Good morning and welcome to the Earnings Conference Call for the First Quarter 2020. My name is Brandon and I’ll be your operator for today. At this time all participants are in a listen-only mode. [Operator Instructions]. Please note this conference is being recorded. And now, I will now turn the call over to Jason Stanley. Sir, you may begin.

Thank you, Brandon. Good morning everyone and welcome to Tidewater’s earnings conference call for the quarter ended March 31, 2020. I’m Jason Stanley, Vice President of Investor Relations for Tidewater. Thank you for your time today knowing many of you are doing so from home. I’m joined on call this morning by our President and CEO, Quintin Kneen; our Chief Accounting Officer, Sam Rubio; and our General Counsel and Corporate Secretary, Daniel Hudson. During today’s call. We’ll make certain statements that are forward-looking referring to our plans and expectations. 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. Please refer to our most recent 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 12, 2020 [ph] so you’re advised that any time-sensitive information may no longer be accurate at the time of any replay. Also during the call, we’ll 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 will turn the call over to Quintin.

Thank you, Jason. Good morning everyone and welcome to the first quarter 2020 Tidewater earnings conference call. Allow me to start off by addressing the ongoing COVID-19 pandemic and Tidewater’s response at both the employee and operational level. I’ll then discuss some of the macro observations we’re seeing as a result of the pandemic before sharing our latest outlook for 2020, our consolidated quarterly results and then reviewing our operating segments in more detail. Last we spoke on our fourth quarter 2019 call. I emphasized the safety and wellbeing of our employees has always been our highest priority and noted that due to the nature of our business, we have well established protocols on safety and emergency communications. As the pandemic circumstances have progressed to current state, I’m proud to share that the entire team at Tidewater has demonstrated both the utmost professionalism and dedication to the task at hand both aboard our fleet and those office employees sheltered onshore. Social distancing, remote working and the rollout of new health and safety protocols have become the norm as we collectively strive to ensure every one of our employees and their families and the clients and the customers, they engage with remain healthy. I thank everyone for their efforts in working together to do their part to eliminate further transmission of the virus. Beyond our employees, we have experienced a number of direct operational impacts from the pandemic. Travel restrictions both internationally and at home have made crew changes where even allowed at all much more challenging. We’ve seen an increase in temporary accommodation cost due to requirement for crews to be quarantined for typically 14 days when embarking or disembarking vessels. As the global logistics infrastructure feels the strain of a displaced workforce, our ability to access technicians and parts…

[Operator Instructions] and from Clarksons Platou we have Turner Holm. Please go ahead.

Hope you all are keeping safe and Quintin thanks for the detailed cash flow outlook in your prepared remarks. It’s certainly helpful. First, I just wanted to clarify something, there’s been a major drilling company as you know that filed proactively for Chapter 11 and on back of that. I guess there’s been some investor speculation that other oil services companies may follow suit. I assume I’m correct in saying that you all are not considering that strategy, is that correct?

Absolutely not. I mean again we’ve got a very manageable debt load and we’re looking to be free cash flow positive. Certainly not in any plans that I have today.

I wouldn’t expect so, but I thought I’d just make the point. And then secondly, you discussed some of the structural issues with the industry, Quintin. To that regard, your consolidation has been off discussed topic and this environment there have been some key lenders to the industry that have been beginning to convert debt equity in some cases. And so I was wondering if you all are seeing opportunities to take over bank controls or in some way participate in consolidation without necessarily stretching the balance sheet.

Absolutely. Any type of legitimate cooperation whether it’s managing vessels for other people, pooling vessels, outright consolidation, non-recourse debt structures where you got built off balance and you get a little bit of the upside with a call option on both. All of that is, out there and being discussed and I would say that, over the past four weeks. The activities and those discussions have heated up. So my hope is that, we’ll see more of that if we can’t do outright consolidation because of debt loads that are out there perhaps there are some other cooperative arrangement that’s of course legitimate but allows us to act us a team in defending the industry.

