Tidewater Shares Tumble as OSV Day Rates Hit New High-Water Mark

Shares of Tidewater Inc. (NYSE:TDW) fell more than 10% on Tuesday after the company reported impressive revenue of nearly $300 million in the third quarter amid rising day rates for offshore support vessels (OSVs), which are in high demand due to a global shortage of vessels.

The figure compares to the $191 million generated during the same period last year and brings Tidewater’s year-to-date revenue to more than $707 million.

Net income for the three and nine months ended September 30, 2023, was $26.2 million ($0.49 per common share) and $59.5 million ($1.13 per common share), respectively, showing significant growth compared $5.4 million ($0.10 per common share) profit in Q3 2022 and a net loss of $32.4 million ($0.76 per common share) through the first nine months of last year.

Shares of Tidewater fell more than 10% as earnings missed expectations. The company’s stock has surged more than 500% over the past two years on the continued recovery of offshore oil and gas industry.

Quintin Kneen, President and Chief Executive Officer of Tidewater, was upbeat on the company’s continued performance.

“The third quarter marks the third consecutive quarterly cyclical revenue and global average day rate high-water marks. Third quarter revenue nicely exceeded our expectations as a continued push on day rates globally drove consolidated day rates up by approximately $1,800 per day sequentially, representing the largest sequential improvement in day rates since the recovery began,” Kneen said.

Kneen attributed the positive momentum in day rates to a global supply shortage of large and small offshore vessels. Tidewater’s medium and small classes of Platform Supply Vessels (PSVs) showed the most relative improvement in leading edge term contract day rates during the third quarter. “We remain confident in the outlook for the business as demand for our vessels remains robust across a variety of end markets, including offshore drilling, subsea, construction, offshore wind, and existing production work,” Kneen said.

Tidewater saw significant growth across all regions in the third quarter. The Americas region experienced a 15.9% increase in day rates, with strengths observed in the U.S. Gulf of Mexico and the Caribbean. West Africa saw a 9.0% increase in day rates, while Asia Pacific recorded a 6.7% increase. Europe and the Mediterranean region also saw modest growth in day rates.

Revenue, gross profit, utilization, and day rates were all up compared to the previous quarter.

Looking ahead, Tidewater provided revenue guidance for 2024, projecting a range of $1.40 to $1.45 billion, along with an initial gross margin guidance of 52%. This is driven by the company’s expectation of an increase in year-over-year day rates of over $4,000 and an annual utilization level of 86%.

Tidewater also announced a stock repurchase program, authorizing the purchase of up to $35 million of the company’s common stock over the next four months. The company plans to consider market conditions and business outlook while opportunistically using the repurchase program. Tidewater said it aslo continues to pursue strategic acquisitions that enhance its position and leadership in certain vessel classes or geographies.

“We remain committed to providing a safe and rewarding environment for our employees as we move forward together building the safest, most sustainable, most reliable, most profitable, high specification offshore energy support vessel fleet in the world,” Kneen concluded.

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