TIDEWATER INC.

(TDW)
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TIDEWATER INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/04/2022 | 04:40pm EDT
FORWARD-LOOKING STATEMENT





In accordance with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, this Quarterly Report on Form 10-Q and the
information incorporated herein by reference contain certain forward-looking
statements which reflect our current view with respect to future events and
future financial performance. Forward-looking statements are all statements
other than statements of historical fact. All such forward-looking statements
are subject to risks and uncertainties, many of which are beyond our control,
and our future results of operations could differ materially from our historical
results or current expectations reflected by such forward-looking statements.
Some of these risks and uncertainties include, without limitation, the risks
related to fluctuations in worldwide energy demand and oil and natural gas
prices, and levels of oil and natural gas prices including the levels to support
offshore exploration and development activities; fleet additions by competitors
and industry overcapacity; our limited capital resources available to replenish
our asset base as needed, including through acquisitions or vessel construction,
and to fund our capital expenditure needs; uncertainty of global financial
market conditions and potential constraints in accessing capital or credit if
and when needed with favorable terms, if at all; changes in decisions and
capital spending by customers in the energy industry and the industry
expectations for offshore exploration, field development and production;
consolidation of our customer base; loss of a major customer; changing customer
demands for vessel specifications, which may make some of our older vessels
technologically obsolete for certain customer projects or in certain markets;
rapid technological changes; delays and other problems associated with vessel
maintenance; the continued availability of qualified personnel and our ability
to attract and retain them; the operating risks normally incident to our lines
of business, including the potential impact of liquidated counterparties; our
ability to comply with covenants in our indentures and other debt instruments;
acts of terrorism and piracy; the impact of regional or global public health
crises or pandemics; the impact of potential information technology,
cybersecurity or data security breaches; integration of acquired businesses and
entry into new lines of business; disagreements with our joint venture partners;
natural disasters or significant weather conditions; unsettled political
conditions, war, civil unrest and governmental actions, such as expropriation or
enforcement of customs or other laws that are not well developed or consistently
enforced; the risks associated with our international operations, including
local content, local currency or similar requirements especially in higher
political risk countries where we operate; interest rate and foreign currency
fluctuations; labor changes proposed by international conventions; increased
regulatory burdens and oversight; changes in laws governing the taxation of
foreign source income; enforcement of laws related to the environment, labor and
foreign corrupt practices; the potential liability for remedial actions or
assessments under existing or future environmental regulations or litigation;
the effects of asserted and unasserted claims and the extent of available
insurance coverage; potential synergies and integration risks related to the SPO
acquisition; and the resolution of pending legal proceedings.



Forward-looking statements, which can generally be identified by the use of such
terminology as "may," "can," "potential," "expect," "project," "target,"
"anticipate," "estimate," "forecast," "believe," "think," "could," "continue,"
"intend," "seek," "plan," and similar expressions contained in this Quarterly
Report on Form 10-Q, are not guarantees or assurances of future performance or
events. Any forward-looking statements are based on our assessment of current
industry, financial and economic information, which by its nature is dynamic and
subject to rapid and possibly abrupt changes, which we may or may not be able to
control. Further, we may make changes to our business plans that could or will
affect our results. While management believes that these forward-looking
statements are reasonable when made, there can be no assurance that future
developments that affect us will be those that we anticipate and have
identified. The forward-looking statements should be considered in the context
of the risk factors listed above, discussed in this Quarterly Report on Form
10-Q, and discussed in our Annual Report on Form 10-K for the year ended
December 31, 2021, filed with the SEC on March 9, 2022, as updated by subsequent
filings with the SEC. Investors and prospective investors are cautioned not to
rely unduly on such forward-looking statements, which speak only as of the date
hereof. Management disclaims any obligation to update or revise any
forward-looking statements contained herein to reflect new information, future
events, or developments.



In certain places in this Quarterly Report on Form 10-Q, we may refer to reports
published by third parties that purport to describe trends or developments in
energy production and drilling and exploration activity and we specifically
disclaim any responsibility for the accuracy and completeness of such
information and have undertaken no steps to update or independently verify such
information.



The following information contained in this Quarterly Report on Form 10-Q should
be read in conjunction with the unaudited condensed consolidated financial
statements and notes thereto included in Part 1, Item 1 of this Quarterly Report
on Form 10-Q and related disclosures and our Annual Report on Form 10-K for the
year ended December 31, 2021, filed with the SEC on March 9, 2022.


