05 MAR 2021
Tidewater, one of the largest operators of offshore vessels servicing the oil and gas industry, is predicting that the worst of the market downturn is over and expects to see a recovery in the second half of 2021. While they believe that “supply and demand will be tightening up over the next 12 months,” the company has also undertaken an aggressive fleet management program to align with market conditions.
“The offshore supply vessel market continues to evolve, and the ability of Tidewater to continue to transform itself is key to delivering top value,” said Quintin Kneen, Tidewater’s President and Chief Executive Officer commenting on the company’s 2020 results. He pointed to the company’s efforts at a digital transformation providing improved connectivity and real-time vessel monitoring along with the ability to quickly adjust to the changing market.
One of the elements of the strategy has been to “high-grade our fleet through disposing of vessels that don’t align with our goals.” The company was aggressive with the sale or recycling of vessels that are deemed uneconomic in the current market conditions. In 2020, Tidewater disposed of 56 vessels and other assets while acquiring only 11 modern crew boats that are more fuel-efficient.
The downturn in the market was demonstrated by the fact that the company reported it had 32 fewer average active vessels working globally in the fourth quarter versus the year earlier. But the beginning rebound in the market along with the vessel disposals brought the company’s average stacked fleet below 60 vessels for the first time in 12 months during the fourth quarter. Tidewater reported it had 12 more vessels active during the fourth quarter versus the third.
The company is also using its financial resources to upgrade its exiting vessels to enhance longer-term operations. Among the investments are in hybrid battery technologies and the company is adopting the use of other environmentally friendly technologies as well as working with customers to realize operational efficiencies. Tidewater said that its vessels operating with hybrid technology throughout 2020 achieved baseline emissions reductions as high as 18 percent. Also, approximately 10 percent of its vessels were engaged in renewable energy activities during the year.
For the year Tidewater was able to generate significant free cash flows from its operations, although they were below forecast largely due to late payments from Pemex in Mexico. The company’s fourth quarter results came in above forecast but revenues for the year were still down 18 percent to $397 million. The net loss, including significant impairment charges related to assets held for sale, affiliate credit losses, affiliate guaranteed obligation, inventory obsolescence, and general expenses, rose 38 percent to more than $196 million.
Their forecast for the offshore market projects improving market conditions in 2021. They pointed to higher tendering activity which they viewed as an indicator for supply and demand. They believe the marketing will b tightening over the next 12 months. For their business, Tidewater projected that they would be back to pre-pandemic levels by the first quarter of 2022.