Tidewater Inc. (TDW) Q4 2015 Earnings Report, Transcript and Summary

Welcome to the Fiscal 2015 Fourth Quarter Earnings Conference Call. My name is Laura, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Mr. Joe Bennett. Mr. Bennett, you may begin. Joseph M. Bennett - Chief Investor Relations Officer & Executive VP: Thank you, Laura. Good morning, everyone, and welcome to Tidewater's fourth quarter and full fiscal year 2015 earnings results conference call for the period ended March 31, 2015. 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, our Executive Vice President and CFO and Bruce Lundstrom, our Executive Vice President, General Counsel and Secretary. We will 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 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. Jeffrey M. Platt - President, Chief Executive Officer & Director: Thank you, Joe, and good morning to everyone. Earlier this morning, we reported a fully diluted loss per share for the fourth quarter of our 2015 fiscal year of $0.19, which includes a $4.1 million restructuring charge, $6.4 million of asset impairment charges and a $23.8 million non-cash adjustment to deferred tax assets, collectively impacting earnings per share by approximately $0.69. Our fourth quarter's results brought our fiscal 2015 full-year diluted loss per share to a $1.34, which included the $284 million goodwill impairment charge recorded in our third fiscal quarter. Adjusting for the goodwill and other asset impairment charges and our deferred tax asset adjustment, our fiscal 2015 fully diluted earnings per share would have been $3.82. Our March quarter's per share results were substantially below the adjusted earnings we reported for the December quarter and reflect the dramatic shift in oil market fundamentals that began last November, and continued throughout the just completed March quarter. As we had warned during our previous earnings call, we expected revenues, vessel utilization and average day rates to decline in the March quarter as a result of our customers announced reductions in their 2015 capital spending plans and decisions to delay and defer certain offshore projects. Lower activity levels were to be expected given the backdrop of weaker customer demand. The pace and magnitude of the decline, however, is nearly unprecedented, reflecting the aggressive cost reduction initiatives that many of our customers implemented in response to lower commodity prices. The restructuring charge we took in the March quarter related primarily to our organizational adjustments made to our Australian operations in light of various vessel contracts ending and few opportunities to re-contract those vessels in that market. In addition to these organizational adjustments in Australia, in the March quarter, the company began implementing cost-cutting initiatives globally that resulted in vessel operating and G&A cost for the quarter that were below previous guidelines for these line items. Our cost-cutting initiatives will continue throughout the coming quarters as we adjust our active vessel fleet to the evolving global demand, recognizing that in a weakened market, our stacking of underutilized vessels will have the greatest impact on vessel operating cost and vessel operating margin. Along with our vessel operating and G&A cost-cutting initiatives, the tightening of our belts also came in the form of some changes to our vessel newbuild program. In April, we canceled three-vessel construction contracts in response to poor shipyard performance. And in May came to an agreement with another shipyard that is in the process of constructing two deepwater PSVs for us that the company would now have an option to take delivery of one or two of the vessels at any time prior to June 30, 2016. We'll receive the return of installment payments made to-date at the end of this period. These are two recent changes to our newbuild program. But we will continue to evaluate our options with respect to other vessels we have under construction. Quinn will provide you with more details on these moves made post-fiscal year-end in just a moment. Just as in our last earnings call, I will focus the balance of my comments on the broad trends impacting our current business along with assessing our current position, how we see the future of our market and how we intend to conduct our business. I'll leave it to Quinn to provide you with the detail of the quarter's financial performance and our financial outlook for the near term. Comparing our March quarter's performance to that of our December quarter, we saw revenues decline 16% due to reductions in average day rates and lower utilization. A number of our customers have terminated offshore drilling rig contracts early and many are deferring other offshore work. While lower exploration and development activity has most directly impacted overall demand for offshore support vessels, continued growth in the offshore vessel fleet has also suppressed vessel day rates and utilization. In our view, a reversal in the currently negative supply demand dynamic will likely require a stable outlook for commodity prices, well north of current strip pricing, more vessel demand and less vessel supply and a recovery period of at least 12 months to 18 months from today. As a result, we expect the OSV market to remain weak until at least the second half of 2016. Given the more challenging operating conditions experienced during the March quarter, as was the case with other market participants, Tidewater's financial results were weaker than in previous quarters. We are comfortable, however, with both Tidewater's market position and its financial position as we work through the current market turmoil. The OSV market has clearly softened. Our absolute and relative positioning however remain good. We continue to maintain a strong balance sheet and a healthy liquidity position. Today, our net debt of approximately $1.5 billion represents 37% of our net book capitalization. Importantly, our fleet reinvestment program is winding down as we have largely completed the transformation of our fleet from one dominated by older, smaller vessels to the industry's most modern and diverse fleet that is capable of operating globally in all water depths: deepwater, midwater and shallow water. Subsequent to our fiscal year end, we extended our $900 million bank credit facility by one year to June of 2019, a prophylactic step designed to assure the long-term liquidity in a down cycle. Together with operating cash flow, additional liquidity also allows us to complete our construction in progress and to be more opportunistic in regards to investments in assets and/or our own shares. At our recent board meeting, we approved a regular quarterly dividend of $0.25, which we have paid each quarter for the last seven years. We have consistently paid quarterly dividends since fiscal 1993. In addition, the share repurchase authority granted to us by our board last year was extended by a year to June 2016. We currently have $100 million of unused authority under the recently extended share repurchase plan, that we'll be very cautious in regards to buybacks in the near-term. One of Tidewater's core values are focus on safe operations. We ended fiscal 2015 with a total recordable incident rate, TRIR of 0.14 per 200,000 man hours worked, and we had one lost time accident during the year. This is a very positive safety performance. I want to thank all of our employees worldwide for their dedication in performing their tasks every day in the safest manner possible. Our compliance initiatives are also an important competitive advantage as our customers along with their partners and local governments remain very focused on how their service providers conduct their business. Compliance is becoming an increasingly important consideration for the international energy service industry. Let me now turn the call over to Quinn to review the details of the quarter and how we see the near-term outlook. Quinn? Quinn P. Fanning - Chief Financial Officer & Executive Vice President: Thank you, Jeff. Good morning everyone. As Jeff mentioned, we issued our earnings press release this morning. We expect to file our Annual Report on Form 10-K through the EDGAR filing service by the close of business on Friday. Turning to financial results, as Jeff noted, we recorded loss per diluted common share of $0.19 for the March quarter, and a loss per diluted common share for the fiscal year ended March 31, 2015 of $1.34. Results for the March quarter included a $0.07 per share after-tax restructuring charge, non-cash asset impairments totaling $0.11 per share after-tax and a non-cash adjustment related to the valuation of deferred tax assets, which is included in income tax expense of $0.51 per share. Results for fiscal 2015 included a non-cash goodwill impairment charge of $4.43 per share after-tax, non-cash asset impairment charges totaling $0.24 (11:16) per share after-tax, and the previously referenced deferred tax asset related valuation allowance. As mentioned in the press release, this adjustment to our deferred tax assets was recorded based on our current assessment of our ability to utilize foreign tax credits prospectively. This may be a relatively conservative financial statement presentation, but it is consistent with accounting literature guidance and is appropriate in our view, given the current operating environment. Adjusted EPS for the March quarter of $0.50 was down approximately 55% from the December quarter. Adjusted EPS for the year of $3.82 per diluted share was essentially flat relative to adjusted EPS for fiscal 2014, which also included a smaller non-cash goodwill impairment charge and more modest asset impairment charges. As of March 31, we have no goodwill in our balance sheet and a book value per share of $15.66 (12:21). As Jeff noted, vessel revenue for the March quarter at $318 million was down approximately 16% from the December quarter, and was down approximately 12% from the March quarter of fiscal 2014. Relative to the December quarter, the average active vessel count was down two vessels quarter-over-quarter. Active vessel utilization and average day rates were off approximately 7 percentage points and approximately 6% respectively from the December quarter. Vessel operating costs at approximately $194 million was down approximately 8% from the December quarter and was down approximately 