Welcome to the Fiscal Year 2016 Fourth Quarter Earnings Conference Call. My name is John, and I will 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. And I will now turn the call over to Joe Bennett.

Thank you, John. Good morning, everyone, and welcome to Tidewater's fourth quarter and full fiscal year 2016 earnings results conference call for the period ended March 31, 2016. 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 VP, General Counsel & Secretary. We will follow our usual conference call format. Following our opening 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 will 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 will turn the call over to Jeff.

Thank you, Joe, and good morning, everyone. Yesterday, after the markets closed, we reported a net loss for our fourth quarter of fiscal 2016 ended March 31, 2016 of $81.8 million or $1.74 per share, inclusive of two items highlighted our quarterly earnings press release, and $0.87 per share after-tax non-cash asset impairment charge and then a $0.18 per share after-tax foreign exchange loss reflected in our equity and net earnings loss of unconsolidated companies related to our joint venture company in Angola. If we adjust our results for these after-tax charges, our loss for the quarter would have been $32.4 million or $0.59 per common share. It's disappointing to report a loss for any quarter or fiscal year, especially since our operating performance was relatively solid, considering this very challenging business environment. We generated a 45% vessel operating margin for the fourth quarter, which compared favorably with our 39% margin a year ago. Our revenues this quarter were 43% below those of the same quarter a year ago. But as you all know, last year was a very different environment for the offshore business. Sequentially quarter-to-quarter, our revenues declined 15% again a reflection of the continued erosion of the global oil service market. Vessel operating margin is a key metric for measuring operational performance, because it captures all of the categories of operating expenses that we can and must control. As we have stated previously, we have no control over oil prices or the corresponding activity levels of our clients. What we can control within limits, our expenses such as recurring costs, repair and maintenance expenses and insurance costs. Our 45% vessel operating margin this quarter follows a 41% margin we generated in the December quarter and a 40% margin for each of the September and June quarters. Given…

Thank you, Jeff. Good morning everyone. As you know, we issued our earnings press release after the market closed yesterday. We plan to file our annual report on Form 10-K through the EDGAR filing service sometime this afternoon. As Jeff noted, we reported an adjusted loss per diluted common share of $0.69 for the March quarter. Vessel revenue for the March quarter at approximately $160 million was down approximately $33 million or approximately 15% quarter-over-quarter. Approximately $19 million or approximately 58% of the quarter-over-quarter change reflects our stacking of previously active vessels that we expect to be underutilized in the coming quarters. Lower vessel revenue in the March quarter as a result of the 91 day quarter was largely offset by lower loss revenue, due to fewer vessels that were dry-docked. The average active vessel count at 198 vessels was down 17 vessels quarter-over-quarter. During the just completed quarter, we stacked 12 previously active vessels, we also reactivated two previously stacked vessels and dispose of three vessels that were stacked at December 31, 2015. As a result, the stacked fleet during the March quarter averaged 73 vessels and was that 77 vessels at March 31 or up 7 vessels from the previous quarter's end, somewhat reflecting a reduced pace of vessel stacking versus what we have seen in prior quarters. For reference, vessel revenue for the just completed quarter is down approximately 43% relative to the March quarter of fiscal 2015. Active vessel utilization at 73% was down approximately one percentage point quarter-over-quarter and average day rates at approximately $13,700 were up approximately 6% quarter-over-quarter. Vessel operating cost in the March quarter at approximately $98 million were down approximately $27 million or approximately 22% quarter-over-quarter. Most significant reductions both in dollar and percentage terms were crew costs, which were down…