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About Tidewater



Our vessels and associated vessel services provide support for all phases of
offshore oil and natural gas exploration, field development and production as
well as windfarm development and maintenance. These services include towing of,
and anchor handling for, mobile offshore drilling units; transporting supplies
and personnel necessary to sustain drilling, workover and production activities;
offshore construction and seismic and subsea support; geotechnical survey
support for windfarm construction, and a variety of other specialized services
such as pipe and cable laying. In addition, we have one of the broadest
geographic operating footprints in the offshore vessel industry. Our global
operating footprint allows us to react quickly to changing local market
conditions and to be responsive to the changing requirements of the many
customers with which we believe we have strong relationships. We are also one of
the most experienced international operators in the offshore energy industry
with a history spanning over 65 years.



At June 30, 2022, we owned 196 vessels with an average age of 11.3 years (excluding one joint venture vessel, but including five stacked vessels and nine vessels designated as assets held for sale) available to serve the global energy industry. We also have two vessels currently under construction. The average age of our 187 active vessels at June 30, 2022 is 11.1 years.




On April 22, 2022, we completed our previously disclosed acquisition of SPO and
its 50 offshore support vessels operating primarily in West Africa, Southeast
Asia and the Middle East. As consideration for the acquisition, we paid
$42.0 million in cash and issued 8,100,000 warrants, each of which is
exercisable at $0.001 per share for one share of our common stock. In addition,
we paid $19.6 million in cash related to pre-closing working capital
adjustments. The cash portion of the purchase price is subject to customary
post-closing adjustment mechanisms related to SPO's closing date working
capital, cash and indebtedness.

Objective


Our management's discussion and analysis of financial condition and results of
operations (MD&A) is designed to provide information about our financial
condition and results of operations from management's perspective. It includes
relevant components of our financial condition and current and long-term
liquidity. Primary revenue drivers include numbers of active vessels, active
vessel utilization and average day rates. Our most significant operating cost
drivers are generally personnel costs and repairs and maintenance. We discuss
our liquidity in terms of cash flow that we generate from our operations. Our
primary obligations are vessel operating costs including routine planned
maintenance, general and administrative costs and long-term debt service. Our
primary sources of capital have been our cash on hand, internally generated
funds including operating cash flow, vessel sales and long-term debt
financing. We also can issue stock or stock-based financial instruments either
in the open market or as currency in acquisitions. This ability is impacted by
existing market conditions. Our results are affected by the activity of our
customers in the offshore oil and gas industry and the supply and demand
dynamics associated with our vessels. Our objective is to discuss how all these
factors have affected our historical results and, where applicable, how we
expect these factors to impact our future results and future liquidity.



Principal Factors That Drive Our Results




Our revenues, net earnings and cash flows from operations are largely dependent
upon the activity level of our offshore marine vessel fleet. As is the case with
the numerous other vessel operators in our industry, our business activity is
largely dependent on the level of exploration, field development and production
activity of our customers. Our customers' business activity, in turn, is
dependent on current and expected crude oil and natural gas prices, which
fluctuate depending on expected future levels of supply and demand for crude oil
and natural gas, and on estimates of the cost to find, develop and produce crude
oil and natural gas reserves.


Our revenues in all segments are driven primarily by our fleet size, vessel utilization and day rates. Because a sizeable portion of our operating and depreciation costs do not change proportionally with changes in revenue, our operating profit is largely dependent on revenue levels.




Operating costs consist primarily of crew costs, repair and maintenance costs,
insurance costs, fuel, lube oil and supplies costs and other vessel operating
costs. Fleet size, fleet composition, geographic areas of operation, supply and
demand for marine personnel, and local labor requirements are the major factors
which affect overall crew costs in all segments. In addition, our newer, more
technologically sophisticated vessels generally require a greater number of
specially trained, more highly compensated fleet personnel than our older,
smaller and less sophisticated vessels. Crew costs may increase if competition
for skilled personnel intensifies.



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Costs related to the recertification of vessels are deferred and amortized over
30 months on a straight-line basis. Maintenance costs incurred at the time of
the recertification drydocking that are not related to the recertification of
the vessel are expensed as incurred. Costs related to vessel improvements that
either extend the vessel's useful life or increase the vessel's functionality
are capitalized and depreciated.



Insurance costs are dependent on a variety of factors, including our safety
record and pricing in the insurance markets, and can fluctuate over time. Our
vessels are generally insured for up to their estimated fair market value in
order to cover damage or loss. We also purchase coverage for potential
liabilities stemming from third-party losses with limits that we believe are
reasonable for our operations, but do not generally purchase business
interruption insurance or similar coverage. Insurance limits are reviewed
annually, and third-party coverage is purchased based on the expected scope of
ongoing operations and the cost of third-party coverage.



