Joseph M. Bennett - Chief Investor Relations Officer and Executive Vice President Jeffrey M. Platt - Chief Executive Officer, President and Director Quinn P. Fanning - Chief Financial Officer and Executive Vice President.

Gregory Lewis - Crédit Suisse AG, Research Division George O'Leary - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division Jonathan Donnel - Howard Weil Incorporated, Research Division Matthias Detjen Turner Holm - RS Platou Markets AS, Research Division Richard Sanchez Mark W.

Brown - Global Hunter Securities, LLC, Research Division Haithum Nokta - Clarkson Capital Markets, Research Division.

Hello, and welcome to the Fiscal Year 2015 Second Quarter Earnings Conference Call. My name is Joe, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to Mr. Joe Bennett. Mr. Bennett, you may begin..

Thanks, Joe. Good morning, everyone, welcome to Tidewater's Second Quarter Fiscal 2015 Earnings Results Conference Call for the Period Ended September 30, 2014. I'm Joe Bennett, Tidewater's Executive Vice President and Chief Investor Relations Officer, and I want to thank you for your interest in Tidewater.

With me this morning on the call are our President and CEO, Jeff Platt; Jeff Gorski, our Executive Vice President and Chief Operating Officer; Quinn Fanning, Executive Vice President and CFO; and Bruce Lundstrom, our Executive Vice President, General Counsel and Secretary. We'll follow our usual conference call format.

Following these formalities, I'll turn the call over to Jeff for his initial comments, to be followed by Quinn's financial review. Jeff will then provide some final wrap-up comments, and we'll then open the call for your questions.

During today's conference call, we may make certain comments that are forward-looking, and not statements and not statements of historical fact.

I know that you understand that there are risks, uncertainties and other factors that may cause the company's actual future performance to be materially different from that stated or implied by any comment that we may make during today's conference call.

Additional information concerning the factors that could cause actual results to differ materially from those stated or implied by the forward-looking statements may be found in the Risk Factors section of Tidewater's most recent Form 10-K. With that, I'll turn the call over to Jeff..

Thank you, Joe, and good morning to everyone. Yesterday, after the market closed, we reported fully diluted earnings per share for the second quarter of our fiscal 2015 year of $1.22, compared to adjacent net earnings per share of $1.15 in the corresponding quarter last year and $0.88 in the preceding quarter.

The financial results reflected a solid operating quarter. As Quinn will detail for you shortly, we generated revenues at the high end of our prior guidance and operating expenses at the lower end.

As usual, there were a mix of positives and negatives during the quarter that impacted our bottom line, but on balance, our revenue gain was driven principally by a roughly $700 a day increase in the global fleet average day rate from the rate earned in the June quarter.

That increase came without significant help from vessel mobilization and demobilization revenues. Overall, our fleet utilization rate declined marginally, although our global deepwater fleet enjoyed a strong 87% utilization rate, partially offset by a small drop on our towing-supply/supply fleet to around 76%.

Our operational earnings performance was driven primarily by the day rate gain, coupled with reduced expenses sequentially, including reduction in repair and maintenance expense and G&A costs.

In light of the turbulent conditions in the oil market today and the uncertain outlook for the offshore business due to possible reductions and expiration of production activity in certain geographic markets, we are pleased with this quarter's results. They reflect the hard work and dedication of our 9,000-plus employees worldwide.

Equally as important, these results confirm the strength of the Tidewater franchise, something which shouldn't be overlooked as we enter a period of business uncertainty. In fact, we believe the strength of our franchise will be more important in the upcoming periods. What are our strengths? Tidewater has the largest new vessel fleet in the industry.

We currently operate only 18 vessels in our fleet that were built prior to 2000, comprising less than 7% of our operating fleet. Our new vessel fleet, which is 248 ships with an average age of less than 7 years will further expand with the 30 new builds we have under construction and are delivered over the next 2 years.

Today, our fleet includes a wide range of vessel types with strong technical and operational capabilities enable us to satisfy the varying demands of our clients globally. Our diverse fleet provides us with a significant competitive advantage, especially in a more competitive marketplace.

Equally important, our global operating footprint is the largest and most experienced in the industry and provides us the additional competitive advantages. This global footprint enables us to move vessels from weak geographic markets to other regions of the world possessing better opportunities with improved financial returns.

The extent of our global footprint and decades of experience in these various global markets, coupled with our new and highly capable vessels, provides us with competitive advantages that we believe are too often overlooked by investors, given that these franchise qualities are part of the foundation of our operating performance.

Another important attribute of our franchise is our focus on safety and compliance, programs that are increasingly important in a more competitive global market.

We focus on safety and compliance because we want to provide a safe workplace, where every employee can expect to complete their watch safely and because we believe in winning with integrity. Safety and compliance are also important to our customers.

They want a safe working environment for their employees, and they realize the safe operations translated reduced operating downtime and lower overall cost. Our safety program has a proven track record executed over many years.

Through September, we experienced no lost time accidents this fiscal year and our total recordable incident rate, TRIR, was 0.13 for 200,000 man hours worked, based on nearly 19 million man hours worked. I want to thank all of our employees worldwide for their dedication and performing their tasks every day in the safest manner possible.

Similarly, compliance initiatives are becoming increasingly important to our customers because they realize that the way in which service companies conduct their business will cover the lens through which partners, governments and other stakeholders view those companies as operators and will ultimately impact their successful participation in future exploration development and production projects.

