for incremental work.
Followed by our mid-sized anchor, handlers and small and mid-size, psvs, the largest Sinker handlers.
Contract covers higher in the earlier part of the year with more opportunity available later in the year.
The bigger rest of our backlog revenue is on unanticipated downtime due to unplanned maintenance and incremental time spent on dry docks.
With that, I'll turn the call over but appears for an overview of the commercial landscape.
Thank you, West and good morning, everyone. First off is both Quentin and West have mentioned. Our overall long-term outlook for the official space remains very positive for the OC Market.
You all, we have some short-term headwinds to navigate through our and the industry's expectations are. But as we get to this time next year, we will start to see that.
expected uptick in during demand, but everyone has been so vocal about
Which led onto the record. Epci backlog should bode. Well for osc day rates in the latter, half of 2026 and 2027.
Osc Supply growth is expected to remain very moderate supporting market dynamics overall with the OC order book of 100 134 units. According to Clarkson's research, still representing roughly, 3% of the current Fleet.
Reflecting limited capacity for Supply growth.
New building activity in the USC space continues to be subdued and we see no signs of significant new Supply, entering the market in the fourth seal of the future.
Turning to our regions and starting with Europe. We saw continued pressure on day rates, mainly in the UK. However, utilization across the whole region compared to previous quarters, as our teams worked hard to keep the boats working in the UK, Med, and Norway.
Market chatter suggests that the UK government May soften its approach to the next Budget on the 26th of November.
Which, if this happens, will be an unexpected shot in the arm to the region as we go into 2026.
The longer-term outlook for both Norway and the Med remains positive, with our teams now working on several multi-bid tenders set to start in 2026.
Any awards, however, I'm not expected until the early part of next year, with much of the work kicking off in the last half of Q2 2026.
In Africa, we continue to see pressure on day rates, which, as we mentioned last quarter was in part because of the slowdown in drilling in Namibia where we have been very active over the last 6 or 7 quarters supporting operations with our largest 900 square meter class of DSC.
We anticipated to slow down the drilling. The team has been focused on winning work elsewhere in the world and we can expect to see a few vessel movements Out of Africa. Over the next few quarters as we mitigate against some of the expected softness. In the first half of 2026,
Longer term, we still remain, very bullish for the region, with recent announcements of total lifting force, and mosan Beek shell allows in their returning to Angola after a 20-year absence to restart deep water expiration with all the orange bases to still be developed. We remain very confident that the regional bounce back very quickly. Once all these pieces fall into place
In the Middle East, vessel demand continued to strengthen in the quarter, driven mainly by the EPCI contractors operating in the Kingdom, as well as additional incremental demand in Qatar and Abu Dhabi.
As we've mentioned previously, this is a very fragmented market, which makes it much harder to drive rates aggressively.
However, we continue to see supply constraints in certain vessel classes, and as demand has been increasing, the team has been doing a great job pushing day rates during 2025.
With no significant slowdown in demand in sight, we expect day rate momentum to continue into 2026 and Beyond especially with the recent news that Sally ranco plans to start reactivating, some of the rigs that they had suspended last year.
In the Americas, we had a solid quarter with day rate and utilization improvement with primarily came from our operations in the Caribbean and Brazil.
The Gulf of America and Mexico both continuing to be flat demand works.
Brazil or Petra specifically is likely to face some short-term headwinds in 2026. As the NOC is rethinking its offshore Logistics model and financial strategy as Brazil enters into an election year in 2026.
Longer term. We don't expect any slowdown in drilling or production, demand, in Brazil.
However, we may see some progress specific projects moving to the right as the politics around the election. Push start times close to the end of 2026 or even the beginning of 2027,
Lastly, in Asia Pacific?
Q3 saw a solid jump in both day rate and utilization as projects in both Australia and Asia continued on from Q2.
We have seen some pressure unnecessarily, in our view, in Australia on day rates with competitors. But more broadly in the region, day rates for our larger class of vessels have held up well. Looking out into 2026, we see some positive signs of various drilling projects coming back to the region from Q2, after a bit of a hiatus during the majority of 2025 caused by various political machinations in certain areas.
Overall, we're very pleased with how Q3 has turned out and how our teams are focused on delivering strong results, even with the short term, white space, headwinds to contend it. So, even with a short-term headwind, we remain very optimistic on the long term fun. Fundamentals for our business, still being very much in the ship owner saber, for some time to come,
And with that, I'll hand it over to Sam.
