Thank you for standing by. At this time, I would like to welcome everyone to the Tidewater Inc. Q4 2020 Earnings Call. [Operator Instructions] West Gotcher, Vice President of Finance and Investor Relations. You may begin your conference.

Thank you, Cheryl. Good morning, everyone, and welcome to Tidewater's Full Year and Q4 2022 Earnings Conference Call. I'm joined on the call this morning by our President and CEO, Quintin Kneen; our Chief Financial Officer, Sam Rubio; and our Vice President of Sales and Marketing, Piers Middleton. During today's call, we'll make certain statements that are forward-looking and referring to our plans and expectations. There are risks and uncertainties and other factors that may cause the company's actual performance to be 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-K for additional details on these factors. These documents are available on our website at tdw.com or through the SEC at sec.gov. Information presented on this call speaks only as of today, February 28, 2023. Therefore, 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 financial measures can be found on our website at tdw.com and is included in yesterday's press release. And now with that, I'll turn the call over to Quintin.

Thank you, West. Good morning, everyone, and welcome to the Fourth Quarter 2022 Tidewater Earnings Conference Call. I'd like to start today's call by reflecting on the difference that a year can make in our industry and the improvements in our business during the course of 2022. 2022 marked the long awaited inflection point in the offshore vessel market. Our revenue increased nearly 75% compared to 2021, driven by a major acquisition, but also a significant rise in average day rates. Average day rates improved over $2,400 per day for the full year, a pace of improvement we have not seen during the past 20 years, and we expect that 2023 will reflect a full year improvement of over $3,000 per day. On a quarterly basis throughout 2023, we expect average day rates to be increasing quarter-over-quarter and although it's too early to comment on the full year day rate increases for 2024, we see nothing stopping the day rate acceleration. To put this in perspective, historical up-cycle year-over-year day rate improvements were approximately $1,500 per day. Vessel operating margins increased by over 10 percentage points year-over-year. Our adjusted EBITDA nearly quadrupled as compared to 2021. We generated positive net income in the third and fourth quarters of 2022. We closed and integrated a major acquisition over the past year. By all measures, 2022 was a seminal year for Tidewater, and we are very pleased to report on the successes of 2022. I'm going to let Piers and Sam give you more details on the performance of the individual regions. As today, I wanted to spend some time on a handful of nonroutine topics. I want to take a moment to explain the process we go through when we provide forward guidance, which many of you will notice we resumed…

Thank you, Quintin, and good morning, everyone. Before I talk about the market and some of Quintin's comments about Tidewater's performance into a wider global context, I wanted to mention that we'll be releasing our third sustainability report at the end of the week and just to reiterate that at our core, ESG is something that has always been and always will be in an extremely important part of Tidewater's DNA. And it's great that with our latest sustainability report, we continue to showcase to our stakeholders historical as well as our future commitment to ESG. Please look out for the report when it is released. Before Sam goes through our numbers in greater detail, I wanted to talk through some of the themes we saw develop and crystallize in 2022, and what Tidewater achieved during the year and what we see happening as we go through 2023 and beyond during this up-cycle period. The big theme in 2022 was the market's realization that there was and is limited OSV supply to meet the increase of demand. Total OSV supply according to Clarksons Research, was down 4% since 2016 peak in 2022 and with little scope for any additional underlying growth in '23 or 2024. Due to both the limited order book and remaining suboptimal stacked fleet, we don't expect to see any future growth in OSV supply for some time. On the demand side, sentiment continued to strengthen throughout 2022 with overall global demand for OSVs increasing 8% during 2022, with offshore brokers projecting a further 10% demand increase in 2023. On the OSV side in 2022, we continue to see the increase in demand and shortness in supply impact rates positively throughout the year. With Clarksons Research reporting new global 1-year time charter rates for the largest PSVs…

Thank you, Piers, and good morning, everyone. At this time, I would like to take you through our financial results and discuss some key points that make up these results. I will begin by highlighting the full year activity and turn to the quarterly results. For the year, we generated revenue of $647.7 million compared to $371 million in 2021, an increase of 75%. The increase in day rates and the addition of the Swire fleet were the main drivers to the revenue increase. Vessel operating margin for the year was $244.1 million compared to $99.8 million in 2021. We generated net income in the third and fourth quarter of 2022 and for the year, we reported a net loss of $21.7 million compared to a net loss of $129 million in 2021. Operationally, average day rates improved almost $2,400 per day for the full year and vessel operating margins increased by 10.5 percentage points year-over-year. Adjusted EBITDA was $166.7 million for 2022 compared to $34.7 million in 2021, an increase of approximately 380%. 2022 was quite a year, and we are pleased to report the success we achieved. As noted on our earnings release, we have once again begun to report forward guidance. So as we look to 2023, based on our most recent forecast, we are estimating revenues to be in the range of $890 million to $910 million, and our vessel operating margins to be between 49% and 51%. I would now like to turn our attention to the quarter. And as in the past, my discussion will focus primarily on sequential quarterly results, comparing the fourth quarter of 2022 through the third quarter of 2022. For the fourth quarter, we reported net income of $10.6 million or $0.20 per diluted share compared to net income of…

Thank you, Sam. Commercial momentum continues as our customers plan for what by all accounts appears to be another leg up in offshore activity in 2023 and into 2024. We continue to be committed to our commercial chartering strategy of staying short, to take advantage of rising day rates in all regions in all vessel classes. We continue to view this as the best strategy to drive earnings and free cash flow generation over the coming quarters. And with that, Cheryl, we will open it up for questions.