Fuel and lube costs can also fluctuate in any given period depending on the
number and distance of vessel mobilizations, the number of active vessels off
charter, drydockings, and changes in fuel prices. We also incur vessel operating
costs that are aggregated as "other" vessel operating costs. These costs consist
of brokers' commissions, training costs, satellite communication fees, agent
fees, port fees and other miscellaneous costs. Brokers' commissions are incurred
primarily in our non-United States operations where brokers sometimes assist in
obtaining work. Brokers generally are paid a percentage of day rates and,
accordingly, commissions paid to brokers generally fluctuate in accordance with
vessel revenue.


Industry Conditions and Outlook




Our business is directly impacted by the level of activity in worldwide offshore
oil and natural gas exploration, development and production, which in turn is
influenced by trends in oil and natural gas prices. In addition, oil and natural
gas prices are affected by a host of geopolitical and economic forces, including
the fundamental principles of supply and demand. In particular, the oil price is
significantly influenced by actions of the Organization of Petroleum Exporting
Countries, or OPEC, and in recent times, OPEC + which is an expanded version of
OPEC. Offshore oil and gas exploration and development activities have
traditionally required higher oil or natural gas prices to justify the much
higher expenditure levels and longer lead times from exploration to production
associated with offshore activities compared to onshore activities. Oil and gas
prices are subject to significant uncertainty, extreme price cycles and
geopolitical risk, and, as a result, can be extremely volatile. In general, the
industry considers crude oil pricing in excess of $50.0 per barrel to be
required to initiate modest offshore development programs. Prices in excess of
$75.0 per barrel are generally considered the level needed to support more
robust offshore development and exploration programs. In late 2014 and 2015, oil
prices declined significantly from levels of over $100.0 per barrel to less than
$30.0 per barrel beginning an industry-wide downturn that lasted several years.
Prices began to stabilize in the $50.0 to $60.0 per barrel range in 2019 and
early 2020, suggesting a return to exploration and production activities for our
customers. However, in the first quarter of 2020, the industry was severely
impacted by a global pandemic (COVID-19) and the resulting loss of demand and
decrease in oil prices. Oil prices declined severely in the second quarter of
2020, trading at below $20.0 per barrel. Oil prices recovered in 2021 to levels
greater than experienced since 2018, and in the first half of 2022 have traded
in a volatile range between $90.0 and $125.0 per barrel. Natural gas prices are
also at historic highs.



In the first quarter of 2022, Russia invaded Ukraine, initiating a military
conflict that continues. Russia is the most significant non-OPEC member of OPEC+
and is one of the largest producers of oil and natural gas in the world. It is
also a primary supplier of natural gas to the European continent. Many European
countries are members of the North Atlantic Treaty Organization (NATO), which
also includes the United States. NATO countries have imposed sanctions on Russia
in response to the invasion, which has disrupted oil markets and threatened
supplies of natural gas to European customers. All of these factors are creating
uncertainty in world economies and affecting commodity pricing.



Despite the price recovery, there are lingering effects of the 2014 downturn and
the subsequent COVID-19 pandemic downturn in the activity levels of our
customers. In addition, there has been recent pressure from certain shareholders
and other stakeholders, including governmental entities, on our customers
related to environmental, social and governance (ESG) factors. A possible impact
of this pressure on our business could be a gradual move away from exploration
and development of fossil fuels. Many of our large international customers have
recently issued statements supporting changes in their future business plans to
move toward a lower environmental impact which has, coupled with the lingering
COVID-19 impact, effectively delayed the recovery in our business that would be
expected with current commodity price levels. Further, as our customers have
responded to pressure to return capital to shareholders in the wake of the 2014
downturn and subsequent industry challenges, they have increasingly shifted
their capital allocation strategy from primarily new oil and gas production and
reserve additions to a mix of returns to shareholders along with new oil and gas
project development. The realistic expectation of a worldwide move towards more
sustainable fuels for supplying energy includes the continued use of fossil
fuels for some time to come. Despite the pressure to return capital to
shareholders and the ongoing social pressure to move away from fossil fuels, our
customers have started to expand exploration and development activities.



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We are one of the world's largest operators of offshore support vessels and we
have operations in most of the world's offshore oil and gas basins. We continue
to believe that there will be sufficient opportunities for us to operate our
vessels in this sector for many years to come. We have, however, also begun to
seek and develop opportunities in the sustainability arena, including the
support of offshore wind energy generation and the improvement of our fleet
performance regarding emissions and environmental impact. There is current
evidence of higher oil and gas demand which has resulted in increased commodity
pricing and increased customer activity offshore. We are optimistic that our
industry will experience a continued recovery over the coming years.