As Quinn will also detail for you shortly, last quarter, we continued to make slow but steady progress in reclaiming the excess working capital that has accumulated in our Sonatide joint venture in Angola. We continue to gain experience and have success in navigating our way through the evolving Angolan foreign exchange laws and regulations.

I want to remind everyone, this is an industry challenge and not something that is unique to Tidewater. We certainly have further to go in reclaiming more of this working capital, but we are encouraged by the progress we are making. Let me now turn the call over to Quinn to review the details of the quarter and how we see the near-term outlook.

I will then return to discuss our outlook for the offshore market.

Quinn?.

Thank you, Jeff. Good morning, everyone. As Jeff mentioned, we issued our earnings press release after the market closed last evening. We expect to file our quarterly report on Form 10-Q through the EDGAR filing service some time before the close of business today. Turning to financial results.

We reported diluted earnings per common share of $1.22 for the September quarter, which again is our second quarter of fiscal 2015. EPS was up 39% relative to June quarter, in which we've reported EPS of $0.88 and up 6% relative to September quarter of fiscal 2014, in which we reported adjusted EPS of $1.15.

Adjusted EPS for last year September quarter excludes a $4.1 million or $0.06 per share after-tax loss on early retirement of debt and was inherited in the Troms transaction.

Vessel revenue at $391 million was up about 2.5% quarter-over-quarter and up about 7.5% year-over-year and as Jeff noted, came in at the high end of the guidance that I provided in early August.

Relative to the June quarter, Vessel revenue for the quarter just completed reflects a reduction in loss revenues from vessels in drydock and pure vessels in transit, or otherwise, off hire for nontechnical reasons.

Offsetting these 2 positive dynamics in the September quarter was a smaller contribution from lump sum mobilization fees and our stacking of a couple of vessels that contributed vessel revenue in the June quarter. Looking at key geographic markets, again, relative to the June quarter.

Activity levels for Tidewater were higher offshore Australia and across the entire Americas region and lower in the U.K. sector of the North Sea and the Arabian Gulf. Vessel operating expense at approximately $230 million was down about 2% quarter-over-quarter and up about 9% year-over-year.

Vessel OpEx for the September quarter was in the middle of the guidance range provided in August with negative variances in crude cost and supplies, largely offset by positive variances in insurance and loss cost in lower repair and maintenance expense. Lower R&M expense largely reflects the timing of major repairs and regulatory drydockings.

Vessel level cash operating margin, at approximately 46%, was a couple of percentage points above the mid-point of the range that was provided in last quarter's guidance.

Pretax start-up losses in our subsea operations at approximately $3 million for the September quarter were consistent with both results in the June quarter and our expectations for the September quarter. Note that the $3 million total I referenced includes approximately $1 million each of G&A and depreciation expense.

Total general and administrative expense for the September quarter of approximately $47 million was down about $4 million quarter-over-quarter. The quarter-over-quarter trend reflects lower professional services costs, and a plus $3 million benefit associated with the down revaluation of equity-based incentive compensation at quarter end.

For reference, equity-based incentive comp was valued in the September quarter using a share price of approximately $39, which was approximately 30% lower than the price of TDW at June 30.

Below the operating income line, note that we recorded a foreign exchange gain of approximately $5 million, which was related to the continued general strengthening of the U.S.

dollar relative to the commodity currencies and the resulting quarter end revaluation of certain non-USD-denominated balance sheet accounts, including our Norwegian kroner-denominated debt.

Offsetting the positive earnings impact of FX movements and stock price volatility, note also that we adjusted our effective tax rate for fiscal 2015 from 24% to 25%. The higher rate for fiscal 2015, including a required catch-up provision, reduced EPS for the September quarter by approximately $0.03. In regards to fleet profile and performance.

Tidewater's active fleet averaged 262 vessels in the September quarter, which is down 6 vessels quarter-over-quarter, largely reflecting the stacking of a handful of crude boats along the African coasts.

Utilization of the active fleet at approximately 83% was essentially flat quarter-over-quarter, and average day rates at approximately $19,400 were up about $700 or 4% quarter-over-quarter.

As Jeff mentioned in his opening remarks, lump sum mob, demob and similar fees will less impactful on reported day rates in the September quarter than they were in the June quarter. So average day rates, excluding lump sum fees, were actually up about $1,000 or about 5.5% quarter-over-quarter. Looking at the key asset classes.

As mentioned, the active fleet in the September quarter was 262 vessels and included on average 90 deepwater vessels and 113 towing-supply vessels.

Reported average day rates for deepwater vessels at approximately $31,000 were basically flat quarter-over-quarter, but were up about $770 or about 2.5% quarter-over-quarter after excluding the effects of lump sum fees. Reported average day rates for towing-supply vessels at about $16,000, were up about $725 or about 4.5% quarter-over-quarter.

The impact of lump sum fees was not particularly consequential in regards to the trend and average day rates for the towing-supply class of vessels. As I mentioned on our last call, lump sum fees are recurring, but difficult to forecast. So I've provided the detail to help you better understand underlying trends and to help you update your models.

Looking at our 4 geographic reporting segments. For the Sub-Saharan Africa and Europe segment, which accounted for approximately 41% of consolidated second quarter vessel revenue, vessel revenue was off about 2% quarter-over-quarter, primarily reflecting lower average active vessel count.