Sure and then sort of lastly, I guess, I wonder how you think this cycle is going to play out in the medium and longer term. You mentioned that, this cycle as seeing faster fall compared to what we saw post 2014 really due to the contract terms. But then I guess I wonder if you might also expect a faster recovery at some point out in the future, just given the lack of new builds and high scraping in place. Just curios on how you think the cycle plays out?

My final remark in the prepared remarks was trying to hit at that which is. There is going to be a reversion to the mean, even if it’s a downward sloping trend line and we’re well below that mean line spec. So I do expect this business to pop up. I don’t know when it’s going to be. There’s a couple of areas that I’m concerned about from a long-term recovery standpoint and quite frankly, the continent of Africa. We’ve really seen a quick pull back by majors and super majors in that area. And I’m not sure that there - they have the ability to go back, quite frankly. And I’m worried about if the pandemic takes hold in the continent of Africa, how long it takes to clear. So they are all regions of the world that I worry about coming back slower and West Africa is one of them. But I don’t worry about for example, what you’re talking about the quick snap back. I expect that in North Sea, fully expected. It’s the most reactive market out there. It’s an open market. It’s a free market. They clear faster than any I think - they naturally clear faster than any market. So I do expect to see that in the North Sea, I see in the correction center. But there are certain areas principally West Africa that I’m worried about. Asia has long been oversupply and we’ve talked about this beginning in 2014 downturn. I don’t think it gets any worse. But I don’t think it accelerates any faster.

Okay and I guess I have a more follow-up maybe while I have you on the line here. And not just how you see the activity towards developing through the year and you mentioned something on the order of 20% to 25%. How do you kind of think through those scenarios? I’m sure there is a lot of sort of sensitivity on the upside and downside. And presumably that’s 20%, 25% is the basis for your cash flow bridge that you build this. Is that 20%, 25% is that something like? How do you think about that relative to rig count so you can kind of track it through the year and get a sense of where you all might land from a financial perspective? I guess that’s the question.

Yes, I appreciate the reason for the question and as I mentioned, it is a bit of fool’s errand. Trying to grab that knife as it’s falling, it’s very difficult. But what I’m basing that on is, what I’m seeing around the world, what I’m seeing in vessel cancellations and generally what I’m seeing in activity levels where we were anticipating the spot market that didn’t happen. I think that when we’re going through periods like this, I think it’s important to prepare for those types of downturns and what I wanted to lay out for everyone on the call is, even with a downturn of that magnitude. This company is prepared to weather the storm, quite frankly. The optimism that you were alluding to, there’s a little bit of that in me as well and I’m looking forward to seeing some of that material lines as we go through the year. It may not be that bad, but if it is that bad. We’re prepared.

All right, thank you very much Quintin. Appreciated.

Thanks Turner, stay safe.

From Baird, we have Patrick Fitzgerald. Please go ahead.

I wanted to ask about your $33 million drydock in 2020 and what that means for active vessels?

Your question is, does that mean I’m decreasing the amount of active vessels as we go through the year?

Yes.

Absolutely, it does. But a lot of those vessels have been on contracts that have been cancelled, so they’re just going into layup and they’re not a lot of those. But there will be some, they’re going to the scrap yard definitely the vessels that we had in layup prior to this pull back are more likely to go to the scrap yard to make room for these vessels that are coming off higher. Order of magnitude is hard to say right now. But it can easily be 20 to 25 vessels, could it more.

Okay, so in order to get those if they go onto layup to get those back out. You would have to spend $20 million that you were expected to spend this year, is that correct?

That’s right. You will eventually have to spend that money. You can work with class societies to give extensions by the month. But again it’s a cost of the business and if you’re going to bring that vessel active or keep it active. You’re going to end up spending that money. So drydock is a delay provided you’re going to back to the same fleet count you were at, active fleet counts.

Okay and then are you seeing other operators do the same thing?

Quite frankly I’ve been so focused on my own business. I haven’t been watching what other operators are doing over the past 30 days. But I can only imagine that everyone’s doing the same thing.