[Operator Instructions] Your first question is from Hans Lund of Clarksons.

Can you perhaps provide some color on how much of the fleet in terms of percentage is committed on contracts in 2023 and 2024?

Yes. Hans, we will, hold on 1 second, we'll give you an idea of what that is. Sam is looking up some of the numbers right here to give you a better number. However, I will tell you that because we're going short, our intention is to minimize that number until we get to a more comfortable thing in locking up longer term.

Maybe perhaps if you're able to -- I mean, you gave some guidance on 2023, but if you look to '24, do you have the backlog number there for next year?

Yes. So Hans, in percentage-wise, we have 70% of 2023 contracted and 2024, it'd be 45%.

And then in terms of the backlog value of those 45% in '24, do you have that number or...

Yes, so 2023 is $586 million and 2024 is $385 million.

Perfect. And then in terms of, I guess, staying on '24, if you compare '24 to '23, do you think revenue and EBITDA could increase as such on an annual basis as you expect revenue and EBITDA to increase in '23 versus 2022? I guess what I'm asking is...

So -- yes, I do. And in fact, I think profitability will increase even disproportionately. So as we were talking about earlier in the call, the year-over-year increases in day rates that we're seeing for 2023 are approximately $3,000, maybe just a little over $3,000. That's implicit in the guidance and as Sam relates to you. And day rates accelerating and we still have some boats that are on charter at a lower rate that we're done in like '19, '20 and '21 that are going to be rolling off, okay? So my anticipation is that in '24, we'll see even more than a $3,000 rate increase year-over-year, which means that essentially, the percentage increase would be just as much or higher.

Okay. Perfect. And then just lastly, I think Sam touched upon it. But just in terms of SG&A for 2023, did you say that you expect SG&A to come in at about $85 million?

That's correct. Yes.

And then dry docks expected to be 77.

Dry docks at 77. That's correct.

Your next question is from Ina Golikja of Fearnley Securities.

I was thinking a little bit, you just mentioned the G&A, but what about the overall cost. What's the average level you see, let's say, the end of 2023? Because we have heard like also from owners here in Norway, they were talking like markets getting tighter, but also the cost and inflation pressure just starting to bite. So I just wanted to -- if you could give a bit more color on what is -- how much cost you think will increase in '23 and '24?

So Ina, we mentioned in the range of 49% to 51% as a margin for 2023.

Yes. I think implicit in that is, there's a couple of things happening. There certainly are general price level increases that we're experiencing as everybody else is for labor and other things. And that's in that 5% to 8% range. But we also have synergies rolling through on the Swire Pacific transaction that are going to bring that down. So if you're looking at the overall dollar magnitude on a per vessel basis is in that 2% to 3% range.

For '23 or '23-'24.

So '24 is just too early to jump. I don't if -- the nice thing about the fact that supply is constrained is that it actually doesn't put more pressure on our supply channel, so on laborers and others. So once all the boats are working, essentially, there's no pressure to lift rates commensurate with the increases in day rates. So my hope is that we'll see that stabilize in '24, but we'll give you better guidance as we get closer to that.

Okay. Just like to mention a little bit utilization, average utilization you see for the next 2 years.

Well, I definitely see it increasing, but let me break it down to you on where I see the limitations, right? So in utilization, you have to think about it over a reasonable time period. So if you give me a month, I could give you 100% utilization. But if you talk about a year, there's always going to be 3% to 3.5% that go for dry dock. So that's going to be -- that's going to cap you out. There's always going to be about 3% and 3.5% down for repairs, right? So your theoretical maximum is in that 93% range, right? Now there's also going to be some frictional unemployment and things like that, so my belief is that as we see the cycle continuing to strengthen, we're going to move out of the high 80s and into the low 90s. But do I think it will ever go over 93% for a year, I certainly hope so. But I don't anticipate that to be the case.

And I -- if I heard it correctly, you mentioned that you have mobilized 1 of the vessels to the Mediterranean, do you see like as we are heading into the strong summer season at least here in the North Sea, do you see more vessels moving towards this region?

I think we'll obviously see where the market goes. I mean the market is very strong in certain areas. So we'll move vessels accordingly as long as we're getting paid off mobilization fees [ and ] demobilization fees. We'll be going to work where our vessels are required where we can push the highest rates. So yes, we're open to going anywhere as long as we're paid properly.

There are no further questions at this time. I will now turn the call over to Quintin Kneen for closing remarks.

Thank you, Cheryl. Thank you, everyone, and we look forward to updating you again in May. Goodbye.

This concludes today's conference call. Thank you for your participation. You may now disconnect.