Within the segment, vessel revenue generated along the African coast was basically flat quarter-over-quarter and vessel revenue generated by the North Sea fleet was up about 14% quarter-over-quarter.

Overall utilization of active vessels in the Sub-Saharan Africa and Europe segment was 82% in the September quarter, which is consistent with active vessel utilization in the June quarter.

Average day rates for the Sub-Saharan Africa and Europe segment at approximately $17,600 were up about 2% quarter-over-quarter, in part, reflecting a mix benefit associated with an idling those crewboats that I referenced a moment ago.

For the Americas segment, which accounted for approximately 34% of consolidated second quarter vessel revenue, vessel revenue was up about 12% quarter-over-quarter, following a 10% sequential increase in the June quarter.

Utilization of active vessels in the Americas segment at approximately 89% was up about 5 percentage points quarter-over-quarter, and average day rates at approximately $22,700, were up very modestly quarter-over-quarter. Vessel revenue in the Americas segment was up about 35% year-over-year.

In the MENA segment, which accounted for approximately 12.5% of second quarter consolidated vessel revenue, vessel revenue was down about 12% quarter-over-quarter, somewhat reversing the sequential increase in vessel revenue that we experienced in the June quarter following the successful startup of a Black Sea project that we are supporting with a couple of large AHTS vessels.

Utilization of active vessels in MENA at approximately 75% was down about 15 percentage points quarter-over-quarter, and average day rates in MENA at approximately 16,000, were up about 3.5% quarter-over-quarter.

As additional color on the quarterly transfer utilization and average day rates in MENA, note that we experienced lower activity levels in the September quarter for our active fleet in Saudi Arabia, which tends to be a towing-supply class driven market for us.

With the recent addition of a couple large AHTS vessels to the region in the June quarter and reduced activity in Saudi Arabia, average day rates in MENA for September quarter reflect a modest mix benefit.

The trend observed in September will likely reverse itself in subsequent quarters, as we are expecting an improvement in utilization of MENA-based towing-supply vessels and a modest reduction in average day rates in MENA for the balance of fiscal 2015. Vessel revenue in the MENA segment for the September quarter is up about 8% year-over-year.

In the Asia Pacific region, which accounted for approximately 10% of second quarter consolidated vessel revenue, vessel revenue was up about 14% quarter-over-quarter after a 6% sequential increase from the June quarter. Utilization of active vessels in Asia Pac at approximately 90% was up about 6 percentage points quarter-over-quarter.

And average day rates at approximately $23,100 were up about 4% quarter-over-quarter. Recognizing vessel movements in and out of Australia makes trend analysis of this entire region somewhat challenging, I'll note that vessel revenue in Asia Pac through the first 6 months of our fiscal year was up about 7% and that's 7% year-over-year.

Looking at relative profitability. Vessel level cash operating margin in the September quarter was about 47% of vessel revenues for Sub-Saharan Africa and Europe and about 50% of vessel revenue for the Americas region.

Vessel level cash operating margin for MENA and Asia Pac were both in the high 30s, reflecting a combination of scheduled drydocks and as discussed previously in regards to the MENA region, nontechnical off hire driven by gaps between contracts.

As I mentioned earlier, overall vessel level cash operating margin for the September quarter was about 46% and up nicely from 43% in the June quarter. Turning to our outlook.

Vessel revenue for the December and March quarters will likely be modestly lower than vessel revenue reported in the just completed September quarter with a quarter-over-quarter trend reflecting an increased level of scheduled drydocks and major repairs.

Our current internal forecast has vessel revenue rebounding somewhat in the March quarter from the expected December quarter level. Again, driven by the projected timing of major repairs and drydocks and the expected delivery during the December and March quarter of 8 new build vessels.

Average active vessel count should be relatively stable for the balance of the fiscal year with 260 to 265 active vessels. Growth in the active deepwater fleet is late largely tied to the timing of new vessel deliveries.

Average active towing-supply vessels will likely fall a couple of vessels due to a recent -- due to recent vessel stackings of a couple of older PSVs in this vessel class. Contract coverage remains in the plus or minus 50% area over the next 12 months. And tendering activity, while down from peak levels, is stable in most geographies.

As a result, we expect the active vessel utilization to be in the 85% to 90% range for the remainder of the fiscal year.

We also expect that average deepwater day rates, without any projected benefit from lump sum fees, will remain in the $30,000 area for the balance of 2015, and that average towing-supply day rates will remain in the $15,000 area for the balance of the fiscal year as well.

In this context, internal estimates currently paid the December quarter's vessel revenue somewhere between $370 million and $380 million. Likewise, based on what we know today, vessel-related OpEx for the December quarter should fall within a range of $210 million and $215 million.

Based on the vessel revenue and vessel OpEx guidance ranges provided, vessel level cash operating margin should be somewhere in the 42% to 45% area in the December quarter.

General and administrative expense should be in the area of $48 million to $50 million in the December quarter, inclusive of approximately $1 million to $1.5 million of G&A related to our subsea services operation.

Overall, subsea is expected to continue to generate quarterly losses of a couple of million dollars until our ROV revenue ramps up on a sustained basis, which we expect to be in the first half of fiscal 2016.

Combined, vessel lease and interest expense, should be in the plus or minus $20 million area in the December quarter or basically flat relative to the September quarter. As to an effective tax rate assumption, as I mentioned earlier, we are assuming a 25% tax rate for the fiscal year, excluding any discrete items.