Thanks, Quinn. Our outlook for our industry has become somewhat more optimistic in recent weeks, as crude oil prices have been raising. Our optimism however is tempered by our understanding of the challenges, our customers continue to face and how they are responding. The increase in oil prices happened so quickly that our customers had little time to assess whether the new prices are sustainable, warranting their adjustment of their outlook and spending plans. We believe our clients remain focused on completing the organizational adjustments they have made in order to deal with lower oil prices that were expected to last for an extended period of time. Yes, $50 dollars a barrel of oil is better than $26 in February. However, one shouldn't lose sight of the fact that oil prices today have merely returned to where they were in October and November of last year. The concern is that until oil prices established a plateau sufficiently high and long enough for oil company managers to gain confidence in the recovery that improves their offshore project economics, our market will remain challenged. What we know is the physics of the petroleum industry is at work. The inevitable production declines of 3% to 4% annually in conventional reservoirs and 60% to 70% in the unconventionals, coupled with the sharp cutback in global drilling and completion activity will limit future supply. Additionally, as usually happens after oil prices have fallen, consumption is rising. In its main May monthly oil report, the IEA increased its estimate for oil consumption in the first quarter of 2016, although they haven't yet increased their full year estimate. As oil supply and demand begins to balance with supply likely moving into a deficit position, the glut of old oil inventories will begin to ease. Following oil inventories,…

Thank you. We'll now take questions. [Operator Instructions] And we have a question from [indiscernible] from Cowen.

Hey, thanks for taking my question. So, starting off with the – on the finance side, if the revolver were to be converted into a secured facility, would that in fact your operations and anyway and how does that impact the other senior note?

I guess it's a difficult to prejudge negotiations that have been completed, but as we've highlighted over a number of months now, successfully securing amendments to our bank and other credit facilities. We expect to require concessions on the part of the company, those concessions could include the granting of collateral, the reduction of borrowing capacity, pricing et cetera, et cetera. I think it's important for everybody to understand though that, the current capital structure of the company is entirely unsecured to the extent that we were to grant collateral, to any of the existing finance parties, it would be done on a pro-rata basis. So, any collateral that is granted in an example to the bank group would be shared by the existing senior note holders and we also have a parent company guarantee that supports the Troms financing and as a result the Troms lenders which is relatively small part of the capital structure, would like to us to be on a [indiscernible] basis. So I guess the bottom line is, this currently were unsecured. We recognized that achieving the amendments that we see will probably require confessions which may include collateral but to the extent that we grant collateral, we grant about on a pro rata basis across [indiscernible] purpose this entire interest bearing capital structure. Does that answer your question?

That does and that's helpful. My follow up would be just thinking about beyond the government amendments of labor if you think about delevering the balance sheet and just curious as to how you think about what can be done and then especially given on the equity issuance that have been taken well by investors, what are the thoughts around equity issuance?

We certainly follow very closely to what extent investors are coming back into the oilfield services space. I don't think we would put anything on the table as a primary focus or take anything off the table. Our focus is on securing the amendments and our waivers to the existing debt arrangements and ultimately continuing to improve upon the company's financial profile as is probably obvious from balance sheet that we filed with our press release. We believe we have adequate liquidity today, so equity would not necessarily be focused on increasing what is already a large liquidity position. I think what we would probably do is let the negotiations with our existing debt providers play out and as we put that behind us, we'll consider all alternatives and improve the company's financial profile and relative positioning.

And last one if I may sneak in, pretty impressive vessel margins around 45%. Is it fair to say that's where it's kind of like a line drawn in sand that we will try to adjust the – we'll try to manage our vessel margins around that level and stack accordingly?

No. We've worked very hard as a company to mitigate reality of lower revenue. As Jeff highlighted, there are certain lines that we can't go beyond or we're not going to compromise safety compliance or the high level of service that our customers have come to expect from the Tidewater franchise. But we've lifted every rock and we continue to do so to try and streamline the operations and reduce costs. But I won't say there is anything magical about 40%. 40% is what we've been able to achieve by responding to the current revenue reality. But to suggest the certain margin as line in the sand artificially pretends know what future day rates will be. We don't know the answer of that.

That's very helpful.

Again, we will optimize margins within the constraints that Jeff has outlined.

Thanks for the time.

And our next question is from [indiscernible].

Hi. Thank you for taking my call. I have four questions. What's the cost of stack, the 77 vessels annually? What's the value to sell all 77 stacked vessels versus scrapping just at the stacked vessels and will you consider moving the stacked vessels to raise more liquidity to be able to pay-off all outstanding liabilities? Thank you.