Thank you, Piers, and good morning, everyone. At this time, I would like to take you through our financial results. My discussion will focus primarily on sequential quarterly comparisons of the third quarter of 2025 compared to the second quarter of 2025.
Including operational aspects that affected the third quarter.
As noted in our press release filed yesterday, we reported a net loss of $806,000 for the quarter, or 2 cents per share.
Included in the net loss was a $27.1 million charge related to the early extinguishment of our debt, which will be discussed later.
For the third third quarter, we generated revenue of 341.1 million compared to 340.4 million in the second quarter.
Essentially flat quarter of a quarter.
But about 4% higher than our expectation, third quarter average day rates of 22,798 were 2% lower versus a second quarter.
6.4%. And the second quarter to 78.5% in the third quarter. This was mainly due to the decrease in idle and dry dock days, as we saw a lighter dry dock load in the back half of the year compared to the first half of the year, as expected.
Gross margin in the third quarter was $163.7 million compared to $171 million in the second quarter. The gross margin percentage in the third quarter was 48%, nicely above our Q3 expectation but below our Q2 margin of 50%. The margin performance versus our expectation was primarily due to higher-than-expected day rates and utilization, combined with a decrease in operating costs.
Lower operating costs were driven primarily by lower crew salaries and travel costs, combined with lower supplies and consumables expense due to fewer idle and repair days, offset somewhat by higher RNM expense.
The margin decrease versus Q2 was due to an increase in operating costs. Operating costs for the third quarter were $177.4 million compared to $170.5 million in Q2.
The increase in cost is primarily due to an increase in salaries, travel, R&M, and consumables, with continuing FX impacts also contributing.
Adjusted EBA was $137.9 million in the third quarter, compared to $163 million in the second quarter.
The decrease is due to the previous Dimension, lower gross margin as well, as a sequential lower FX gain.
GNA expense for the third quarter was 35.3 Million 4 million higher than the second quarter due to an increase in professional fees.
We are projecting g& expense to be about 126 million for 2025, which includes about 14.44 million non-cash, stock based compensation.
For 2026, we are projecting our G&A costs to be about $122 million, which includes approximately $13.4 million of non-cash stock-based compensation.
We conduct our business through five operating segments. I refer to the tables in the press release and the segment footnotes, as well as the results of operations discussions in the 10-Q for details of our segment results.
In the third quarter. As mentioned, we saw overall revenues decrease slightly sequentially. However, results vary by segment with our APAC. Middle Eastern, America's Revenue, increasing
These increases were offset by decreases in the Europe, Mediterranean, and African regions.
Gross margin versus a previous quarter increase in 4 of our 5 regions, with our Europe and Mediterranean region, seeing a decrease of about 12 percentage points.
The increase in the Middle East region was due to increases in average day rates and utilization. While operating expense was essentially flat versus Q2,
The increase in the America's region was due to increase in average. Stay rates in utilization, offset by 2% increase in operating expenses.
The improvement in utilization was primarily due to fewer dried-off idle and mobilization days. The increase in the APAC region was primarily due to a 7% point increase in utilization and a 5% increase in average day rates.
Offset by higher operating costs. Primarily driven by higher salaries, due to movement of some southeast Asia vessels into Australia.
The increase in utilization was primarily due to lower idle and repair days. Africa's gross margin percentage was marginally higher versus the previous quarter.
A decrease in our Europe and Mediterranean region was driven by an 11% decrease in day rates, combined with a 6 percentage point decline in utilization.
As well as an increase in operating costs. The cost increase was primarily due to higher repair and maintenance expenses and higher fuel expenses due to low utilization.
The decrease in utilization was due to higher Dry Dock and repair days, as well as an overall weaker spot Market compared to a very strong Q2.
We generated 82.7 million in free cash flow. This quarter compared to 97.5% quarter over quarter was primarily a trivial to lower cash flow from operating activities, a lower cash proceeds, from asset sales.
For a while. Now, I have mentioned that we had received, we had not received payment from our primary customer in Mexico.
Although we did not receive payment from them prior to the end of the third quarter, subsequent to the quarter, we did receive a payment of $7.4 million, and we expect to receive additional amounts prior to year-end.
Of our total accounts receivable and other receivables.
