Welcome to the earnings conference call fourth quarter 2018. My name is John, and I'll be your operator for today's call. [Operator Instructions] Please note the conference is being recorded. Now, I'll want to turn the call over to Jason Stanley.

Thank you, John. Good morning, everyone, and welcome to Tidewater's earnings conference call for the period ended December 31, 2018. I am Jason Stanley, Tidewater's Director of Investor Relations, and I'd like to thank you for your time and interest in Tidewater. With me this morning on the call are our President and CEO, John Rynd; Quintin Kneen, our Chief Financial Officer; Jeff Gorski, our Chief Operating Officer; and Bruce Lundstrom, our General Counsel and secretary. After I cover a few formalities, I'll turn the call over to John for his initial comments to be followed by Quintin's financial review. John will then provide some final wrap-up comments followed by an opportunity for you to ask questions. During today's conference call, we may make certain comments that are forward-looking and not statements of historical fact. There are risks, uncertainties and other factors that may cause the company's actual future performance being materially different from that stated or implied by any comment that we make during today's conference call. Please refer to our most recent Form 10-Q for additional details on these factors. This document is available on our website or through the SEC at sec.gov. Information presented on this call speaks only as of today March 1, 2019, and therefore, you are advised that any time-sensitive information may no longer be accurate at the time of any replay. Also during the call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in last evening's press release. And now with that, I turn the call over to John.

Thank you, Jason. Good morning from Houston, everyone, and welcome to the Tidewater call. Tidewater has marked many milestone years over its 60-plus-year history, and we would most certainly count 2018 as one of those years. Following the successful closing of the merger with GulfMark in November, Tidewater is once again the largest owner and most geographically diverse OSV operator in the world. The all-equity combination maintained the company's strong balance sheet and further significantly scaled up our presence in key strategic markets including the North Sea and U.S. Gulf of Mexico. We are well-positioned to capitalize on growth opportunities as the OSV sector recovers. Since the deal closed in the fourth quarter, our combined team has made substantial progress executing on our integration plan, merging the best systems and practice of both companies as effectively as possible. This includes welcoming many of the talented GulfMark employees to Tidewater as we assemble the best and brightest team to prepare for the industry recovery. A key benefit of the merger was the opportunity for both companies to realize operational and cost synergies associated with running a larger fleet of vessels, utilizing existing broad geographical footprint. With only a couple of months as a combined company, we have made swift and significant progress towards achieving our cost synergy targets, including reducing our duplicate shore-based footprint around the world. 5 facilities have been consolidated so far, including our corporate headquarters here in Houston. You may recall that when we announced the deal to combine with GulfMark, we committed to achieving significant cost reductions, bringing our historical combined G&A run rate of $145 million down to $100 million by the fourth quarter of 2019. Based on our success to date, we are committed to reducing that run rate further to $90 million, and we…

Thank you for the kind words, John. Obviously, it's no longer my role to comment on the company's financial results or the outlook for the business. I will say, however, that I have been really impressed with the combined team's commitments to quickly and fully realizing identified merger synergies. Tidewater is a great company and, in my view, is one of the ways to investors to participate in an offshore market recovery. It's been an honor to play a leadership role here, and I wish my friends and colleagues nothing but good luck and Godspeed.

I'll also take this opportunity to formally welcome Quintin to the team, taking over as Tidewater's Chief Financial Officer. Quintin will take it from here to cover our financial performance for the fourth quarter.

Thank you, John, and greetings, everyone. We can certainly appreciate the quarter was a bit noisy with the impact of the merger. And we recognize the comparisons are somewhat difficult due to the predecessor and successor presentation and the change in fiscal year in 2017. My objective today is to give you a look at Tidewater's results excluding the direct costs of the merger and to give you an update on our progress of integrating the 2 companies. I will also give you more information on 2 items that impacted the fourth quarter, but were not a result of the merger. Consolidated revenue for the quarter was $110.2 million, up $11 million from the prior quarter. Active utilization was up 4 percentage points to 82%, while the average day rate was down slightly to $9,545. The trend of increasing utilization and decreasing average day rates reflects the slight increases in spot day rates we are seeing around the world, offset by the roll-off of higher day rate contracts, and then further impacted by the tonnage mix shift from the roll-on of the next best tonnage, as utilization around the world begins to pick up. There was also a bit of tonnage mix impact from the merger as lower day rates vessel from the Americas and higher day rate vessels in Europe were added to the fleet. The fourth quarter included incremental revenue of $12.5 million from the merger, with utilization of the new active vessels at 88% and an average day rate on those vessels of $9,721. Active vessel operating cost for the quarter was up $9.1 million, largely driven by the addition to the active fleet of 32 vessels at approximately 6,300 per day. The quarterly average active vessel operating cost per day was $5,202, reflecting an increase of…