6% from the March quarter fiscal 2014. Relative to our expectations that we shared with you in early February, we had large positive variances in crew costs and repair and maintenance expense, which were somewhat offset by negative variances in insurance and loss costs. As Jeff mentioned in his opening remarks, given the current operating environment, we are very focused on reducing costs. Cost reductions have come from and will continue to come from a combination of initiatives including staff and wage reductions, the selective deferral of drydockings and major repairs and when appropriate, the stacking of underutilized vessels. As a result of ongoing cost reduction initiatives, we expect that crew cost will continue to trend down in fiscal 2016. Repair and maintenance expense should also fall year-over-year, though repair and maintenance expense will likely be volatile quarter-to-quarter based at least in part on the timing and nature of the drydocks, many of which are required by regulation that are undertaken during any particular quarter, also note that the continued strengthening of the U.S. dollar, particularly relative to the Brazilian reais had the effect of reducing our dollar denominated operating costs and modestly benefiting vessel operating margin during the fourth quarter. Vessel level cash operating margin at approximately 39% was within the range of 39% to 41% provided in early February, again with cost cutting efforts to-date, somewhat mitigating the precipitous fall in vessel revenue. Losses in our subsea operations for the March quarter at approximately $1 million were generally consistent with our expectations for the quarter. Total general and administrative expense in the March quarter of approximately $45 million was down a bit more than a $1 million quarter-over-quarter and was down a couple of million dollars from our run rate earlier in the fiscal year. As was the case last quarter, G&A in the March quarter was positively impacted by lower professional services costs through negotiated fee reductions and a downward revaluation of equity-based incentive compensation as a result of Tidewater's lower share price at March 31 relative to December 31. Below the operating income line, in addition to the previously referenced asset impairment charges, note that we recorded a very modest foreign exchange gain in the March quarter whereas in the December quarter, we recognized a foreign exchange gain of approximately $4 million. As previously noted, the U.S. dollar again strengthened relative to key commodity currencies during the March quarter, but the impact of revaluation non-USD denominated assets and liabilities was less significant than it was in the December quarter. That was particularly the case in regards to foreign exchange benefit recognized as a result of our quarter end revaluation of our Norwegian kroner-denominated debt. With the deferred tax asset valuation allowance that was recorded during the March quarter and the goodwill impairment charge that was taken in the December quarter, there was obviously a lot of noise in the tax expense line for both the March quarter and the fiscal year. I will just note that our normalized effective tax rate for the fiscal year was in the low 20%s or a couple of percentage points lower than our current expectations for fiscal 2016. Recognizing the changes on the geographical mix of earnings and other variables can create quarter-to-quarter volatility and estimates for our effective tax rate. In regards to fleet profile and performance, Tidewater's active fleet averaged 258 vessels in the March quarter, which is down two vessels quarter-over-quarter reflecting the delivery of four newbuild deepwater PSVs and our stacking of six vessels comprised of three towing supply vessels and three vessels reported in our "other vessel classification" during the March quarter. Utilization of the active fleet at approximately 76% was down about 6.5 percentage points quarter-over-quarter and average day rates at approximately $17,900 were down approximately $1,100 or approximately 6% quarter-over-quarter. Noting that lump sum mob, de-mob and similar fees were higher in the December quarter than they were in the March quarter, average day rates as adjusted for lump-sum fees were down approximately $800 or approximately 4.5% quarter-over-quarter. For reference, average day rates excluding lump sum fees were approximately $17,800 in the March quarter. Looking at key asset classes, as I just mentioned, the active fleet in the March quarter was 258 vessels and included on average 92 deepwater vessels and 111 towing-supply vessels. Average active other vessels, which include crew boats and offshore tugs, were down two vessels quarter-over-quarter. Reported average day rates for deepwater vessels at approximately $27,900 were down approximately $2,300 or about 7% quarter-over-quarter. After excluding the effects of lump sum fees, average deepwater rates in the March quarter were still $27,900, but they were down a more modest 5.5% quarter-over-quarter. Reported average day rates for the towing-supply vessels at approximately $14,500 were down approximately $1,000 or about 6% quarter-over-quarter. After excluding the effects of lump sum fees, the average day rates for the towing-supply class of equipment were approximately $14,400 or down approximately 5.5% quarter-over-quarter. Looking at our four geographic reporting segments, for the Sub-Saharan Africa and Europe segment, which accounted for approximately 39% of consolidated fourth quarter vessel revenue, vessel revenue was off approximately 18% quarter-over-quarter. Average active vessel count in the Sub-Saharan Africa and Europe segment at 116 vessels was off three vessels. The average active North Sea fleet at seven vessels was flat quarter-over-quarter. The average active Sub-Saharan Africa fleet at 109 vessels was off three vessels quarter-over-quarter. Active vessel utilization across the Sub-Saharan Africa and Europe segment at 76% was off about 7.5 percentage points quarter-over-quarter and average day rates at approximately $15,900 were off about $800 or about 5% quarter-over-quarter. Within the Sub-Saharan Africa and Europe segment, utilization in Africa was off about 6.5 percentage points quarter-over-quarter to 76%. Utilization of the North Sea fleet was down about 20 percentage points quarter-over-quarter to approximately 70%. Average day rates in Africa at approximately $15,900 were off about 2% in average day rates and the North Sea at approximately $16,300 were off more than 30%, reflecting a structural oversupply and very weak demand. To the extent there is a global (20:20) market today where utilization adjusted day rates are at/or around cash operating costs is most acutely evident in the North Sea, where exposure is relatively small. For the Americas segment, which accounted for approximately 37% of consolidated fourth quarter vessel revenue, vessel revenue was down approximately 13% quarter-over-quarter. The average active fleet in the Americas segment at 71 vessels was flat quarter-over-quarter. Utilization of active vessels in the Americas segment at approximately 84% was down approximately 2 percentage points quarter-over-quarter, but was still relatively strong and stable in the March quarter. Average day rates within the Americas segment at approximately $21,800 in the March quarter were down approximately 9% quarter-over-quarter, in part reflecting a particularly good December quarter for lump sum mobilization and demobilization fees. Adjusting for lump sum fees, average day rates in Americas in the March quarter were approximately $21,600, which is off about 6% relative to the December quarter. In the MENA segment, which accounted for approximately 14% of fourth quarter consolidated vessel revenue, vessel revenue was down approximately 19% quarter-over-quarter. The active fleet in MENA at 45 vessels was down one vessel quarter-over-quarter. Utilization of active vessels in MENA at approximately 74% was down about 9 percentage points quarter-over-quarter. And average day rates in MENA at approximately $15,100 in the March quarter were down about $800 quarter-over-quarter. In the Asia-Pac region, which accounted for approximately 9% of fourth quarter consolidated vessel revenue, vessel revenue was down about 10% quarter-over-quarter. The active vessel count in Asia-Pac at 26 vessels was up two vessels quarter-over-quarter. Utilization of active vessels in Asia-Pac at approximately 64%, however, was down about 10 percentage points quarter-over-quarter with at least part of the quarter-over-quarter trend reflecting our taking delivery of a couple of newbuild vessels during the March quarter. Average day rates in Asia-Pac at approximately $20,300 were down about 4% quarter-over-quarter. Looking at relative profitability, vessel level cash operating margin in the December quarter was in the 40% to 43% area for the Americas and MENA segments and 36% for the Asia-Pac and Sub-Saharan Africa and Europe segments. Note that vessel level cash operating margin in Asia-Pac is exclusive of the restructuring charge associated with downsizing our Australian operation. Turning to our outlook, we expect that customers announced reductions in their capital spending plans, project delays and cost reduction initiatives, particularly when coupled with additional newbuild OSV deliveries that have previously been announced by Tidewater and other companies will result in utilization challenges and day rate pressure in the near to intermediate terms. We do note that it is particularly challenging to make any forecast of vessel utilization and average day rates given today's very fluid market environment. In any event, our near-term expectation in regards to average active vessel count is in the range of 240 vessels to 250 vessels, which is down 10 vessels from my prior guidance. Guidance reflects the adjustment to our newbuild program that Jeff referenced in his opening remarks, as well as our expectation that we'll continue to selectively stack underutilized vessels. In this context, internal estimates currently peg the June quarter's vessel revenue somewhere between $290 million and $300 million. Likewise, based on what we know today, vessel related OpEx for the June quarter should fall within the range of $180 million and $185 million. For your added information, our expectation for repair and