We will continue to monitor and assess the situation closely.
As we communicate it, on our previous call, we successfully refinanced, your 3, previous secured and unsecured debt instruments to a single longer tenu, tenured unsecured structure and we also entered into a senior secured 5-year, credit agreement, which provides for a 250 million revolving credit facility.
The 225 million increase over previous revolving credit.
As part of the refinancing, we recognize a charge of $27.1 million, or about 55 cents per share, related to the early extinguishment of the previous debt instruments.
As a result of renewed debt structure, we will only have small debt repayments that are related to the financing of recently. Constructed smaller crew transport vessels. We have no payments until 2030 on our new unsecured notes.
We encourage 17.6 million in deferred dry out costs in Q3 compared to 23.7 million in the second quarter.
In the quarter, we had 943, Dry Dock days that affected utilization by about 5 percentage points for the year we're projecting Dry. Dock costs to be about 105 million which is down about 2 million from our prior call.
It decreases due to the net effect of changes in timing of our various 2025 projects with some push to 2026.
In addition we see savings generated from projects completed for the remainder of the year.
For 2026. We are projecting dry. Do costs to be 124 million included in that number is 21 million in engine overhauls and 7 million of carryover projects from 2025.
We are expecting draw out days of to affect utilization by 6 percentage points.
In Q3, we incurred $5.1 million in capital expenditures related to ballast water treatment, installations, DP system upgrades, and various IT upgrades. In addition, we exercised an option to purchase a vessel that we had been operating in our fleet for the past several years under a variable agreement.
This purchase option was significantly below market value and allows us to keep a high-quality young vessel in our owned and operated fleet. The purchase option is reflected in the financing section of the cash flow statement.
For the full year, we project capital expenditures of about $30 million, which is down $7 million from our previous forecasts, similar to our dried-out projects. The cost savings are due to the timing of projects that will be done during dry docks, deferred to next year.
For 2026. We're projecting Capital expenditures to be approximately 36 million, which includes the 7 million carryover from 2025.
In addition to this year, we have two other vessels under releasing arrangement, and we intend to purchase in 2026 for approximately $24 million.
In summary Q3 was another strong quarter.
From an operations and execution standpoint, we delivered both strong financial results and free cash flow.
A balance sheet is an in an excellent position and we are well positioned to continue to drive earnings and generate meaningful free cash flow in the future.
Industry, long-term fundamentals, remain very strong and will remain very optimistic about the opportunities that lie ahead for Tidewater.
With that, I will turn the call over to Clinton.
Thank you, Sam. Liz, would you please open it up for questions?
At this time, I would like to remind everyone in order to ask a question. Press star, then the number 1 on your telephone keypad, look box for just a moment to compile the Q&A roster.
Your first question comes from the line of Jim Wilson with Raymond Sheen. Please go ahead.
Hey, good morning all. Um,
Quinton, if I kind of take some of your comments around how the market is shaping up at this stage for Q4.
Your pricing back or does that actually come a bit sooner? Because you've soaked up some capacity into the production Market since then, do you think
Hey Jim. Hey, thanks for the question and I think if something's up really well, uh, no, because of the increasing activity in both fpso and epci and subsidy. Broadly, I would expect that we would get there sooner.
Um so and there's also been vessel, attrition over over the intervening 2 years that I think will help us get there sooner regardless. But but no we I would love to see the drilling activity, get back to where it was in the 2400, because I think that's going to give us the ability to push day rates again, at that 3 and 4 thousand dollars a day per year level, which is really what we need in this industry to get back to earning our cost of capital. We need a couple of years of that.
Right? Okay, that's helpful. And that's what I figured. And then, if I read between the lines and some of your comments,
You know, you talked about Capital uh, where where Capital flows between BuyBacks between m&a potential. Uh, and obviously to you know this quarter are you guys built a lot of cash and and and didn't buy back anything and you didn't really buy anything. But I'm assuming out of the way you operate that the lack of share repurchases in this quarter. Uh maybe suggests that you're you're at least looking at some m&a opportunities that you're kind of holding some dry powder for
Um, not that. I expect you to tell me, you know, who you're buying when that's happening or anything like that. But I'm just curious, is that an accurate read that, at least, you're pursuing some things that could happen? And maybe that's why you didn't do any shared purchases this quarter.
Do you have a very thoughtful? And a great question. Allow me to say that we had material non-public information during the quarter, but I just have to leave it at that.