Turning to financing and investment issues. Cash flow from operations for the 6 months ended September 30 was approximately $185 million, comprised of $154 million for the September quarter and $31 million for the June quarter, with the quarter-over-quarter trend in part reflecting an improvement in working capital balances.

At September 30, our net due from affiliate related to our Angolan operations was approximately $281 million or down approximately $30 million quarter-over-quarter.

Cash collected by Tidewater from the Sonatide JV through the first 6 months of fiscal 2015 was approximately $186 million, which represents slightly more than the $179 million of vessel revenue that was generated by our Angolan operations at first 2 quarters of fiscal 2015.

As noted in prior filings, the challenges for the company and other service providers successfully operate in Angola remained significant, primarily due to Angola's new ForEx law, recent related decrease and the result in uncertainty in regards to onshore and offshore payment arrangements.

Nonetheless, our sense remained for the excess working capital tied to Angola operations to stabilize and our expectation remains that excess working capital will trend down over the next couple of quarters.

Collection subsequent to September 30 continue to approximate vessel revenue generated, but it was likely that we will see a slowdown in collections during the holiday season in the latter part of December and in the first part of January.

As the nonoperating uses of cash, CapEx in the September quarter was approximately $90 million, a portion of which was funded by asset dispositions, including 1 sale/lease transaction that was completed in the September quarter.

As we go forward funding requirements, based on commitments as of September 30, CapEx related to vessels and ROVs under construction for the remainder of fiscal 2015, is estimated at approximately $280 million, of which we expect to fund approximately $123 million in the December quarter.

Total unfunded capital commitments at September 30 were approximately $597 million. This total includes 30 vessel construction projects and 2 ROV commitments. Total debt at September 30 was approximately $1.5 billion. Cash at 9/30 was approximately $124 million; and net debt to net book capital at 9/30 was approximately 33%.

As previously reported, we have no significant debt maturities in fiscal 2015. Total liquidity at 9/30 was approximately $725 million, including full availability under our $600 million bank credit facility, which is available to the company until fiscal 2019. And with that, I'll turn the call back over to Jeff..

Thanks, Quinn. Our financial results for the quarter reflected solid operational performance within what we continue to believe will be an overall extended offshore industry up cycle.

However, the path ahead will no doubt be bumpy due to the crosscurrents of lower global oil prices and a likely more conservative stance by our clients toward their capital spending plans in the near term.

Our financial performance may be lumpy over the next few quarters, as Quinn just explained, but the variability in earnings that we see ahead is not because we see our clients pulling back on their activity in a big way, but rather more due to the timing of delivery of our new build vessels and drydockings for some of our large deepwater vessels.

Since these timing issues involve some of our more expensive vessels, there will be the negative -- there will be a negative revenue effect from the lost vessel time at high day rates and also, the R&M expense associated with the drydockings, which will be meaningful, but transitory.

Our operating margins will likely be squeezed over the next few quarters. And thus our near-term guidance is relatively cautious. For the longer-term, I suspect we are significantly more bullish than the majority of the analysts and investors.

During these somewhat in certain times, we will continue to focus on improved business practices, cost control and operational execution in order to extract maximum value from our business activities.

Behind the scenes, we have recently invested in improved information technology and business process upgrades, and we are fully expecting to reap benefits from these improvements in the coming quarters.

While investors are concerned about trends in certain high profile markets, such as the Gulf of Mexico, the North Sea and Southeast Asia, let me point out that currently, none of these markets is particularly significant to the operating results of Tidewater. As we have pointed out in the past, our operations in U.S.

Gulf of Mexico accounts for approximately 10% of our consolidated vessel revenue. Equally as important, we have very limited exposure to near-term market softness in the U.S. market having entered into multi-year term contracts last year for much of our domestic fleet in anticipation of a potential weakness in the U.S. market.

So while the caution in regards to the U.S. market that we had expressed last year, appears to be the near-term reality, our domestic fleet is currently enjoying high utilization and very good day rates. Our contract coverage in the Gulf of Mexico averages in excess of 2 years, which should provide us earnings protection for the foreseeable future.

In the North Sea, where we recently reestablished our presence through a few new build vessels plus our acquisition in the last summer of the Troms business, our market exposure is limited. However, our fleet is new and our vessels highly capable, plus our operational performance has been solid.

While the North Sea will suffer in the current low oil price environment, due it being a high-cost market, we believe that the long-term outlook for this cold water region will improve and the operating experience gained will enable us to compete more effectively in cold water markets around the world.

The Southeast Asia market is actually a series of regional submarkets. For Tidewater, our Asia Pac region includes our Australian operations. Setting the Australian market aside, Tidewater has somewhat limited exposure to the traditional Southeast Asia markets.

Our current fleet in Southeast Asia is comprised of 13 vessels, all of which are new and have enjoyed 89-plus percent utilization this fiscal year. Again, as in the Gulf of Mexico and North Sea, we have strategically sized our fleet and its capabilities for the market opportunities we foresee.

You may remember, in recent years, we have mobilized vessels from Southeast Asia to other markets possessing better long-term prospects. Where Tidewater is particularly strong geographically is in the Middle East, West Africa, Brazil and Mexico. All of these markets are active, and we see few signs of weakness at the present time.