maintenance expense, inclusive of drydockings and major repairs in the June quarter is slightly higher than the actual results for the March quarter and is projected currently to be our highest quarterly level in fiscal 2016. Based on the vessel revenue and vessel OpEx guidance ranges provided, vessel level cash operating margin in the June quarter would fall somewhere in the 36% to 40% area. General and administrative expenses should be in the area of $44 million to $45 million in the June quarter inclusive of $1 million of G&A related to our subsea services operation. I'll also note that to the extent our outlook for quarterly vessel revenue remains in the plus or minus $300 million area, we will be looking for opportunities to further reduce normalized OpEx and G&A, recognizing that the timing and nature of drydocks will have a significant impact on quarter-to-quarter vessel revenue, OpEx and vessel level cash operating margin. Combined vessel lease and interest expense should be in the plus or minus $20 million area in the June quarter or basically flat relative to the March quarter. As to an effective tax rate assumption, we are currently assuming a 24% to 25% tax rate for fiscal 2016, of course, excluding any discrete items. Turning to financing and investment issues. Cash flow from operations for the 12 months ended March 31 was approximately $359 million, including approximately $81 million of CFFO for the March quarter. At March 31, our net due from affiliate related to our Angolan operations was approximately $235 million or down approximately $108 million, since the beginning of the fiscal year, largely as a result of increases in the due to affiliate balance, which includes commissions payable to Sonatide. Cash collections during the March quarter were approximately $67 million or approximately $14 million less than the revenue we recognized in regards to our Angola operations in the March quarter. Tidewater's Angola related cash collections, during fiscal 2015, totaled approximately $338 million, 53% of which represented successful conversion of Angola kwanza to U.S. dollars. The balance of cash collected was from USD payments from customers made pursuant to USD or split USD/kwanza payment arrangements. Revenue recognized in regards to our Angola operations in fiscal 2015 was approximately $351 million or approximately 24% of consolidated vessel revenue. As to non-operating uses of cash, CapEx in the March quarter was approximately $133 million, a portion of which was funded by asset dispositions, including one sale/lease transaction that was completed in the March quarter that generated approximately $13 million. As of March 31, 2015, we had 24 ships under construction with a total estimated cost of approximately $691 million, $311 million of which has been invested as of March 31 and $380 million of which was unfunded as of March 31. As Jeff noted, subsequent to March 31, we notified one shipyard that we were terminating the contracts for three of six towing-supply vessels that it was building as a result of late delivery. Recognizing that it makes little sense to accept vessels that if construction was ultimately completed, delivery would be into an OSV market that has materially weakened. We have also made a demand on the Bank of China refunding guarantees that secure the return of approximately $36 million in milestone payments made to-date plus interest. Likewise subsequent to March 31, we reached a mutually satisfactory agreement with another shipyard in regards to two deepwater PSVs that are currently under construction. As Jeff mentioned, under the terms of the negotiated settlement, Tidewater can elect to take delivery of one or both completed vessels at any time prior to June 30, 2016. If we do not elect to take delivery of one or both vessels prior to June 30, 2016, we are entitled to receive the return of milestone payments made to-date totaling $5.4 million per vessel plus interest. And we will be relieved of any obligation to pay the shipyard the $21.7 million of remaining payments per vessel. As to go-forward funding requirements, based on commitments at March 31 as adjusted for ship construction contracts terminated subsequent to 3/31 and the settlement arrangement that I just summarized, CapEx for fiscal 2016 as related to vessels under construction is estimated at approximately $263 million, more than half of which is expected to be expended in the June quarter. Beyond fiscal 2016 cash (29:33) is related to commitments as of March 31, 2015, totaled approximately $63 million. Total debt at March 31, as Jeff noted was approximately $1.5 billion, cash at 3/31 was approximately $78 million, and net debt to net book capital at 3/31 was approximately 37%. With the recent one year extension of our $900 million bank credit facility, we have no significant debt maturities until fiscal 2020. Total liquidity at 3/31 was approximately $658 million, including $580 million in availability under our $600 million bank credit facility, which again is available to the company until fiscal 2020. I'll also note that subsequent to March 31, we closed on a $31 million 12-year term export credit financing that is tied to one of the Troms vessels. In our view, pricing and other terms on this new financing were very attractive. And with that, I'll turn the call back over to Jeff. Jeffrey M. Platt - President, Chief Executive Officer & Director: Thanks, Quinn. Current trends in the commodity arena and the offshore market appear to be diverging. Almost coincidentally with the ending of the March quarter, we have seen a nearly 25% rise in oil prices, which has led some to speculate openly that the industry may have seen the bottom in oil prices for this cycle. We certainly hope this is the case, but in our view, it is premature to believe that we have experienced the worst of the cycle's downturn in terms of commodity pricing. Yes, global oil prices are higher, but they are still well below where they were a year ago, and offshore market conditions remain difficult, despite the recent optimism in the commodity markets. So what do we know about the outlook? With lower oil prices, our clients are responding as they have in every other similar period: cutting capital spending, deferring projects, reducing overhead costs by cutting staff and pressuring the service company providers for lower rates. How long this environment is likely to last is a question that everyone is struggling to answer. Our clients continue to say lower for longer. Our read of market trends and our clients' contracting strategies suggest that we should be prepared for an extended downturn. But panic, like optimism, is probably premature. If oil prices continue to recover then we could look for a better 2016, but the reality is that 2015 will be a very difficult year for oil and gas operators and their equipment and service providers. As Quinn pointed out, our fleet utilization and our day rates have all suffered in the March quarter from weaker market conditions. We expect that average day rates and utilization will continue to be under pressure for at least the next couple of quarters. And as I stated on our last earnings call, we continue to be of the (32:31) opinion that a meaningful industry recovery may not occur until the later part of 2016 or even into 2017. So what do we do in the interim? We will continue to conduct our operations with a focus on those factors that we can't control. For example, making sure that we continue to deliver a high level of service quality; that means we will not alter our focus on safety and compliance. As I mentioned earlier in this call, we consider these two qualities to be core values at Tidewater and believe our performance in these areas provide us with competitive advantage. We will also stay close to our customers, not only to make sure that we're providing outstanding service, but also so we can partner with them in steps that help achieve increased efficiencies and reduced operating costs. We want and need our customers to be successful and have been responsive to their requests for rate reductions, so long as we are trading things for things rather than things for promises. As appropriate, we are prepared to defend day rates based on the equipment, services, and global support that we provide to our customers. As a general matter, we will also avoid entering into long-term contracts at day rates than in retrospect, maybe characteristic of a transient trough or a cyclical bottom. While prompt and proactive cost reductions are a priority in the near term, we will endeavor to balance profitability, cash flow and revenue market share objectives as we consider stacking additional vessels. Our global operating footprint also provides us with some flexibility to shift vessels from relatively weaker markets to relatively stronger markets and thereby optimize vessel utilization and day rates. At some point, our customers will gain confidence that market trends have stabilized and global growth will resume. As I mentioned in my earlier comments, we are winding down on our 10 year plus fleet reinvestment program that has allowed us to replace, enhance and grow our fleet and operating capabilities. We are well positioned to meet our clients' needs anywhere in the world they operate, but we will follow a disciplined approach in regards to any new capital commitments. We are committed to maintaining a young and highly capable fleet in the future, but it will not require the magnitude of capital investment that has been consumed during the past decade. One thing we do know after 60 years in this business is that industry down cycles often provide market leaders with opportunities to expand their operations and enhance their growth profile. What specific opportunities may develop for Tidewater is difficult to assess currently. But our balance sheet is strong and our liquidity position is solid. Falling CapEx and reduced investment in working capital will benefit free cash flow. Our global operating footprint and experienced management team should also give us visibility on acquisition or investment opportunities and provide us with scope for cost synergies in the context of possible industry consolidation. Our response to any opportunity, however, will be dictated by our commitment to creating shareholder value, which remains management's key objectives. With that, we're ready for your questions. Laura?