As COVID-19 spread throughout the world, its impact on many of our locations,
including our vessels, has affected our operations. We implemented various
protocols for both onshore and offshore personnel in efforts to limit this
impact. The effect on our business has included lockdowns of shipyards
performing drydocks which delays vessels returning to service and the
cancellation and/or temporary delay of certain revenue vessel contracts allowed
either under the contract provisions or by mutual agreement with our customers.
These cancellations and/or temporary delays reduced our year 2020 revenues by
18% and our year 2021 revenues by less than 3%. Our revenues for the six months
ended June 30, 2022 were not significantly impacted. In addition, in the year
ended December 31, 2021, and the six months ended June 30, 2022 we incurred
approximately $7.0 million and $2.2 million, respectively, in higher operating
costs, primarily related to additional crew costs, mobilization and vessel
stacking costs as a result of these unplanned contract cancellations or delays.
There may be additional cancellations or delays.



ESG and Climate Change



Climate change is expected to increase the frequency and intensity of certain
adverse weather patterns, which may impact our business. Due to concern over the
risk of climate change, several countries have adopted, or are considering the
adoption of, regulatory frameworks to reduce the emission of carbon dioxide,
methane and other gases (greenhouse gas emissions). In addition, the increased
regulation of environmental emissions is expected to create greater incentives
for the use of alternative energy sources. Consideration of climate
change-related issues and the responses to those issues through international
agreements and national, regional, or state regulatory frameworks are integrated
into our strategy, planning, forecasting and risk management processes, where
applicable.



Our primary business is to support the fossil fuel industry. In addition, we
burn fossil fuels in operating our vessels. The fossil fuel industry is
considered one of the primary contributors to the elements of global climate
change. The primary source of energy in the world is fossil fuels. We believe
that continued use of fossil fuels will be important as the world transitions to
alternative energy sources. We are prepared to participate in the transition but
also to continue to support the fossil fuel industry. We have begun to take
measures to address the future of our company and our impact on climate change.
Such measures include modifications to many of our vessels to reduce our carbon
footprint (approximately $10.9 million of emissions focused costs including fuel
monitoring systems and batteries for supplemental power are included in our net
properties and equipment amount as of June 30, 2022); developing associations
with alternative energy providers such as windfarms; and publication of a
written sustainability report. We have also recently formed an ESG committee
within our Board of Directors. We are in the early stages on most of these
measures and continue to develop our strategies and solutions. The measures we
undertake will continue to evolve in compliance with new regulations and in
recognition of applicable new sustainable technologies.



The SEC has recently proposed rule changes that would require registrants to
include certain climate-related disclosures in their registration statements and
periodic reports, including information about climate-related risks that are
reasonably likely to have a material impact on their business, results of
operations, or financial condition, and certain climate-related financial
statement metrics in a note to their audited financial statements. The required
information about climate-related risks also would include disclosure of a
registrant's greenhouse gas emissions, which have become a commonly used metric
to assess a registrant's exposure to such risks.



The proposed rule changes would require a registrant to disclose information
about (i) the registrant's governance of climate-related risks and relevant risk
management processes; (ii) how any climate-related risks identified by the
registrant have had or are likely to have a material impact on its business and
consolidated financial statements, which may manifest over the short-, medium-,
or long-term; (iii) how any identified climate-related risks have affected or
are likely to affect the registrant's strategy, business model, and outlook; and
(iv) the impact of climate-related events (severe weather events and other
natural conditions) and transition activities on the line items of a
registrant's consolidated financial statements, as well as on the financial
estimates and assumptions used in the financial statements.



For a detailed discussion of climate change and related governmental regulation,
including associated risks and possible impact on our business, financial
conditions and results of operations, please see "Risk Factors" in Item 1A of
our Annual Report on Form 10-K for the year ended December 31, 2021, filed with
the SEC on March 9, 2022.





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Segment Changes



In conjunction with the acquisition of SPO, the previous Middle East/Asia
Pacific segment has been split into the Middle East segment and the Asia Pacific
segment. Our previous operations in Southeast Asia and Australia, along with the
legacy SPO operations in the Asia Pacific region, now form the new Asia Pacific
segment. Our segment disclosures reflect the current segment alignment for all
periods presented.



Each of our five operating segments is managed by a senior executive reporting
directly to our Chief Executive Officer, the chief operating decision maker.
Discrete financial information is available for each of the segments, and our
Chief Executive Officer uses the results of each of the operating segments for
resource allocation and performance evaluation.