Okay, I appreciate that color. Good job. I look forward to how things play out as we go into 2026.
Thank you.
Your next question comes from the line of projects. Team this Clarkson security. Please go ahead.
Hope you are all well and uh appreciate all the the detailed commentary uh as as always.
Uh, I wanted to dive a bit into the guidance for for 2026. Um, I must say that there was a bit surprised that you gave it uh, during the third quarter uh since you gave it to the fourth quarter for last year, but but clearly positive to see that you have confidence enough in next year to to guide at this point.
uh, with that, as as the preface, uh, I wanted to ask if you you could
Help me with with a bit of granularity when it comes to, you know, which regions would be caused more exposed to open capacity, uh, which regions are well covered Etc. When we think about this, you know, 69% midpoint Revenue number that you gave West. And under 57% of available dates, that were booked, uh, is there any sort of of regional discrepancies? Um, going into next year? Some regions to watch closer when we try to assess whether or not you'll hit that guidance or or even outperform. Thanks.
Hey listen, thanks for the question. I'm going to give a a quick response because I'm going to hand it over to to West and Pierce because I've got more detail on that. But as it relates to the guidance timing, we just think it's appropriate at this point in the year to give people guidance. And if we can give people guidance at this point of the year, that is somewhat uh,
Uh, you know, firm. What we're going to do this year, um, we have a little more confidence than we had last year, and I think that we could characterize this year's, uh, guidance as kind of a, you know, a base case. You know, we're hopeful to see that upside in the latter part of 2026. But, uh, we are very confident that we could deliver a year in 2026 that was at least as good as 2025. And so we wanted to.
African Asia. As we look out for the year elsewhere, we've got fairly fairly solid coverage. I would say as we go into 2026,
All right. Thank you. And and um, just as a follow-up to to that 1.
You you're talking about 69% from firm revenues and and options are you able to to give a split there or, or at least give some color on?
You know, whether or not it's it's sensible. That most of those options will be exercised given you know, whether price price that price that
Uh, I don't have the split on further options, uh, so, but, um, I would say we've got, um, options which we do have, ones which were done a while ago, so,
You know, we're very confident, they'll get uh, we'll get taken when they come.
Yeah, thanks I just want super quick 1 at the end there, which doesn't really relate to any any markets but you know in your 10q you're you're talking about a case uh with the quality of Venezuela case where you are potentially older around 800 million dollars and and to my understanding, there's potentially a verdict by by year. End, how you know, is this something to to care about this? Is there a chance that you'll be able to collect
Uh that Mom is if if it's going in your favor, any commentary would be super helpful, as you know, more cash is obviously positive.
Hey, Frederick is quantum, you know, the timing on these types of cases is so difficult. I mean this has been going on for 12 years now. Uh, so yes, we do feel that we're getting really close but trying to call whether it's the end of this year or the first half of next year, I would tell you is, uh, is is, is really difficult. Uh, you know, I, I would say that most people are thinking this is going to settle.
Right. Thank you so much. That's all from me. Have a good day.
Thanks.
Your next question.
comes from the line of Josh Jean, this
Please go ahead.
Thanks, good morning. Uh, Clinton. You alluded to it a little bit in the answer to the last question, but I'm going to go ahead with that anyway about confidence level. So as we sat here a year ago there's a lot of questions about domestic energy policy and Saudi and um you know we just change presidents on and offshore white space. All of those went on to I think impact offshore activity over the course of 25. Do you get a sense that customers have a better sense of the Playbook today and are more confident in the next 12 months? Maybe more so than you were a year ago. Um, maybe just elaborate on that a little bit more, it would be great.
I do. Yeah, just because we've had it here of of of dealing with this volatility and uncertainty and and we're getting a sense for which regions it impacts and what it doesn't. But also we've gotten a real good view on OPEC and how they're releasing excess barrels into the market and how they're managing price expectations as they do that. So, yes, I I think that the operators are broadly have a better sense for where they want to go and how deep they want to go in particular regions. But let me I'm looking over to pierce and Pierce. You may have some other commentary I'd like to add. Yeah, no. Hi Josh. Um,
I think, yeah, I think when we speak to our customers at the moment, they
Do seem to have a little bit more of you as to, where they think this is going to go. Um, and you can start seeing that in some of the conversations and what you've probably heard from the Drillers, in terms of the second half of 26, we're seeing a lot more tenders and pre-tender type of uh, discussions at the moment, um, across all of our regions. Um, so there's definitely
A good undercurrent of noise coming out in terms of giving us that sort of positive outlook as we go into the second half of 2026. Um, I mean you mentioned the Ramco; I mean they've already come out.