Thank you. We will now begin the question-and-answer session. And our first question comes from George O'Leary from Tudor, Pickering. George, your line is open. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: Good morning, guys. Jeffrey M. Platt - President, Chief Executive Officer & Director: Good morning, George. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: You guys talked a little bit about needing to see supply come in as well as demand pick up. So you've certainly done your part. What are you seeing on the part of your competitors in terms of stacking vessels, and to-date have you seen anyone out there willing to go ahead and scrap vessels? Just given your broad footprint, I think it would be good to hear your thoughts? Jeffrey M. Platt - President, Chief Executive Officer & Director: George, certainly, the older vessels, I think that's a continuing scrapping issue that's going on. It's hard to put a number on how many vessels are exiting it. Others have reported in their earnings calls certainly here domestically of stacking of new and newer equipment, so we're seeing that. Certainly others of our major competitors we're seeing that in the North Sea there's been some stacking of vessels reported. So I think everybody is looking at the same operating environment and where it certainly makes sense for one company that certainly applies to others as well. So can I quantify it with a number? Don't see it, but I think certainly the longer this progresses to the depth that it has, you'll see some additional stackings, and as Quinn and I have laid out, Tidewater will not be exempt from that. We'll certainly look at underutilized vessels and again do our part to make the right decisions for Tidewater and I think overall the industry will do the same. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: All right. That's helpful and then we've seen Saudi in particular negotiate lower some day rates in the jackup market in your Middle East, North Africa region. Are you experiencing any of those same pressures from that customer? Jeffrey M. Platt - President, Chief Executive Officer & Director: George, I don't want to talk about individual clients. I can just say that this downturn is – there's no place to hide, and we have those negotiations ongoing and have had those with lots of clients. I don't want to get into particulars on it, but again, it's pretty broad based as everyone I think understands. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: And then maybe sneaking one more if I could. Given the magnitude of the downturn and your comments in maybe a place like the North Sea you're starting to see day rates approach cash operating costs. Is this a time when you expect to see some industry consolidation and how do you maybe envision that playing out for Tidewater? Are you a consolidator here as the newbuild program ramps down? Jeffrey M. Platt - President, Chief Executive Officer & Director: Well, again, we've made comments. I think we like our relative positioning both from the operating side, our fleet side, our fiscal strength. I would say that you would have to look from the characteristics that if there are to be consolidators, I think Tidewater has the right attributes for it. How it plays out? I don't want to hazard a guess on that. Certainly we're looking at opportunities as we always do look at opportunities, but I do think when you have this type of market turmoil, this does present some unique opportunities and the window for that, Lord knows how long it's going to be open for. Again, I'm not hoping for an extended downturn, but a little bit of consolidation wouldn't hurt the industry, but I'd also caution that ours is a very fragmented industry. So consolidation is not going to be the magic answer to turn around what is a pretty highly fragmented industry. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: Thanks for the color, guys. Jeffrey M. Platt - President, Chief Executive Officer & Director: Thank you, George.