This is not to say that Tidewater is immune to lower commodity prices, customers deferral planned projects, our ongoing cost control initiatives that may result in a material reduction in overall offshore spending. But excess supply in the contract drilling space will not necessarily translate into a corresponding pullback in the OSV space.

The current working rig count, a 700-plus offshore drilling rigs provide demand for 2,600 to 2,800 OSVs. We believe that if the working rig count can grow modestly, it can't support the additional OSVs currently under construction as the remaining operational older OSVs continued to be removed from the market.

Others have commented that older OSVs don't seem to leave the market. But at least in our experience, we are not losing many jobs either regards to deepwater work or jack-up support to older low spec vessels. As a general rule, clients simply do not want a 25- or 30-year-old vessel to support their operations drilling or otherwise.

This client sentiment is what has led to Tidewater retiring virtually all of our older vessels over the last several years.

While we recognize that the working offshore rig count is the key driver of our business, Tidewater's diverse fleet and broad base of operations participate, not only in rig support, but in all phases of offshore oil and gas activity.

We estimate that 60% of our revenue is related to rig support activity in deep, mid and shallow waters with the remaining 40% related to production, construction and other offshore activities not tied to the working rig count. Over the past decade, we have invested over $5 billion in new vessels to renew and upgrade our fleet.

Today, we stand first in the industry with respect to youth and capabilities of our vessels. As we approach the end of our fleet reinvestment program, the discussion with our Board has turned to the next steps for the evolution and growth of the Tidewater franchise.

We have entered the subsea support market and successfully completed our first commercial jobs. And we are finding new opportunities to deploy our growing fleet of remotely operated vehicles and the additional pull-through of vessel support activity.

This is an exciting new opportunity for Tidewater and one in which we look forward to enhancing our growth. We are continuing to examine other adjacent offshore markets that could accelerate Tidewater's future earnings growth.

We are also mindful that turbulent markets often present attractive investment opportunities, and we are prepared to capitalize should they develop.

In the context of our capital investment program potentially winding down, let me point out that including our spending plans for this fiscal year, we will be completing an 8-year run with an average expenditure of over $400 million per year in new vessels.

With our current backlog of 30 vessels and 2 ROVs under construction, our level of CapEx is fully expected to be substantially reduced over the next few years. With next year's -- with next fiscal year's CapEx expected to be sub $300 million and fiscal 2017 substantially less than that.

As we come to the conclusion of our planned fleet reinvestment program, we will continue to exercise a high level of capital discipline going forward, considering our desire to make further inroads into the subsea market and to be prepared to capitalize on opportunities that will undoubtedly arise.

I would also remind everyone that the substantial portion of our long-term debt does not mature until fiscal 2019, allowing us to dedicate our cash flows from operations to growth initiatives.

Today, our balance sheet is strong, and our liquidity position continues to improve as a result of our financial performance and our continuing efforts to reduce excess working capital related to our Angolan operations.

We will continue to adhere to what we believe are sound financial principles with respect to capital structure and debt levels for a capital-intensive, cyclical business operating in the global offshore oil service industry.

Considering the fact that our stock is trading at a fairly significant discount to book and tangible book and, in our opinion, the intrinsic value of our fleet is well above net book value, we believe that our stock is undervalued. As you may recall, in May of this year, our Board authorized up to $200 million for share repurchases.

However, we have not purchased any shares under this authorization to date. We are mindful of our long-standing pledge to create shareholder value, and that remains a key objective of management.

We will continue to evaluate investment opportunities, including any opportunity to acquire vessels and our current share repurchase authorization relative to each other, while at the same time, adhering to our discipline and desire to maintain a strong and flexible financial profile. We're now ready for your questions..

[Operator Instructions] Our first question here comes from Mr. Gregory Lewis from Crédit Suisse..

Jeff, as you guys went through the prepared remarks, for subsea, Sahara, Europe, you definitely -- you went out of your way to split out the North Sea. As we think about what's going on in the North Sea and realized you're still building out that business, but just given some of the softness that we're seeing in the North Sea.

Does it make sense for Tidewater to maybe reposition a vessel here or a vessel there away from the North Sea, maybe down to West Africa, where the market seems like it's holding in tighter?.

Gregory, you're 100% right. And we've been doing that, we do that with all of our areas, not just the North Sea. We have moved some vessels out onto other term projects with better opportunities. So it's an ongoing process, and the answer is yes..

Okay, great. And -- okay. So then, when we think about -- okay, so when I think about the revenue guidance that you're -- it sounds like you're embedding those potential vessel moves..

Absolutely. That's certainly part of the forecasting plan, Gregory..

Okay. Okay, great. And then just as I think about it longer term, I mean, clearly, you guys are generating a good hunk of cash and you're always posed with the investment propositions that you have whether it's ROVs, you mentioned maybe something else.

How should we think about the deployment of that capital? Is that something -- I mean, is it just simply an IR analysis or is it -- what can Tidewater due to maybe break the mold of the traditional supply book company and potentially try to move to, let's call it, higher quality type revenues?.

Gregory, those discussions we have internally with the Board, certainly getting the franchise with the investments we've made. That was an absolute must before we start moving on to the enhancement of the franchise. But we certainly are looking for ways to pull through the existing fleet.

We certainly understand, I think, what our strengths and capabilities are. We've got to play to those strengths. And pretty excited about the opportunity set that's in front of us.