Okay, for the $395 million of revenue. Is there any way to break out how much of that is production versus drilling services?

The drilling pieces give you much less, unfortunately it’s not because the vessels that get chartered don’t actually get charter for a specific task, sometimes they do but frequently they’re doing that. So really, it’s the demand piece that kind of incrementally impacts a group of vessels and so if you have four vessels that are doing both drill and support and productions maybe it’s goes down to three vessels or something like that. But as I look at the $395 million and you look at the amount that I indicated it was the spot market work, that work is still more drilling related and feel comfortable with it because if you’re still drilling, but it’s at risk.

Okay. And then, so these asset disposition $39 million for the year, $10 million roughly in the first quarter. I mean these are - is this all scrapped or some of them going into other industries?

No we actually look to, I would prefer of course to sell them out of the industry into some other function and there’s a not a lot. I indicated there’s a not a real big secondary market for these vessels, but there’s some. Very often they get used for not oil and gas offshore related, cargo transportations, very often they can be used as shuttle vessels. So if you see some of them using small ones using in the barge work. So yes there’s an opportunity to sell these in to those markets and that’s what we do when we’re selling these vessel. So in fact the disproportionate number in the first quarter were actually sales as opposed to scrapping. But scrapping programs I think will be accelerated as we go into the second and third quarters.

Okay, so if your $39 million how many vessels is that, if you don’t mind me asking?

The $39 million was originally, Sam how many were in the investment held for sale category.

46.

46. Yes, so 39 equates to 46.

Okay and so is there a huge spread in price and sales versus scrap?

So it’s not a lot in grand scheme of things. Scrapping you can probably net $200,000 to $400,000 and the sale is probably $900,000 to $1.3 million that dependent on the vessel specification size of the vessel, all of that. But that’s order of magnitude between those two active vessels [ph].

Okay, great. Last one to me. I just wanted to ask about the Troms Offshore subsidiary, there are six vessels there? Is that correct?

There is. That’s correct.

And then what’s the status of those vessels? Are they working?

So those are very capable North Sea vessels. I couldn’t tell you if they’re all working today. There’s two that are probably going to be idled here quickly. But those are the kind of boats that go back to work. I don’t worry as much about the more sophisticated Norwegian or North Sea tonnage because when I was talking earlier about the what - yes, this is a commoditized industry, don’t get me wrong. But nothing is perfectly commoditized. And so when it comes to higher spec vessels and larger vessels those are the ones that get the work and as I said before, sometimes they don’t get the price you want, but they get to work so they don’t get, but they get volume. So I think two of those are at hire right now, but not overly classified those vessels.

But you think that those vessels cover the $65 million of debt that’s, at that subsidiary?

Yes. So I’m sorry your question wasn’t about the subsidiary it was about the [indiscernible] Norwegian debt on those vessels.

Yes.

That’s perfectly long dated, yes. I’m not worried about that at all.

Okay, thank you.

From Rabadi [ph] and Company, we have Bob Rabadi [ph]. Please go ahead.

Tough time, keep up the good work. There’s a lot of detailed information you had in there. You know at the end of the year, of course you did the review in terms of fleet and fleet adjustments right off 216 taking 46 out, four active, 42 not. And you’ve obviously done a lot of work because you’ve updated kind of information that and also the cost part of the equation, do you think you have kind of because embedded in your estimate, you have [indiscernible] huge granularity, will you do more in terms of - and I guess because what drydockings are, how things have changed because of COVID. Obviously, you reevaluated what that fleet looks like and how much you’re going to keep and how much not. But although it’s also dynamic too, so and that is probably hard to do exactly today. So do you anticipate updating as you did at the end of the year that fleet review because that’s an important component for driving cost down, I imagine?