And our next question comes from Matthias Detjen from Morgan Stanley. Matthias, your line is open. Matthias Detjen - Morgan Stanley & Co. LLC: Thank you. So I have one question about the dividend, so you talked a bit about it earlier and I was wondering how secure you see it given your current outlook and if you think you're actually going to – or if you're committed to it and want to sort of like continue paying it even given that we're going into this downturn, if you could maybe give us some color on that. Jeffrey M. Platt - President, Chief Executive Officer & Director: Well, the only thing I found in life that are absolute are death and taxes. With that being said, I'd just ask you, as we pointed out, the history of what Tidewater has done and I would say that again we're not new to the game. Some people have jumped in in the last 12 months and had to pull the dividend back. That's certainly not Tidewater. We've been a long-time player and we look at the value repayment to our shareholders as something that's very much part of what we're doing. So with that I'll just ask you to look at our history. Matthias Detjen - Morgan Stanley & Co. LLC: Okay. And then I have one question regarding the ROV segment, so what effect has the weaker oil price environment had on your outlook for the ROV and the Subsea segment. Has that changed since you like initiated the program there and if you could maybe give us some color there? Jeffrey M. Platt - President, Chief Executive Officer & Director: No, again, I think the subsea work, especially the market that we are looking at and what we're into currently, I don't see a major pull back. Certainly for us, it's a very small number of ROV fleet that we have. But again, the whole industry is seeing the retrenchment. So certainly the ROVs that are tied to the drilling rigs that's a much different story. That's not the Tidewater story, but obviously with the reduction in the deepwater rigs that you've seen, that affects ROV utilization as a whole. But with respect to the subsea and the construction, I don't necessarily see a big pullback in that. And for us, again, it is a growth part of our business. I think also it is a learning part of our business that certainly opens opportunities for us as we've talked about growth initiatives in the future. And again, the overall retrenchment, there may be investment opportunities in that direction as well as in our core OSV side. Quinn P. Fanning - Chief Financial Officer & Executive Vice President: I guess the thing I'd add is, part of the reason that we found the ROV and subsea space interesting is that it would increase our exposure to the production side of the business. As we've talked about on prior calls, probably 60% of our activity is driven by rig activity. The balance is production, construction, seismic, et cetera, and we would like better balance in the business, and we think exposure to the ROV segment and the vessels associated with IMR work is helpful in that regard. I think it's fair to say that if we have a excess supply issue on the OSV side of the business that excess supply is probably also real on the subsea vessel side of things. And as we highlighted, maybe the downturn creates opportunities for us to consolidating the OSV space. It may also create more attractive entry points or price points on the subsea side. But at least in my view, really attractive investment opportunities will take at least a couple of quarters for potential counterparties' valuation expectations we calibrate. So in the near-term we're focused on managing our costs, managing our capital program and if with the passage of time opportunities are created, we'll be prepared to act on them and think we have an absolute and relatively strong financial profile that would allow us to do that. Others probably don't have that characteristic as, Jeff put it. Matthias Detjen - Morgan Stanley & Co. LLC: Well, great. Thanks for the update, gentlemen. Jeffrey M. Platt - President, Chief Executive Officer & Director: Thank you.