I mentioned briefly about reactivating rigs, they had suspended last year so that's a very positive um, sign from from that side we're seeing a lot more um activity in in places like the med um and uh, obviously the Caribbean as well. So you know, it's very positive and in all the conversations we're having at the moment. Um so yeah, I mean customers seem
They seem to have plans in place and they're starting to to move on those plans, which I think is a a positive sign for us.
Uptick in, uh, rig activity in the second half of 2026. And just when I think about the timing, is that intentional on your part, or is the duration of those contracts, or is that just sort of where the market is today? What customers are willing to sign? Maybe just speak to that a little bit more.
Um, it's it's really sort of where the market is today. I mean, we've and I think I mentioned this on the last, um, call, you know, when you
When we've had this sort of fix, some expected softness or white space. People talk about, we've obviously been chasing a little bit of utilization. So, some of those contracts are just to get us through into the second half of 2026. And I think the thing which we're very...
Conscious of this, we are keeping utilization up at the same time. We want to make sure we don't overcommit too long term because we believe in this uplift in the market for the second half of 2026 and into 2027. We don't want to be locking in something that we think is a little bit subscale today. Some of the contracts we're signing now are just giving that cover and getting us into the sort of second half of 2026.
Is how we sort of been focusing in terms of the commercial strategy.
And then maybe if I could just squeeze in one more, I’d love to get your thoughts on, um, just the new build fleet today. You highlighted the number of vessels, but then also the ongoing attrition, some of which happened over the last 2 years. Could you just frame that against the attrition that you’re expecting over the next 12 to 24 months and your expectation if all of the number of vessels that are on order today ultimately get built? Thanks, I’ll turn it back.
Hey, Josh, it's West. I'll I'll give a little bit of, uh, View and, and, um,
Peers or others want to chime in, that's fine, you know?
What we've seen over the past, I guess a couple of years. Now, is a handful of orders from, uh, folks, in different parts of the world for the most part. These are not coming from Legacy Industrial participants, uh, you see some, uh, orders from. Um, if you will new entry new entries into the industry, you do have some new builds that are, uh, that have been ordered down and Brazil against contracts, which we think is makes sense, especially given the rates that, uh, those reportedly been won at. But as of today, again, it's roughly 3% of the fleet across both, you know, psvs and anchor handlers that have been ordered.
Now.
What does that mean? That that matters is as it relates to net, new build additions or net incremental Supply and as we look out over time and then industry where the assets are 20 to 25 year live that would tell you every year, you'd lose roughly 4 to 5% of the fleet. It doesn't always work out as elegantly as that because not all vessels are built you know kind of pro rata over time but over the course of a few years you would expect dozens if not more vessels to reach that 20 to 25 year life at which point they should otherwise attrition now
If you're in an economic environment, such that, you know, spending a considerable amount of money to keep a vessel going that's possible that that can happen, but there is a finite life for a lot of these vessels. And so what we see is less new build activity or less new build vessels on order. Then what, uh, attrition would tell you, um, would would lead to net new Supply once these vessels start to deliver now, whether they ultimately deliver, I don't think there's any reason to believe they won't. Um, you know,
If if they're in a shipyard today and they're being built, and they had the financing to do that, they presume presumably, they should be, you know, delivered. The question is is on what time frame? A lot of these vessels haven't been built in a long time.
and so there's some muscle memory that has to be um,
You know, put back in place with the shipyards but I I think it's fair to assume that it they do indeed deliver. Uh but you know against that attrition um dynamic
In our mind, does it create a net new boat? And if it doesn't, then we're still in as good of a place as we've been.
Understood. Thanks, I'll turn it back.
Your final question comes from the line of Greg with PTI. Please go ahead.
Better than psvs um you know as as you think about the world evolving offshore which it clearly looks like it's going to over the next 5 years. Do we kind of have a preference for specific asset pipes? Or
You know, hey, we think asset prices are attractive, and if it's on the water, we want to buy it type view.