Well the cost of stacked was currently 77 vessels, while it is not consistent across the stacked fleet, because we have a different locations at which we stack and in some cases, we have fewer and in some places we have more vessels, which create certain scale-based economies. What we're trying to highlight is that, we are not taking where many cases has very new equipment and putting up it in the grass and hoping for the best. And as a result, our stack cost may be higher than some of our competitors who may not be approaching their stack fleet in the same way. We call it smart stacking, I think the phrase has been used by the some of the rig owners as well. But importantly, our expectation is that those vessels will be well-positioned to return to the market when the demand supports it, bottom-line is that our stack costs run about a $1,000 plus or minus per day, per vessel. So, you can do the math on that depending up on your expectations in terms of the trend and the stack fleet. So, that's the cost to maintain the stack fleet, the value of those vessels in a disposition scenario, I guess at the end of day, it requires a buyer and a price and the ability to write a check. Our sense today is that the bid for OSVs is relatively weak today, but I wouldn't say that we are precluding the disposition of vessels, either as part of a high grading exercise or to generate liquidity, which as you would suspect would be primarily focused on reducing outstanding debt. We have no specific plan to sell the 77 vessels or any other vessels that are in stack. That said, I would highlight that over a decade or so, we've consistently sold 10 vessels to 15 vessels per quarter. We continue to sell largely the smaller lower book value vessels, while maintaining the higher spec, bigger vessels and it's also worth noting that much of what we sell tends to be outside the oil and gas market, whether it's Caribbean cargo trade, Nigerian security or whatever. And we have done that, over many, many years successfully, the fact of the matter is, there is not a lot of demand for these ships in the oil and gas space and we're not looking to do a fire sale, I guess this is the punch line.

And the other thing too, if the vessels, the stack fleet comprises probably 65 new vessels, 64, 65 new vessels. So, these are not older pieces of equipment. This is good equipment that ultimately will be returning to work, hopefully as the market improves. Did that answer your...

That's my question. Thank you.

Thank you.

Our next question is from Dan Burke from Johnson Rice.

Hi, Daniel.

Good morning, guys.

Hi, Dan.

There was a small piece of that last question, I want to follow-up on, were you all consider any scrapping of stacked assets and then also what's the book value of the stack fleet, can we get that?

I'll answer the second to the first part first, again as I just said, most of that fleet, the larger percentage of it is newer equipment. So, I'm not sure that scrapping makes sense and now we don't have a -- we do not have an intention to start scrapping new equipment. There's still some older ships that are part of that and very much we look at the way to dispose that properly and scrapping might be the ultimate, the ultimate end. Quinn, you want to...

To your other question, the carrying value as of March 31 of the vessels and stack as of March 31 was approximately $785 million or approximately $12.3 million per vessel.

Okay. All right. Thanks guys.

Basically [indiscernible] those average that's the average of 77.

And Daniel just the new fleet, the 65 or the 64 that I referenced of the stack fleet, the average age of that is probably right around eight years, to give you an idea of what that looks like.

Okay, that's helpful.

And some [indiscernible] vessels, I think we have later on the last call, we had two vessels that were delivered from yards and end of the stack based on the available demand for those vessels.

Okay, okay. That's helpful. And then just one on the fundamental side, Quinn you'd alluded to a little bit of a deceleration in the phase of stacking. What if anything drove that in the just concluded quarter, I think any reason to anticipate that slower pace of stacking is sustainable?

It's tough to speculate as to the trend of stacking, ours is not a market that has multi-quarter visibility typically and even less so in the market that has access capacity, because the motivation our customers to grab a vessel, because they're concerned about not getting one and it's reduced. But no, obviously you know I think as we've articulated in previous calls or at investor forms, we have a strategy which is designed to try and maintain economic utilization of the vessels that we are marketing or operating and that's typically plus 70%. So there is overall global demand which I think we are probably more exposed to than any company given our operating footprint, that generate certain amount of vessels demand for the market, we – whatever share we get and in many cases historically, we've gotten probably more than our historical through cycle market share in a weaker market, has an operating footprint than each of our customers, kind of priority risks et cetera, but the kind of swing factor that we are managing is what we stack or what would reactivate on a global basis and by geographies in order to sustain that kind of 70% plus utilization, where we think we can actually make reasonable cash operating margins, probably not reasonable returns on capital today that has been deemphasized as a financial priority.