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Results of Operations - Three Months Ended June 30, 2022 compared to June 30, 2021




Revenues for the quarters ended June 30, 2022 and 2021 were $163.4 million and
$90.0 million, respectively. The $73.4 million increase in revenue is primarily
due to the acquisition of 50 vessels in the SPO acquisition and to increases in
utilization, average day rates and active vessels. Overall, we had 54 more
average active vessels in the second quarter of 2022 than in the second quarter
of 2021. Average day rates increased from $10,435 per day in 2021 to $12,544 in
2022. Active utilization increased from 78.4% in 2021 to 82.5% in 2022. The
vessels acquired in the SPO acquisition accounted for 68% of the increase in
average active vessels with an average day rate of $14,553 per day and average
active utilization of 87.3%.



Vessel operating costs for the quarters ended June 30, 2022 and 2021 were
$100.3 million and $64.3 million, respectively. The increase is primarily due to
the increase in vessel activity, as we have 54 more active vessels in our fleet
in the second quarter of 2022 compared to the second quarter of 2021 primarily
due to the additional vessels from the SPO acquisition and also as a result of
our continued recovery from the low vessel utilization levels caused by the
pandemic and increased activity as higher crude oil prices has resulted in more
activity from our customers.



Depreciation and amortization expense for the quarters ended June 30, 2022 and
2021 were $31.8 million and $28.5 million, respectively, largely due to
an increase in depreciation expense because of a higher vessel count resulting
from the SPO acquisition partially offset by lower amortization of deferred
drydock expenditures.



General and administrative expenses for the quarters ended June 30, 2022 and
2021 were $27.8 million and $16.8 million, respectively. The increase is
primarily due to increased general and administrative costs associated with the
Singapore and Dubai offices acquired in the SPO acquisition and professional
fees and transaction costs related to the SPO acquisition which totaled $7.2
million for the quarter.



Included in loss on asset dispositions, net for the quarter ended June 30, 2022,
are $1.3 million of net losses from the disposal of four vessels and other
assets. During the quarter ended June 30, 2021, we recognized losses of
$0.9 million related to the disposal of seven vessels and other assets. One of
the vessel sales in 2021 was to a third-party operator, whose Chief Operating
Officer, Matthew Rigdon, is the son of Larry Rigdon, the chairman of our Board
of Directors. This vessel was sold for proceeds of $11.4 million, all of which
was collected in the second quarter of 2021, and we recognized a gain of $4.3
million on the sale.



Interest expense for the quarters ended June 30, 2022 and 2021, was $4.3 million
and $3.9 million, respectively. The increase reflects higher overall long-term
debt balance and higher coupon rate on the Senior Secured Bonds issued in
November 2021 compared to the Senior Secured Notes and Troms debt outstanding in
the second quarter of 2021. The debt outstanding in 2021 was replaced by the
Senior Secured Bonds in November 2021.



We recognized a $14.2 million loss to value the warrant liability at fair value
on the date that we amended the SPO share purchase agreement to allow us to
reclassify the warrants from liabilities to equity based on the difference in
the Tidewater common stock price on amendment date and the acquisition date
closing common stock price.



During the quarter ended June 30, 2022, we recognized foreign exchange losses of
$1.9 million and during the quarter ended June 30, 2021 we recognized foreign
exchange gains of $0.4 million.



The income tax expense for the three months ended June 30, 2022 was $6.6 million
compared to an income tax expense of $6.0 million for the three months ending
June 30, 2021. The tax expense for the three months ended June 30, 2022 is
mainly attributable to foreign taxes that are calculated on the basis of deemed
profit or minimum tax regimes or withholding tax on revenue instead of taxable
income or loss. Additionally, the inability to offset profits in one country
with losses in a different country contributes to having a tax liability despite
large consolidated pre-tax losses.



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Results of Operations - Six Months Ended June 30, 2022 compared to June 30, 2021




Revenues for the six months ended June 30, 2022 and 2021 were $269.2 million and
$173.5 million, respectively. The $95.7 million increase in revenue is primarily
due to the acquisition of 50 vessels in the SPO acquisition which closed on
April 22, 2022 and to increases in utilization, average day rates and active
vessels. Overall, we had 35 more average active vessels in the first six months
of 2022 than in the first six months of 2021. Average day rates also increased
from $10,219 per day in 2021 to $11,738 in 2022. Active utilization increased
from 78.0% in 2021 to 82.5% in 2022. The vessels acquired in the SPO acquisition
are included in our results from the acquisition date and accounted for 53% of
the increase in average active vessels with an average day rate of $14,553 per
day and average active utilization of 87.3%.



Vessel operating costs for the six months ended June 30, 2022 and 2021 were
$168.8 million and $125.3 million, respectively. The increase is primarily due
to the increase in vessel activity, as we have 35 more active vessels in our
fleet in the first six months of 2022 compared to the first six months of 2021
primarily due to the additional vessels from the SPO acquisition and also as a
result of our continued recovery from the low vessel utilization levels caused
by the pandemic and the increased activity as higher crude oil prices has
resulted in more activity from our customers.