Correct. So I will tell you that some of the some commentary I made in the past, we've been real focused in the Americas and I will say that South America to us is probably more interesting than the North America at this point. But but vessel classic, uh, I would say large psvs, uh, definitely a real preference. You know, medium and large, anchor handlers, not the extra large, large the medium and large, and that's for sure, too. Uh, I'm not looking really the stretch too far out of that right now, but we could, I mean, I I do like the the subsea Market, but there's a you really need, um, scales to get into that market appropriately. And and so we'd have to really think hard about the stretching further than the the typical PSV and anchor handles. But it's certainly a possibility based on the core competencies of managing vessels managing Crews and managing customers.
Okay. And, and, and I appreciate that. You have, and in a market like West Africa, which is a key piece. And, um, you have.
You know, there's a lot more medium-size than than large vessels, um, you know, in your Fleet but, you know, I guess any kind of color on on the kind of the what is keeping the, the larger vessels pricing stronger, relative to the medium slash small vessels.
Is that is that mix of work? Is that scarcity? A vessels any any kind of any kind of commentary you can have around that?
All right, Greg, it says, um,
It's, um, I think just in the larger PSVs. I think it's a combination of all those. I mean, it's, uh, they're always the go-to vessels that our customers want to get, you know, size masses that they can get it. Um, I wouldn't say there's a, you know, there's a little bit of a scarcity and we have some, um,
We have obviously a very large Fleet of those vessels around the globe. But I think when you're doing an epci contract or you're doing a drilling program in particular, you know, there's definitely a need for as large as psvs, you can get to fit as much space on. So, it definitely works, um, uh, to our advantage to have that Fleet, um, you know, you mentioned Africa. I mean, you you just go through these waves, occasionally, where there's a little bit of a, um, a Slowdown in activity, but, um,
Yeah, we've been able to, we are being able to, there's enough work out there where we can reposition some of our larger PSVs into different regions. So, you know, it gives us that option and people are prepared to pay to mobilize vessels to different places to support, you know, drilling and construction projects as well. So I think it's a...
A combination of all the things that you mentioned in terms of what's allowing us to keep rates. Um,
High enough but could could go higher always, of course and that's where we're hoping to get to. As we're going to the next next half next year to Quinton mentioned.
Okay and then and then um I guess since it's on the last caller, I'll just ask 1 more um you know, around around next year's guidance. Thank you for that. Um, you know, I think somebody else mentioned that um, you know, that was great to see each other. I think it kind of shows you your, your kind of outlook on the market, but but I guess I just had a couple questions around that 1 is, you know, if we kind of think about um you know, I remember about you know I don't know, maybe a year and a half a year 1 that 1 and a half years ago, you you kind of had we had some hiccups around, you know, you know maintenance and we've kind of been um, you know, thinking about um, you know, potential impacts the utilization. You know. I, I guess as, as we think about utilization, for next year, are we kind of carrying through, you know, expect, you know, some some cushion for, you know, those kind of always unexpected on
Playing down times. And and then and then just 1 other question and apologize. I was late dialing on, you know, it seems like, you know, myself included, everybody expects us a stronger, half of of, of, of the back, half of next year, versus the front half, um, any kind of view on on how we think. Uh, may maybe the revenue shakes out and second half versus first half.
To be fairly even. So it's not necessarily a back half weighted. Um, Outlook we did say, however, to the extent drilling comes back in a little bit stronger than what we currently are able to see, then that may influence the back half higher from what we guided to. But right now the the what we indicated was that the quarterly progression would be fairly even
Uh, in in terms of, in terms of, uh, the the down for repair time, as we've talked about it, if you've noticed the past 3 quarter or so, we've uh, continued to have better uptime performance than what we saw about a year and a half ago as you mentioned. And so, you know, 3 quarters is better than 1 quarter in terms of establishing a trend and and seeing the, the fruits of the Investments and and all the work that have gone into the, uh, the, you know, are the wherewithal of our vessels. And so for next year we we didn't dive into it specifically, but I do think we have a bit more confidence in the operational, wherewithal of the vessels at this point in time.
Super helpful. Thank you very much.
That's correct.
That completes our Q&A session. I will now
President and CEO, and director for closing remarks.
Liz, thank you. Thank you, everyone. We look forward to updating you again in February. Goodbye.
Ladies and gentlemen, that concludes today's call, thank you all for joining. You may now disconnect