And as I said in my prepared remarks, if this uncertain period turns out to be somewhat of a downturn, and I'm not projecting any length to it or shortness to it, certainly, there's going to be opportunities, I think, within our space, and adjacent spaces, where some people have gotten in over their heads, highly levered and really can't stand a whole lot of stress to them in what might be a pull back.

So I think there's going to be some opportunities, as I mentioned before. But we're looking at again, trying to grow the franchise, grow on our strengths. And at the same time, move a little upscale in some of the service offerings that we do than just a conventional time chartering of vessels..

And our next question here comes from George O'Leary from Tudor, Pickering, Holt..

On the -- looking at your results, the shallow water rates, at least versus our expectations, were stronger than we had forecasted.

Looking out going forward, do you think there's more upside to shallow water relative to your deepwater expectations from here?.

Again, it's going to depend how the jack-up market unfolds. We had a little bit of benefit in that average day rate, where in the Saudi markets, some of the lower spec to supply vessels have rotated of some Saudi contracts. So that actually had effect of moving up the day rate averages.

Those vessels are going on and have going on to new contracts at rates that were more commensurate with the specification of those vessels. See, you might actually see that average day rate pull back a little bit from the gains that we've received. But overall, it's going to depend on how the jack-up market continues to unfold.

Certainly, that segment of vessels has not performed as well as we would have liked certainly not as well as the deepwater market, but it's all going to be dependent on the shallow activity levels.

If in fact the -- a portion of the jack-ups coming in and being delivered to the market are incremental, and up, certainly not 100%, then that will tighten that market out. And when you look at the OSVs under construction, there's a much lesser percent of those that are really targeted to the shelf market.

So again, it's going to come back to that supply/demand. The supply is not as bad on the new vessels coming in, but it's just going to depend on what the jack-up market does. Long-winded answer, I'm sorry..

No, that's helpful color. And then your strong Americas results, both on utilization and just the operating profit margin side. You mentioned 2 years backlog coverage for that segment.

Can we expect to see utilization kind of hold in around these levels going forward? And then can you keep up the operating margin performance in that segment as well?.

I think the 2-year comment was specific to the Gulf of Mexico. But in general, when you look at what makes up the Americas, you have the U.S. market, which we just talked about having that kind of term. Mexico and Brazil are the other 2 big drivers. They tend to be term contracts that have pretty good length to it.

We made some nice moves, I believe, in Brazil over the last year to go back into contracts. We've increased our vessel count with, primarily Petrobras and at good day rates, we believe. So I think the Americas utilization should hold pretty well. And those day rates, again, were locked in. I think, at relatively favorable term for us.

So you will have, as you have major R&M, you're going to see some margin issues there. Those are expensive big day rate boats. But if you sort of take out that cost of the maintenance and repair on it on the major, on the docking side, I think that the Americas segment should hold up quite nicely..

Just comment regarding the contract coverage that's correct the specific comments we made were regarding U.S. Gulf of Mexico. But it's also true that Americas region probably has the best contract cover of the entire business.

And again, margins are expected to remain good I know with potential quarter-to-quarter volatility largely driven by timing and drydocks..

And our next question comes from Jon Donnel from Howard Weil..

I had a question regarding the vessel count guidance. Just trying to kind of reconcile between the expected newbuild deliveries versus maybe some sales. Looks like for the September quarter, I had -- there was supposed to be 5 deepwater boats delivered. Sounded like there are some delays there, but the deepwater fleet stayed relatively flat.

I was wondering were there any sales of active deepwater boats during the quarter? And should we expect any of those going forward? And maybe the same question applying to the towing-supply class as well?.

Now, we have no plans to dispose deepwater vessels and that's not embedded in the guidance. You're correct that timing of vessel deliveries is fuzzy at times, and we've had some delays in our disruption projects.

But the trend that I would expect is that deepwater will, at a minimum, be stable in terms of vessel count and likely growing by the end of the fiscal year, actual timing of those deliveries and ultimately, the time to get on contract is less easy to predict.

But in regards to towing-supply vessels, that may be moving in the opposite direction very modestly as a result of a couple of vessels that we would stack, that I'd telegraphed. And those again are older PSVs that are generally supporting shallow water activity..

Okay, that's helpful there. And then, also, regarding the kind of just the status in Angola.

It looked like the -- again, with the overall fleet, active fleet count down in that segment, I guess, could you just give us an idea of kind of what the fleet count stands there? Maybe how that's been changing and whether -- yes, there is any we should be expecting any other big changes? It doesn't sound like it based on you prepared commentary, but I know that's always a big question..

Yes. You'll see, when we file this afternoon, there is an extended discussion of Sonatide and Angola, including vessel trends over the last couple of quarters. But I wouldn't interpret that to mean that we've got some massive exodus of equipment out of Angola. We have selectively redeployed equipment as we talked about in prior calls.

We evaluate all opportunities when we've got a vessel available and obviously, the risk profile of Angola has changed over the last couple of years. And as a result, tides are frequently going to other areas or other regions and that's what gets reflected in the redeployment decisions.

But no, we've had no massive pullout in Angola and don't plan one, either..

Our next question here comes from Matthias Detjen from Morgan Stanley..

My first question is about the Middle East region. You said that utilization would probably come back up next quarter, it seemed like you signed those contracts.