And next we have Greg Lewis from Credit Suisse. Greg, go ahead. Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker): Yes, thank you and good morning. Hey, guys, I hope you're managing through that flood down there. It looks pretty nasty on TV. Anyway, I have a couple questions. I guess first, as we kind of look at the utilization in the deepwater segments, it looks like the Americas and Asia/Pacific is – and I realize Asia/Pacific is down a lot over the last two quarters, but it look likes those were more flattish than the Middle East, North Africa and West Africa regions. Is that just a function of timing or is it the nature of contracts. I kind of thought that the West Africa market was more of a term contract, so if you could provide any color around that that would be pretty helpful? Jeffrey M. Platt - President, Chief Executive Officer & Director: Yes, Greg, let me give this a shot. First of all, when you're looking at Asia/Pacific, we're in a cycle in Australia. So most of the active drilling programs are pushing to the right, so that utilization for deepwater PSVs have softened. However, there are some bright spots in Asia/Pacific, specifically places like Myanmar, whatnot, where we have some upcoming expiration activity. In terms of the Gulf of Mexico with contracts that we've had, we have many long-term contracts in the Gulf of Mexico, so that utilization is holding there. In terms of West Africa, we do have a large spot market that we do play on the West Coast, but we also have a real healthy mix of long-term contracts in places like Angola. So you really can't put your finger on anything. It's really from a perspective of a balance of moving from our longer-term contracts and working spot. And the deepwater PSV market is strong in both of those areas. Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker): Okay, great. And then just shifting gears. Clearly, you're having conversations with shipyards. You addressed those five. It sounds like those were more just a function of the shipyard failing to perform. I guess, a two-part question. One is, are there other vessels in the order book that are potentially going to run into issues where we could see maybe the order book for Tidewater change a little bit. And you mentioned Bank of China was providing the refunding guarantees on the three towing-supply boats. Is the Bank of China also providing the refund guarantees on those PSVs? Jeffrey M. Platt - President, Chief Executive Officer & Director: The answer to that question, Greg, is yes, they were. Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker): Okay. Jeffrey M. Platt - President, Chief Executive Officer & Director: I don't really want to go to the hypotheticals of our construction queue. I'll just say that we're certainly mindful of what we have on order. We expect our counterparties, the shipyards to deliver the quality product on time. And you're right in your assessment that the result of certainly the three cancelations, that was a direct result of the yard not being able to meet their contractual performance. Had those vessels been delivered and the time that they were contracted for was a much different market in the OSV side, our market. So, again, we will continue to be mindful of our assets under construction and certainly we'll preserve all the rights that we're entitled to. Our intention is not to cancel the vessels. I've said that before. We like the vessels we spec out. It makes sense for the long term. But when the counterparty in that business transaction doesn't meet their obligations, then we really have to defend certainly our rights and continue to do so. Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker): Okay. And then I know you guys... Quinn P. Fanning - Chief Financial Officer & Executive Vice President: And Tidewater plans to meet its contractual commitments and our expectation is that our counterparties will do the same. Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker): Okay. And then I know you guys don't want... Quinn P. Fanning - Chief Financial Officer & Executive Vice President: We will evaluate the situation based on the facts and circumstances around that situation. But we have no plan to walk away from contractual commitments, but we expect others to do the same. Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker): Okay. And then I know you guys don't like to comment on competitors or suppliers, so just keeping it very general. As you're in the marketplace and talking to customers, competitors and the shipyards, do you get a sense that this is something that's more widespread or do you get a sense that it's something specific to Tidewater where it's maybe one or two yards that are potentially having an issue or is this something that is, like I said, is it more widespread across the industry and I'm focused more on the order book? Jeffrey M. Platt - President, Chief Executive Officer & Director: Yes. I think there's a large contingent of vessels ordered primarily in Asian yards. And when you look at who the owners or prospective owners would be, there's a pretty good question as to whether those owners will actually take delivery? I think we've mentioned that in previous earnings calls. I don't have any numbers to put in front of you, just say that there is, we think, a meaningful number of OSVs currently under construction that most likely will not see market. Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker): Okay, guys. Hey, thank you very much for the time. Quinn P. Fanning - Chief Financial Officer & Executive Vice President: And the other thing I'd probably point out to you is that we believe an underappreciated portion of the order book is actually vessels that are potentially being constructed for the yard's own account and obviously the market today probably makes a speculative newbuild to keep the yard busy probably a less attractive proposition than it was 12 months or 18 months ago.