Absolutely, so yes. We’ve certainly have made some assumptions as we’ve gone through the processes of trying to drive where the business is going to go. When it comes down to the level of granularity as to which particular vessels are going to be going into just going right to the scrap yard and some going to layup. We’re still in the process of evaluating that and we’ll make that determination and we’ll make it this quarter as we go through little bit more of the reverberations from the downturn. But suffice is to say, that we’re going to be very judicious in managing the capital once we go through the remainder of the year.

And then when you ran through the numbers though you did say that, SG&A you thought was still going to be around $81 million in deduction which is kind of what it was kind of pre, is that kind of a current estimate or are there other details too because I was a little bit surprised that number didn’t change so?

Yes, definitely bought it down, from what I think we said on the last call which was $83 million. Right now we’re still evaluating what is the right shore based footprint. So I think there’s a room there too naturally. Obviously, we’re running a little lower rate than we have budgeted. There’s a couple of things that that are on my to-do list. One is, got to get a CFO in, eventually. Right. And that comes with its own cost, so that number is going to be added to the equation. But when I talked earlier about evaluating the shore based footprint. There’s definitely reasons to believe that number should be able to go down. There is a lower limit quite frankly just because not all of those personnel and really what we’re talking about is closing down offices and what we’re experiencing even in the offices that we’re in the process of shutting down like in Southeast Asia. You’re still in the hook for six months’ worth of cost as you run out leases and you run out personnel’s and severances and things like that. So part of it is just waiting to see exactly what the plan is and then exactly how much its’ going to cost us to get out of those activities. But yes, so when I think about G&A I think about it in cost per active day. So the numbers that we have historically run that are about 1,450 per active day. Okay as that actively count comes down that number should come down as well. However that range that 1,450 that’s within - that’s a useful number within a relevant range. If we step out of that range then the yes and fixed cost elements that I have to deal with. So that’s the way I think about G&A cost and as we go through the business and reset the business, that’s the number I think about.

Well clearly obviously you have a task in front of you as you said for on a per vessel active fleet base, that’s coming down, so therefore you’ve got plenty of push there I’m sure, you recognized. And of course the other thing is, how disappointed will you be for the next six to nine months you having down something to consolidate with? All right because all of these things you’re doing in terms of fleet size downsizing, you, others, costs all those things become so much easier. And I guess I saw Harvey Gulf came today and say, they renewed two vessels, but they’re actively looking for consolidation and of course you’ve got one back doing something, you’ve got [indiscernible] so how disappointed because really it seemed to be as if there were plenty more options that were available kind of coming into the year, given the market really was improving and given where things are today. What seeing as if, the idea of consolidation being a key element for advancing in success become all the more instrumental, I think.

Well 100% agree with you. I mean consolidation is the answer to this thought. Okay. My issue is getting the capital providers to understand that they’re not getting borrowed returns because unfortunately there’s just still not enough vessel companies that have cleaned their balance sheets. But as I mentioned when I was doing talked earlier there’s a lot more dialog going on now than there has been in the past six months. So I’m actually just pointing now that we haven’t gotten any more consolidation done either to us or somebody else in the industry. I welcome Harvey Gulf and others to consolidate the industry with us. I mean that’s fantastic. But yes, so I strongly believe that consolidation is the answer, it’s the best thing for the capital providers. It’s the best thing for the industry. It allows us to rationalize the fleet. My only caution is I just don’t want to do it and disadvantage my current equity holders.

Clearly the benefits of consolidation today probably worth more money than kind of clearly what they were, three months.

Absolutely. Anytime the margins get thinner, the benefit from reducing SG&A is all that much more disproportioned.

Thanks Quintin.

From Southpaw, we have Ceki Medina. Please go ahead.

I’ve got a question about competitors and I know this was, I know you touched upon this a little bit before you’ve said I’ve been so busy working on my own team I couldn’t focus on the competitors. But I still got to ask, can you show any or give any color about the behavior of others out there? Is there a way to kind of compartmentalize how they respond to this challenge and last time on the prior call, you had shown amazement to the ability of others or the willingness to find cash and finance these drydockings either SPS [ph] or layups? Do you see that’s continuing or have people come to the end of the road?