I was wondering, have you seen a large number of vessels coming in from other regions, area sort of, flooding in from other regions? Or do you have seen a supply that being relatively stable?.

No, I think the supply has been relatively stable. We have moved vessels back over the last couple of years, primarily from Southeast Asia. We've made that move into the Middle East and primarily into the Saudi market. So I don't see a big ramp-up of entrance into that region. What you have is Saudi rationalizing their fleet.

And in fact, upgrading the technical specifications, which has benefited Tidewater. We've upgraded the vessels that we have working for Saudi and that's kind of pushed out maybe some of the lower spec vessels. And those are the ones that I've made reference to that we see came off the Saudi that have been picked up on other contracts..

Okay, that's interesting. And then on the subsea segments and your ROV venture. Can you maybe give us some more color on how you're integrating that with your current business and how that's sort of coming along with....

Well, first of all, we have 6 ROVs. So it's not -- but it is a -- it's a global effort, and we've had success-ed in the Americas. And we've now got success though beyond going in the Far East as well. So it's global.

We're outfitting some vessels that we have in our fleet to be able to do some IMR-type of work, and we're in the process of signing up contracts in Africa, too. So actually, it's picking up steam and going quite nicely..

Our next question comes from Mr. Turner Holm from RS Platou..

Yes, you mentioned in the prepared remarks that you have -- you had exposure to some of the better markets, I think you pointed out Brazil, Mexico, West Africa, in particular, as opposed to, say, North Sea or the Gulf of Mexico.

But can you just give us an idea of what's happening to leading edge day rates in those and sort of what you might call the better market?.

Well, say, that the utilization is still strong, obviously. The leading edge day rates certainly in the deepwater is, I think, we've reported over the last couple of quarters while we've had some upticks. It's basically flat. So it's stable and flat.

And then on the tow-supply, it's probably again ticking modestly upwards, but again, not a whole lot to write home about. I mean, we've had some gains on the tow-supply. We say it's been flat.

But if you kind of look back over the last 18 months, 2 years, we actually have had a little bit of increase there, certainly not to the extent of the deepwater, but I'd say, today, leading edge day rates are pretty flat..

Okay.

So nothing like, I guess, what you've seen in the North Sea then?.

Not at all. And again, it's a different market, different players. So you don't have near the size of the spot market that you do. You don't have the winter season causing a slowdown period. So it's 2 entirely different operating dynamics for the market..

I think the only thing I'd add is that leading-edge day rates are flat, as Jeff indicated, but they've been flat for some time. So you haven't seen in the last couple of quarters, as you saw in the prior 6 to 8 quarters, is a lagging up of average day rates, as contracts rolled over and vessels went to current market rates.

And so we've seen as both stability and leading-edge rates and stability in regards to average day rates as well..

At all-time high..

Sure. Yes, yes, Totally. Agreed. So just I know you guys mentioned that you're probably a little bit more bullish than a lot of the investors out there.

I'm curious, I'd be curious to hear what you had to say about maybe what you might be hearing from your customers or what you guys might be seeing that gives you a little bit more confident? And then, I guess, related to that, if it doesn't, I guess, play out as well as is what we're expecting now on how do you guys think about stacking vessels.

And I guess, where would you do that?.

Well, right now, we've got virtually a new fleet at very high utilization. So you -- where you would think about stacking, and I'm not saying that we are thinking about stacking, but the question where obviously, it's when you have a portion of the fleet that has reduced or greatly reduced utilization, that's what you think about.

You try to foresee, if you could move it to another market to keep the vessel working, where the numbers work out. But if not, then you look at potentially trying to reduce your running costs by doing that. And I'm not saying we have any plans for that.

To the contrary, our utilization numbers, I'm pretty doggone happy with what we've been running these boats at and continue to.

And what is it that I'm talking to my clients about? I can tell you even when in the good times and the bad times and I guess, it depends if it's a very bullish market, we can go in and we can increase day rates, they try to beat the hell out of us to put day rates down. That's the way it is. They never welcome you with open arms.

So certainly, this slowdown, just pretended slowdown when you see in the day rigs and drilling rigs take a tremendous reduction, it doesn't get any easier when you talk to the client. But at the end of the day, Quinn made a comment about our bidding activity.

And while it's down a little bit and then this is just a subjective that we take the rounds within the company, it's still at a very pretty robust rate. And that's sort of, at least an indicator internally we have a feel for what the market's doing.

So what makes it bullish, I think, is the fact that the -- again, I think the market is a whole, everybody's looking at the drillers. There's a big supply question mark there. No doubt with all that equipment coming on. And you look at their leading-edge day rates, which used to start with a 6, they may start with a 4.

Quite frankly, I would like to see the drillers. I would hope to they can get the maximum day rate. But if it's a working rig, that's much more germane to my business, and our business, because a working rig at $600,000 a day or $400,000 a day requires the same support pull-through to keep that rig working.

And I think some discussions with clients, I think, I mentioned at the last call, when you start having that kind of reduction for the rig, which takes up a large portion of the drilling budget, then all of a sudden, marginal projects or projects that may have been shelved at $600,000 a day for the rigs, at $400,000 a day for the rig, all of a sudden, it gets back on the table for discussion.

So I think there's a potential for a little bit of a rebound there. And then, if I try to go through what we do, everything we had -- everything that we, Tidewater, do is not tied to rig activity.