Thanks, Quintin. We entered 2019 in a strong financial and operational footing with considerable opportunities for additional value creation through exceeding our merger-related synergy -- cost synergy targets, incremental improvements in fleet utilization, organic growth through vessel reactivation and potential additional M&A. While we may not be able to put market volatility in the rearview mirror quite yet, we along with several of our peers in the drilling contractor sector, have a constructive view of the offshore market as we progress through 2019. While the market develops, we will continue to create value through our merger-related synergies and maintaining safe high-quality operations for our clients globally. With our strong balance sheet, substantial cash position, global footprint and our high-quality fleet, Tidewater's clearly positioned to act swiftly to meet customer needs anywhere in the world, anytime in this cycle. I will take this opportunity to thank the Tidewater team for their exceptional performance in 2018 and continued hard work and dedication.

Thanks, John. Operator John, can you please open up the line for questions?

[Operator Instructions] And our first question is from Turner Holm from Clarksons Platou.

John, I just wanted to check on something that you said on the last call. I believe you mentioned last quarter that you don't expect any improvements in day rates until the second half of 2019 at the earliest. So how would you say that view has evolved, if at all, since late last year? Are you seeing signs that are giving you more confidence of progress in day rates later in the year? Or would you say that it's going to take a bit longer?

Well, I think you have to go region by region. We have seen some opportunities to increase rates modestly, but there's still a lot of pressure in the market, in certain markets where we participate. So I would say I'm feeling slightly more positive than I was on the last call.

Sure. Okay, well, maybe we can touch on some of those regional markets. First, maybe West Africa, it's a big position for Tidewater, maybe the single largest position. There's been some talk of improvement in contract terms and day rates in some cases in the West African market over the last 6 months or so, but it's hard to see in operating data you all published. Is there something going on down there that might not be present in the numbers yet, but might show up later in the year or early next year?

Yes, I think we'll see benefits of that in the back half of '19. I think the market right now that looks the brightest near term for us is Nigeria. They're increasing their jack-up rig count, and also they're picking up additional floaters. So I think as we mentioned, of the 26 years of backlog, a portion of that backlog is dedicated to Nigeria. Also Angola is remaining a solid footprint for us. And then up and down the West African coast outside of Nigeria and Angola, Gulf of Guinea is showing some signs and improvement as we progress. But again, and not to pour cold water on it because we have been able to modestly improve rates, we're still in a vastly oversupplied situation, which will always challenge the right momentum. But again, as I said earlier, a little more optimistic today than I was on the previous call.

Okay, that's helpful, and then just one more on the regional level is the North Sea. There's been some better spot rates recently. Obviously, those are volatile, but the term rates also seem to be -- see a bit of improvement as we gear up for the summer season. There was a lot of optimism last year around that market, and a lot of it maybe didn't play out. How is the North Sea shaping up for you all in 2019? How do you see it?

Well, we're experiencing just what you said. And so I guess, remembering from last summer we had the anticipation of a very strong summer season, we are cautiously optimistic. But we have seen it's relatively tight on the spot right now, so we've -- the industry's been able to push rates.

[Operator Instructions] And we have Turner Holm back from Clarksons Platou.

Okay, here we are again. So just to touch on some of the themes that you mentioned in your prepared remarks and things we heard from the drillers, I think there were 2 or 3 other drillers at least that mentioned that the tender activity is taking a step up from where it was in the middle or late last year. Is that something you all are also experiencing?

Yes. I think obviously, you know the timing is -- from -- the timing of the recovery we're tied directly to the drilling rig recovery. There may be a timing gap for those contracting the equipment, but we're tied directly to the hip of the drillers. And yes, I think if you walk around the world, you're seeing increased activity in almost every market we're in.

Okay, good. I just wanted to jump real quick as well on maybe some financial issues. Quintin, you mentioned I believe a budget for the maintenance CapEx and the repair and maintenance costs for 2019. I think you said $65 million in your prepared remarks. I just wanted clarify, is that including the reactivations that you all mentioned you might do? Or what do you think that sort of final number could end up shaping up like in 2019?