Honestly you know I still see it continuing unfortunately. Some of it a narrative in my prepared remarks was really talking to those competitors like stop doing this, scrap the lower end tonnage, you’re killing yourselves and you’re killing the industry along with it. Right, that’s my concern. A recent case in point, of course I’ve been really focus how are business, the type of our business. But I’m certainly - always going to - got feelers out on one of the competitors. What frustrates me more than anything is there, not that we’re just player. But a medium-sized player in Norway that just got build out is now putting boats to work at cash flow breakeven or just below that and that’s idiocy. Why would a bank refinance a company just so that it can put boats to work at breakeven? And if that kind of activity happens out there, unfortunately and it’s because vessel owners still think that this industry hasn’t changed and this industry is changing and so what I was trying to get to in my prepared remarks was just that.

Thank you.

Thanks, Ceki. Talk soon.

[Operator Instructions] and from Nationwide, we have Christian Donoso. Please go ahead.

Thanks for the calls and for the details as well. Couple quick questions in terms of covenant compliance with the debt. Are you envisioning any issues there in the near future?

No, in fact. We did a bonds incentive [ph] tender in Q4 and we really widened down the covenants which was quite fortuitous. We did it because we ended up having to pay 180 to buy back the bond so I try to do as much as possible in exchange for that premium. So no I’m actually not worried about the bonds at this point.

Okay and I know the debt is due in two years out. In your time, but any initial thoughts on when you guys are going to start thinking about refi year, any ideas?

I’m always thinking about the bonds because we know we want to take them out. The issue with the bonds is that they have a significant make-whole even how, even to the day before maturity. There’s a minimum $1 million prepayment, penalty if you will. So it’s frustrating as long as there is their take back paper in the bankruptcy, there’s a lot of privileges around that debt. So it’s good paper and as a result, we’ll ride as long as I can because I don’t want to pay the high make-whole to call them. But we’ll see what happens.

Okay. And in terms of the markets, you mentioned on the last call that you were planning to exit, how are those exits proceeding and planning [indiscernible]?

Pulling out of Brazil is always a multi-year process unfortunately and in Southeast Asia will be closing the office in June 30 and we’ll generally take all the shore based facility and management that’s going on there and move it into the Middle East region, so we’ll manage it out of that office. Brazil is a slow process, we have to wind ourselves out of the contracts and looking for any other opportunities. I was hopeful at the beginning of the year because the market was improving in Brazil as well as other places. But there might be a way to exit Brazil via sales process but unfortunately that’s off to table today.

I think that’s it. Just a quick one. In terms of the backlog you provided some visibility in terms of what is production services versus drilling or is not - you don’t have that granularity?

Unfortunately when we contract the vessels very seldom are the contracted for a specific activity. Sometimes we can discern that by knowing where the vessel is working and so forth. But the reality is at this point, production departments and drilling departments are sharing vessels and trying to be as efficient as they can be and so we don’t have a good guide for that unfortunately.

Okay. Thank you.

And we have no further questions at this time. We’ll now turn it back to Quintin Kneen for closing remarks.

Thank you, Brandon. I’d like to close today’s call by summarizing the Tidewater has become an agile organization as applying continuous improvement principles to optimize its operational processes and general administrative spend. We have created a technology platform at Maples Tidewater to advanced efficiency for our shore based and fleet operations. As a recent example in April, we achieved a five-day financial close with our global teams telemarketing [ph]. This is remarkable achievement that was inconceivable for Tidewater 18 months ago. This was possible because of our dedicated staff, efficient processes, technology and most importantly a new resilient Tidewater culture that embraces change. This is why I’m confident that Tidewater will overcome the obstacles presented to us. Tidewater has an experienced team that proven themselves in past downturns, who will overcome the unprecedented challenges before [indiscernible] who will once again prove themselves as we emerge from this downturn, strong and well positioned to capture the recovery market. Thank you and we look forward to updating you again in August. Goodbye.

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for joining. You may now disconnect.