And that's why I went to the 60% revenue tied a direct rig support and then 40% through all the other life of the well, production services and others, to give you an idea that not everything we do is tied directly to a rig..

Sure. Understand. If I could just sneak in one last quick one. It's just that it's really interesting to know, I guess, what you guys are saying with regards to use of cash. I mean, I think if you look at your 2 years appears they're very much talking about share buyback.

You guys mentioned that you are, call it, maybe relatively more bullish than others. Talking a little bit more about acquisitions.

But I'm just curious how that, the timeline of that thinking plays out? Are you going to sit around and kind of wait out the market if see if there's a distress in the event that maybe there's a little downturn? Or do you go ahead and start deploying that cash relatively so you can just -- you're thinking around shareholder returns versus acquisition?.

Turner, we're thinking about all those things. Okay? We're trying to see again what the capabilities are of the company. This is a cyclical capital intensive business.

If the downturn does turn into a major downturn, I'm not suggesting that it will, then again, I think our conservative bent has served Tidewater well over the years and will continue to do so.

What I've tried to state is that, certainly, when you look at the price of our shares, when we look at that and we try to use that against the metrics that we have, it makes us a pretty compelling case that the stock is undervalued.

I think almost every company that's in the space has probably made that same evaluation and they're certainly saying the same things. And you have to certainly look at that and value that and weigh that against other investment opportunities that you have. And as I said, we'll continue to do that.

And I think, certainly creating shareholder value and growing the franchise, that's the intention..

But I wouldn't interpret our comments regarding share buyback see they're either on absolute or relative basis. Jeff made the comment that the stock is undervalued and significantly so from our perspective. And if you look at an investment opportunity whether it's in iron or in shares, we'll be looking at those same relative valuation dynamics.

And obviously, with our own stock trading at 80% of tangible book value, an opportunity to invest in ships will be viewed similarly. So it doesn't make sense to spend dollars to buy dollars when you can spend dollars to buy quarters. And that's the same way we've always looked at it.

So I wouldn't interpret our views on share buybacks as being different than anybody else's commentary regarding what the recent equity markets have done and how that's created a different slate of investment opportunities for issuers..

Our next question here comes from Richard Sanchez from IHS..

My question is regarding the future and your potential plans and strategies for the opening up of Mexico..

Richard, the good news for Tidewater, we've been in Mexico a long time. So we're not new to the market. We certainly have a very nice business in Mexico. We have had over the years. We view the opening as something that's certainly positive.

And it's going to unfold, probably a little bit slower paced than what a lot of people, what a lot of others have said. But again, we fully intend to capitalize on our business there and grow with the Mexican market..

Our next question comes from Mr. Mark Brown from Global Hunter Securities..

Just wondering, you mentioned in your discussion that turbulent markets present attractive investment opportunities.

And are you focusing on distressed assets in the shipyard? Or are there adjacent markets or adjacent lines of business that you would consider investing at this stage?.

Mark, all of the above. I mean, if that's what you're looking at. You try to see where that best value presents itself and then how does that fit in the overall strategy for the company on a go forward..

Okay. Got it, got it. And then I was wondering if -- just not for Tidewater specifically, but for the industry in general, if you've seen vessel stacking increasing in recent months or if you expect that to accelerate going forward.

I know you've mentioned in the past that there are 700 or so vessels that are in the global population that are 25 years or more.

And did you see those being removed from the fleet in an accelerated manner going forward?.

Well, I think, certainly, if there is a bit of more supply being given the OSV fleet, it's not that people purposely take them out, the market pushes them out. And as I said, the space where we operate in, really on a worldwide basis, we're not losing jobs to old equipment. And again maybe others that have commented they don't seem to go the way our.

I'm just telling you, we're not losing much of any work to a 30-year-old boat. So a lot of that equipment, I think, is at least left at least the space that we occupy.

I've seen some stacking, others have reported here in the Gulf of Mexico because of the kind of timing issues with rigs coming on where some of our competitors had some smaller vessels and they tend -- they're stacking those and working some of their bigger, new vessels in those slots.

But that's just listening to the same earnings calls that you are recently..

The only thing I'd add, Richard, is don't misinterpret my comments regarding potential vessel stackings. And we've pulled a couple hundred vessels out of the active fleet over the 6 years that I've been with Tidewater and our flag stack fleet peaked to about 100 vessels. And today, it's, I believe, averaging 13 in the quarter.

And it may get up to 15 or 16 or 17 or something like that. But we're not planning a significant number of stackings in part because it's already taken place at Tidewater..

It's an all new fleet that's out there..

Yes, that's right..

Our next question comes from Haithum Nokta from Clarkson Capital Markets..

Apologize if you gave this already.

But do you still expect your R&M expense to be flat to up mid- to high-single digits this year?.

I actually don't have it in front of me. I'd have to circle back to you on that. I should say we haven't significantly revised our annual R&M spending plan. It's just the pattern of occurrence quarter-by-quarter certainly was changed as the year progressed.

So I don't have a specific number in front of me, but I wouldn't say that we've had any significant upward revision our overall expected R&M expense..

At this time, showing we have no further questions from the audience..

All right, Joe, thank you very much. Thank, everyone, for their participation on this busy day, this day of voting nationally. So again, thanks for your interest in Tidewater. Have a great day..

And thank you ladies and gentlemen, this concludes today's conference. Thank you for your participation, and you may now disconnect..