Depreciation and amortization expense for the six months ended June 30, 2022 and
2021 were $58.4 million and $58.3 million, respectively. Depreciation expense
only increased slightly because the higher vessel count from the SPO acquisition
was largely offset by a decrease in amortization expense related to deferred
drydock expenditures.



General and administrative expenses for the six months ended June 30, 2022 and
2021 were $46.0 million and $32.8 million, respectively. The increase is
primarily due to general and administrative costs associated with the Singapore
and Dubai offices acquired in the SPO acquisition and professional fees and
transaction costs related to the SPO acquisition which totaled $9.4 million for
the six months ended June 30, 2022.



Included in loss on asset dispositions, net for the six months ended June 30,
2022, are $1.1 million of net losses from the disposal of nine vessels and other
assets. During the six months ended June 30, 2021, we recognized losses of
$2.9 million related to the disposal of 13 vessels and other assets. One of the
vessel sales in 2021 was to a third-party operator, whose Chief Operating
Officer, Matthew Rigdon, is the son of Larry Rigdon, the chairman of our Board
of Directors. This vessel was sold for proceeds of $11.4 million, all of which
was collected in the second quarter of 2021, and we recognized a gain of $4.3
million on the sale.



Long-lived asset impairment during the six months ended June 30, 2022 was $0.5
million credit related to recovery of impairment on a vessel reclassified from
assets held for sale back to the active fleet. There was no long-lived asset
impairment in the six months ended June 30, 2021.



In the first six months of 2021, we recognized $1.8 million in losses related to
our interest in the Sonatide joint venture in Angola. On January 3, 2022, we
acquired our partner's 51% interest in Sonatide and ceased recording equity
gains and losses.



Interest income and other, net was $3.8 million higher in the first six months
of 2022 compared to the first six months of 2021. The 2022 income was primarily
related to the $1.3 million bargain purchase gain on our acquisition of 51% of
Sonatide and $1.9 million in interest and other income related to a litigation
settlement for one of our vessels.



We recognized a $14.2 million loss to value the warrant liability at fair value
on the date that we amended the SPO share purchase agreement to allow us to
reclassify the warrants from liabilities to equity based on the difference in
the Tidewater common stock price on amendment date and the acquisition date
closing common stock price.



During the six months ended June 30, 2022 and 2021, we recognized foreign exchange losses of $0.9 million and $0.4 million, respectively.




The income tax expense for the six months ended June 30, 2022 was $11.8 million
compared to an income tax expense of $8.0 million for the six months ending June
30, 2021. The tax expense for the six months ended June 30, 2022 is mainly
attributable to foreign taxes that are calculated on the basis of deemed profit
or minimum tax regimes or withholding tax on revenue instead of taxable income
or loss. Additionally, the inability to offset profits in one country with
losses in a different country contributes to having a tax liability despite
large consolidated pre-tax losses.



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The following table compares vessel revenues and vessel operating costs by geographic segment for our owned and operated vessel fleet and the related percentage of vessel revenue for the periods indicated:



(In Thousands)                               Three Months Ended                                   Six Months Ended
                                   June 30, 2022            June 30, 2021              June 30, 2022             June 30, 2021
Vessel revenues:
Americas                       $  37,520          23 %   $ 23,481          27 %    $  65,964          25 %   $  49,705          29 %
Asia Pacific                      16,362          10 %      4,870           6 %       21,259           8 %       8,442           5 %
Middle East                       28,396          18 %     20,758          23 %       48,614          18 %      41,600          25 %
Europe/Mediterranean              32,475          20 %     22,467          25 %       56,394          21 %      37,216          22 %
West Africa                       47,422          29 %     16,938          19 %       73,820          28 %      32,544          19 %
Total vessel revenues          $ 162,175         100 %   $ 88,514         100 %    $ 266,051         100 %   $ 169,507         100 %
Vessel operating costs:
Americas:
Crew costs                     $  12,949          34 %   $ 11,132          

47 % $ 24,201 37 % $ 21,726 44 % Repair and maintenance

             2,866           8 %      2,192           9 %        5,493           8 %       4,906          10 %
Insurance                            248           1 %        (30 )        (0 )%         615           1 %         170           0 %
Fuel, lube and supplies            2,326           6 %      1,952           8 %        4,711           7 %       3,726           7 %
Other                              3,054           8 %      2,972          13 %        5,250           8 %       4,952          10 %
                               $  21,443          57 %   $ 18,218          78 %    $  40,270          61 %   $  35,480          71 %
Asia Pacific:
Crew costs                     $   8,138          50 %   $    801         