Right.

Does that answer.

Yeah, yeah, no that is. And then just a last one and a quick one, that this, it was my understanding I think you alluded to it earlier to be clear, if you will collateralize any portion of the debt, essentially all the debt including all of the senior notes would be collateralized, correct or which actually collateralized?

[Inaudible]

I'm sorry could you repeat that.

That is our expectation.

Okay. Okay guys, look I appreciate the time. Thank you.

Thank you.

Our next question is from Mark Brown from Seaport Global Securities.

Thank you. Hi guys, how are you doing?

Hi, Mark.

Hi, Mark.

I just wanted to ask on the given your macro outlook seeing fairly conservative, I think you said 24 months you would not expect a meaningful improvement in the market and I just wanted to check if that based, I mean, if oil prices were to go to $65 by the end of this year, would you still hold to that view and is it just a question of there's just too much supply that's on contract that has to get work through before we can it's like to see any kind of recovery.

All right, Mark. Once the price of oil goes back up, it's kind of be there for a period of time that our clients feel that it's sustainable. Again getting back to $65, I think there is a lot of – there is more support for that today than it was a month ago that it might get there. In this market I think taking the conservative approach to it is the right thing to do. But there is no doubt that we have certainly the demand side rig counts are falling from a high of around 720 this offshore working rigs on a worldwide basis to somewhere it seems to have bottomed in the – right at about the 500 has been bouncing around the high 490s to 500 and that's where it is currently as a week ago. So that that number starts to – need to start climbing up and at the same time, there is no doubt that there's still another 350 OSVs under construction that have yet to be delivered not to say that all of those will bake into the market, in fact, we think there's probably a fairly high percentage of those that never will come into the market to compete. So again when you kind of look through all of that I think that that all factors into what we think how the market will unfold.

Okay.

I hope we are onto the more conservative side, we will certainly welcome it. But again, we can react quickly when it does, but I think taking I think a little more longer bend to it is the proven thing to do.

That's great color Jeff. I had another question on one of your line items is equity and net losses of unconsolidated companies, and I think that includes the carrying value of your Sonatide joint venture. Can you just explain why that was negative $6.5 million for the quarter?

Yeah, the P&L line item which is what you referred to, which is the equity/loss and our consolidated affiliates or earnings in consolidated affiliates is our 49% share of the joint ventures, net earnings for the period, which was a net loss largely, as Jeff highlighted as the result of the devaluation of the Angolan kwanza and the revaluation – the resulting revaluation of the kwanza denominated bank balances are maintained by the joint venture, which is not part of our consolidated financials. To your other question, which is the caring value of the joint venture, I believe our caring value of Sonatide, which is one of the tables on the 10-K is in the mid $30 million area and obviously that has been adjusted quarter-by-quarter for our share of earnings and loses since the formation of the joint venture.

Okay [indiscernible]. And I just had one other question, just you're talking about you're unwind from Australia and there is some demand in Australia, it's not, I was just curious, if there were local content kibitzed type issues, barriers for you or was it just you wanted – there just wasn't enough work to have that critical massive vessels in that region?

It is the amount of work, it's a – that's a very high-cost area. You have that the local labor cost is very high, end of the day, it is just to wind-up some big projects related really a lot to the L&G and some other drilling projects, but it's more the – again the lack of new opportunity, we can certainly go back into Australia relatively quickly, but it's a high operating cost area at the end of the day. The kibitzed side, there really is not a kibitzed issue as a German's Act or some of the other countries we operate in. You do have the crewing issue with the Australian labor unions and it's pretty expensive at the end of the day.

Okay. Thanks.

And so we're really not able to move a cost structure as we have another areas to respond to you know the lower revenue which is part of functioning of our projects coming in conclusion and part of function of weak day rates. But we have been able to move labor cost down in most jurisdictions those of where that are so strong union presence it makes some more difficult.

Okay. Thank you very much.

Thank you, Mark.

And we have no further questions at this time.

John, thank you for hosting us today. We appreciate everyone's involvement in this call and hope everyone has great day. Thank you very much.