And our next question comes from Mark Brown from Global Hunter. Mark, your line is open.

Thank you. Just curious on the vessel operating margin guidance, I think you said 36% to 40%. Do you think that's a level you can hold even if we see a continuation of the downturn for the next few quarters? It seems like in the past you've been able to take steps to reduce cost or stack vessels if necessary. Do you have any sense in terms of how we should think about margins going forward? Quinn P. Fanning - Chief Financial Officer & Executive Vice President: Sure. I mean, obviously it'll be impossible to maintain margins if day rates and utilization remain weak and we don't take mitigating steps, which is why, as we talked about on our last call and we talked about today, we're trying to focus on the things we can control and attacking our cost structure is first and foremost in our minds. But we've gone through a budgeting process, which is certainly more difficult in the current environment than it is in a more stable environment, but the guidance that I gave you recognizes that rates, utilization are different than they were 12 months ago and we're taking the needful steps. So the guidance I gave you is based on our best view of revenue outlook and the steps we're taking in order to offset what otherwise would be significant margin pressure.

Thank you. Thank you. That's helpful. Quinn P. Fanning - Chief Financial Officer & Executive Vice President: (51:35) margin guidance, but we're certainly going to be working to generate the best margins possible in a very difficult environment.

That's helpful. In the North Sea, clearly there is an oversupply there, your vessels that you acquired from Troms can work in many different cold water environments, are you looking to move any of those outside of the North Sea or are they on contracts or in situations where you want to keep them stay put? Jeffrey M. Platt - President, Chief Executive Officer & Director: Mark, first off the Tidewater view of the world is where we don't have a bias towards one market or another except to the fact of what is the most beneficial use of that asset. So yes the Troms fleet when it was joined into Tidewater, it's part of that worldwide pool and we look at every vessel and we look at every market and every contract that possibly comes up for it and we try to make the best fit. So no, we're not going to say that those are carved out and those will stay at all costs in the North Sea. We do have some contractual commitments up there, which we will obviously meet those contractual commitments and we quite honestly are not going to cede the North Sea. We're not going to pull everything out of it, but again we're looking at a relatively small number of vessels in the Tidewater fleet, but it is part of the worldwide fleet of Tidewater and we will look to best employ those assets. Quinn P. Fanning - Chief Financial Officer & Executive Vice President: And the subset of the Troms fleet does have term contract coverage.

All right. Well, thank you very much. Jeffrey M. Platt - President, Chief Executive Officer & Director: Thank you, Mark.

And we have Cole Sullivan from Wells Fargo. Cole, your line is open.

Thanks for taking the call. Jeffrey M. Platt - President, Chief Executive Officer & Director: Hi, Cole.

Hi, how are you? The question I had was you talked about breaking sessions, you guys are willing to do that if it makes sense for the term side, kind of give and take there. To what degree have you guys seen that in first quarter of the year and then in what regions have we seen that? And then where do you expect to see more of that going forward? It's kind of been discussed across the industry by your peers and the rig contractors, just wanted to get a little bit more color on that. Jeffrey M. Platt - President, Chief Executive Officer & Director: Cole, this downturn is worldwide. As I said there's no magic geographic market that you can go to that somehow is exempt from it. So, those discussions, to answer your first part, those discussions are occurring with many clients in probably every geographic market we're in. So, it is broad-based and everyone is having those discussions and every one of our competitors I can tell you is having the same discussions as are any of the service providers in the oil and gas segment. So, it is broad brushed and it will continue to go until we truly see the market turnaround. We've kind of weathered I think the first kind of volley from our clients, we have gone through that. But there will be continued pressure depending on the commodity pricing. As the commodity pricing rebounds, it will lessen. As more rigs go back to work and activity loosens up, it will lessen it, then it will probably would turnaround. But at this point where we're sitting, I would expect to have more of those discussions on an ongoing basis across the board.