Well, we've currently budgeted it to be $65 million for everything that we talked about, the drydocks that are scheduled including the reactivations.

Okay, good. Is that -- I guess, we've -- you've been in a period over the last couple of years where we've seen those repair and maintenance CapEx falling pretty steadily. Is 2019, is that an unusually heavy year for you where, basically, that $65 million is a little bit more than you otherwise might expect, just given the timing of drydocking? Or is that kind of what you think is normalized as you look over the next couple of years?

No. I consistent with John's comments earlier, everybody's hitting a wall. They've kicked the can as long as they can kick it. Now we're 5 or 6 years into this downturn, and there's a lot of vessels that are requiring their 5-year surveys, a lot of vessels built in 2014. I actually expect that number to fall off sharply in 2020, but I'd be surprised if it was more than half of that in 2020.

Yes, okay. Well, okay. And then just maybe one last one for me is on the contract terms. You all touched on this a few times during your prepared remarks. But through the downturn, I guess the clients pressed pretty hard on those issues like mobilization payments, operating risks and firm commitment periods, sort of lead times ahead of committed work. It sounds like you're seeing that trend reversing. I guess I'd be most interested in hearing about the willingness to pay for mobilization periods -- payments, but also on the lead times, whether or not you're seeing any sign that the clients were trying to lock in some lower prices ahead of an increase in activity that's expected in the sort of medium term?

Yes, I'll take that. I think we ask every client for mobilizations or anything around the margin that -- well, anything that will improve our margins, whether it be day rate, fuel cost, pick up extra labor, et cetera. Because if you don't ask, you know the answer. We're not successful in every ask, but that's the target this year is to continue to try to drive margins. Because the market is not really giving us margins, we're going to have to create our own margins. So that's one avenue we take to do that. And I'm getting old. Turner, what was the second question? On the timing. I would say we've seen...

Yes, [ well done. ]

Yes, sorry, senior moment. I would say that the typical term players i.e. the IOCs, Middle East, Mexico, Brazil, India tend to go still at the long -- they kind of do that irregardless of where they are in the cycle. And we have seen term really dedicated to direct programs, not really people just locking up capacity because it's cheap, so they have it at their beck and call. Most of the stuff that we talked about on our 26 years of backlog that we've been able to achieve is tied directly to a certain program.

Yes. And I guess one more that it sort of comes to mind here is on the active utilization that you mentioned, would you guess, is probably the -- maybe the most interesting item out of the operating statistics that you all provide during the fourth quarter. It's backed up into the lower 80s, which you mentioned is probably the highest level it's been since 2014. And it seems to indicate that there's an underlying tightness for the active vessels. And so to the extent that there is some expected increase in demand going forward, there has to be more vessels coming into the market, I think there's very few newbuilds out there that [indiscernible] sort of in the game. Is that extra supply I guess has to come from the stacked fleet. And so when you're looking at a specific market where you have both of your actives capacity tied up to the extent that such a market exists now, how do you kind of approach that, that business decision in terms of reactivating the vessel? Are you kind of leaning into it, knowing that you have more capital than some of your competitors, and maybe you're going to take a bit more risk? Or has this gotten to the point where you really kind of need the contract in order to pull the trigger?

Yes, we're not going to speculatively deploy capital. So we will do it on a project-specific basis where the returns justify the new capital. I think the other thing as you look out into '19, and we touched on our prepared remarks, I think the really interesting thing to watch of those plus or minus 250 vessels that have the surveys, how many are going to get done? Because as you mentioned, at the low 80s utilization rate, I mean you take out 13% of the fleet, or let's say half of that, 7% of the fleet out of the current active fleet, things could get snugged up pretty quick.

Sure. Okay, so you're looking for that, you're looking for that contract essentially at this point to be able to reactivate vessels, which presumably means that you need a higher day rate then what you've been seeing recently in the operating statistics that you report?

Day rate and term.

[Operator Instructions] I see no further questions at this time. So I'll turn the call back over to Jason Stanley for closing remarks.

Thanks, John. Thank you, everybody, for your time and interest in Tidewater. And that'll wrap up the call for today. Thanks. Have a great day.

Thank you, ladies and gentlemen. That concludes today's conference. Thank you for participating, and you may now disconnect.