(55:19) I'll go back to the last earnings call and our generalized expectation for rate and utilization. As a vessel comes off contract in the current environment, market is market. And recontracting opportunities will reflect the currently available rates. That is one dynamic that is quickly working its way through our financial results and others. As a result of delays in decision making, project deferrals and the like, I expressed a view that our revenue would be first impacted by lower utilization as a result of projects moving to the right. The expectation is as customers decide which projects will move forward and we will see some uptick in utilization of the active fleet, recognizing that the active fleet may be down a few vessels as a result of stacking. Our expectation remains that as utilization rebounds modestly, that it would be coincident with a fall in average day rates in part reflecting the new reality, leading-edge day rates and also in part reflecting a renegotiation with customers on existing contracts where at least from our perspective, we achieved things for things, as opposed to things for promises.

Okay. Quinn P. Fanning - Chief Financial Officer & Executive Vice President: So the original question is to what extent has it been reflected in actual financial results? Tough to put a percentage on it, but it has certainly impacted results from a utilization perspective. Again my view at least is that utilization will rebound, but average day rates will continue to fall and ultimately that's what got dialed into the guidance that I provided.

Okay. Thanks for that. And then on the backlog you guys have historically kind of held around 50% kind of across the fleet, how does that stack up today and any color there? Quinn P. Fanning - Chief Financial Officer & Executive Vice President: I think that's moved materially I think the forward contract cover on available days basis is still in the mid 40%s or so, honestly, I think that's a less relevant statistic today than it used to be only because customers aren't shy about renegotiating the existing contracts. So we take no comfort or find no safe harbor in contract cover, obviously it helps utilization and gives you seat at the table on a negotiation, but it's not going to insulate you from falling day rates as a result of renegotiations, hopefully we get something in the bargain, but those are ongoing conversations, we expect them to continue to take place until you see a market rebound.

Okay. Thank you. Then I'll turn it back.

And our last question comes from Turner Holm from Clarksons Platou. Turner, your line is open.

Hi, gentlemen, thanks for taking my call. Quinn P. Fanning - Chief Financial Officer & Executive Vice President: Hi, Turner.

Just a follow-up on the last remarks, I was curious if you could give us just sort of a rough ballpark of where you think, a mark-to-market day rate on the fleet would be now and I appreciate that it's difficult to make a forecast, but you guys were what, just shy of $18,000 in the March quarter, if you kind of thought about where all those vessels would re-contract today, roughly where might that land? Jeffrey M. Platt - President, Chief Executive Officer & Director: Turner, I think that question we got too many geographic markets that have sort of unique cost structures in them, just to give you an example, in a normal market the day rates in Australia versus the day rates in West Africa, it's two different day rates and you've two different cost structures. So to tell you what that normalized would be, I just think we would be hazarding a guess that really would be misleading more than anything else. Quinn P. Fanning - Chief Financial Officer & Executive Vice President: And magnitude of it (59:19) obviously significantly impacts that as well. Jeffrey M. Platt - President, Chief Executive Officer & Director: Yeah. Quinn P. Fanning - Chief Financial Officer & Executive Vice President: And what's working and what's not.

Right. Okay. So, one more thing on the cost, I was just curious to what extent you might be able to further reduce ongoing operating costs, sort of what the trajectory of that might be beyond just on stacking, is there more to go after the June quarter or what is kind of the trajectory of cost reduction look like through the fiscal 2016? Jeffrey M. Platt - President, Chief Executive Officer & Director: Well, the biggest move on that would be further reduction of underutilized assets. Okay? So, as the market would continue, if it's continuing to pull back, we would look at doing that. But then when you look at certainly crew wages and routine maintenance and repairs, again, we are going to provide a level of service that we're not going to cannibalize those things in the short run to try to reduce cost that way, we're not going to do that. But I'll tell you that we are scrubbing every cost item and we will continue to do so. And we will continue to wring out efficiencies wherever we possibly can. Quinn P. Fanning - Chief Financial Officer & Executive Vice President: And then in regards to offshore and onshore costs and as I mentioned, we've taken initial steps in regards to wage and staff cuts and we're continuing to take a hard look at that. Just like our customers are doing, we're in active dialog with our vendors in regards to negotiating reductions in costs and I think that's going to play out over time, and hopefully you'll see the benefit in both G&A and OpEx, but it's a daily effort and one that we won't let up on until the market rebounds.

Okay. Thank you very much. If I could sneak one really quick one in, the Angola (1:01:20), you guys said that on the last quarter call that, you expected that to normalize over the next couple of quarters or in the foreseeable future. Would you maintain that outlook? Quinn P. Fanning - Chief Financial Officer & Executive Vice President: That still is our expectation and it's a daily effort.

All right. Thank you very much. I'll turn it back. Quinn P. Fanning - Chief Financial Officer & Executive Vice President: (1:01:42).

And we have no further questions at this time. Joseph M. Bennett - Chief Investor Relations Officer & Executive VP: Thank you very much, Laura.

Thank you, ladies and gentlemen. Joseph M. Bennett - Chief Investor Relations Officer & Executive VP: Thanks to everyone for (1:01:57) today.