16 % $ 8,926 42 % $ 1,651 20 % Repair and maintenance

               945           6 %        268           6 %        1,229           6 %         818          10 %
Insurance                             90           0 %        (10 )        (0 )%         144           1 %          30           0 %
Fuel, lube and supplies            1,590          10 %        205           4 %        1,695           8 %         615           7 %
Other                              1,176           7 %        459           9 %        1,598           7 %         770           9 %
                               $  11,939          73 %   $  1,723          35 %    $  13,592          64 %   $   3,884          46 %
Middle East
Crew costs                     $  11,193          39 %   $  9,109         

44 % $ 19,658 40 % $ 17,898 43 % Repair and maintenance

             3,429          12 %      2,364          

11 % 5,553 12 % 4,473 11 % Insurance

                            325           1 %         47           0 %          622           1 %        (217 )        (1 )%
Fuel, lube and supplies            2,700          10 %      1,289           6 %        4,259           9 %       2,448           6 %
Other                              2,249           8 %      2,233          11 %        4,706          10 %       4,881          12 %
                               $  19,896          70 %   $ 15,042         

72 % $ 34,798 72 % $ 29,483 71 % Europe/Mediterranean: Crew costs

                     $  12,349          38 %   $ 10,519          

47 % $ 24,352 43 % $ 19,541 53 % Repair and maintenance

             2,414           7 %      2,244          10 %        4,520           8 %       3,917          11 %
Insurance                            307           1 %       (131 )        (1 )%         616           1 %         168           0 %
Fuel, lube and supplies            1,740           5 %        864           4 %        2,817           5 %       1,623           4 %
Other                              2,468           8 %      1,803           8 %        4,494           8 %       3,510           9 %
                               $  19,278          59 %   $ 15,299          68 %    $  36,799          65 %   $  28,759          77 %
West Africa:
Crew costs                     $  16,010          34 %   $  6,124         

36 % $ 24,339 33 % $ 12,031 37 % Repair and maintenance

             3,823           8 %      2,466          15 %        6,143           8 %       4,857          15 %
Insurance                            396           1 %        (13 )        (0 )%         753           1 %         335           1 %
Fuel, lube and supplies            3,165           6 %      2,231          13 %        5,115           7 %       3,989          12 %
Other                              4,307           9 %      3,173          19 %        6,959          10 %       6,465          20 %
                               $  27,701          58 %   $ 13,981         

83 % $ 43,309 59 % $ 27,677 85 % Vessel operating costs: Crew costs

                     $  60,639          38 %   $ 37,685          

43 % $ 101,476 38 % $ 72,847 43 % Repair and maintenance

            13,477           8 %      9,534          11 %       22,938           8 %      18,971          11 %
Insurance                          1,366           1 %       (137 )        (0 )%       2,750           1 %         486           1 %
Fuel, lube and supplies           11,521           7 %      6,541           7 %       18,597           7 %      12,401           7 %
Other                             13,254           8 %     10,640          12 %       23,007           9 %      20,578          12 %

Total vessel operating costs $ 100,257 62 % $ 64,263 73 % $ 168,768 63 % $ 125,283 74 %





                                       29
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The following table presents general and administrative expenses in our four
geographic segments both individually and in total and the related general and
administrative expenses as a percentage of the vessel revenues of each segment
and in total for the three and six months ended June 30, 2022 and 2021:



(In Thousands)                        Three Months Ended                                 Six Months Ended
                            June 30, 2022            June 30, 2021            June 30, 2022            June 30, 2021
Segment general and
administrative
expenses:
Americas                 $   2,644          7 %   $   2,822         12 %   $   5,227          8 %   $   5,427         11 %
Asia Pacific                 3,242         20 %         226          5 %       3,464         16 %         455          5 %
Middle East                  2,386          8 %       1,850          9 %       4,179          9 %       4,406         11 %
Europe/Mediterranean         1,977          6 %       1,928          9 %       4,042          7 %       3,755         10 %
West Africa                  2,449          5 %       1,733         10 %       4,283          6 %       3,840         12 %
Total segment general
and administrative
expenses                 $  12,698          8 %   $   8,559         10 %   $  21,195          8 %   $  17,883         11 %




The following table presents segment and total depreciation and amortization
expense and the related segment and total vessel depreciation and amortization
expense as a percentage of segment and total vessel revenues for the three and
six months ended June 30, 2022 and 2021:



(In Thousands)                        Three Months Ended                                 Six Months Ended
                            June 30, 2022            June 30, 2021            June 30, 2022            June 30, 2021
Segment depreciation
and amortization
expense:
Americas                 $   7,503         20 %   $   7,382         31 %   $  14,619         22 %   $  15,389         31 %
Asia Pacific                 2,080         13 %       1,199         25 %       2,929         14 %       2,436         29 %
Middle East                  6,421         23 %       5,322         26 %      11,827         24 %      10,965         26 %
Europe/Mediterranean         6,958         21 %       7,225         32 %      13,720         24 %      14,709         40 %
West Africa                  8,002         17 %       6,580         39 %      13,743         19 %      13,150         40 %
Total segment
depreciation and
amortization expense     $  30,964         19 %   $  27,708         31 %   $  56,838         21 %   $  56,649         33 %




The following table compares operating income (loss) and other components of
income (loss) and its related percentage of total revenue for the three and six
months ended June 30, 2022 and 2021:



(In Thousands)                            Three Months Ended                                     Six Months Ended
                               June 30, 2022              June 30, 2021              June 30, 2022              June 30, 2021
Vessel operating profit
(loss):
Americas                   $   5,930           4 %    $  (4,940 )        (5 )%   $   5,848           2 %    $  (6,591 )        (4 )%
Asia Pacific                    (899 )        (1 )%       1,722           2 %        1,274           0 %        1,667           1 %
Middle East                     (307 )         0 %       (1,456 )        (2 )%      (2,190 )        (1 )%      (3,254 )        (2 )%
Europe/Mediterranean           4,262           3 %       (1,986 )        (2 )%       1,833           1 %      (10,007 )        (6 )%
West Africa                    9,270           6 %       (5,355 )        (6 )%      12,485           5 %      (12,122 )        (7 )%
Other operating profit           790           0 %          858           1 %        2,282           1 %        2,302           2 %
                              19,046          12 %      (11,157 )       (12 )%      21,532           8 %      (28,005 )       (16 )%

Corporate expenses           (15,909 )       (10 )%      (9,070 )       (10

)% (26,412 ) (10 )% (16,575 ) (10 )% Gain (loss) on asset dispositions, net

             (1,297 )        (1 )%        (932 )        (1 )%      (1,090 )         0 %       (2,880 )        (2 )%
Affiliate credit loss
impairment credit                  -           0 %        1,000           1 %            -           0 %        1,000           1 %
Long-lived asset
impairment credit                  -           0 %            -           0 %          500           0 %            -           0 %
Operating loss             $   1,840           1 %    $ (20,159 )       (22 )%   $  (5,470 )        (2 )%   $ (46,460 )       (27 )%




                                       30
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Results for three months ended June 30, 2022 compared to June 30, 2021




Americas Segment Operations.  Vessel revenues in the Americas segment increased
59.8%, or $14.0 million, during the quarter ended June 30, 2022, as compared to
the quarter ended June 30, 2021. This increase is primarily the result of a
25.9% increase in average day rates largely due the demand recovery with higher
crude oil prices and the reduction of COVID-19 restrictions and an increase in
average utilization from 76.4% in the second quarter of 2021 to 86.8% in the
second quarter of 2022. The SPO acquisition added one average vessel in the
Americas segment that contributed 77.0% utilization, $15,226 average day rate
and $0.7 million in revenue.



Vessel operating profit for the Americas segment for the quarter ended June 30,
2022 was $5.9 million, compared to a $4.9 million operating loss for the quarter
ended June 30, 2021. The increase in operating profit was largely due to the
increase in revenue partially offset by a $3.2 million increase in
operating expenses, resulting mainly from reactivation costs and $0.8 million
from the additional SPO vessel.



Asia Pacific Segment Operations. Vessel revenues in the Asia Pacific segment
increased 236.0%, or $11.5 million, during the quarter ended June 30, 2022, as
compared to the quarter ended June 30, 2021. Average active vessels increased by
13, entirely as a result of the acquisition of SPO. Average day rates increased
28.4%.



The Asia Pacific segment reported an operating loss of $0.9 million for the
quarter ended June 30, 2022, compared to a $1.7 million loss for the quarter
ended June 30, 2021. The increase in revenue was offset by additional operating
expenses of $10.2 million, general and administrative costs of
$3.1 million, depreciation and amortization expense of $1.5 million, all as a
result of the SPO acquisition.



Middle East Segment Operations.  Vessel revenues in the Middle East segment
increased 36.8%, or $7.6 million, during the quarter ended June 30, 2022, as
compared to the quarter ended June 30, 2021. Average active vessels increased by
nine, with five average vessels added from the SPO acquisition that contributed
$6.2 million in revenue. Active utilization for the quarter ended June 30,
2022 decreased to 80.8% from 86.8% but average day rates increased 15.5%.



The Middle East segment reported an operating loss of $0.3 million for the
quarter ended June 30, 2022, compared to an operating loss of $1.5 million for
the quarter ended June 30, 2021 as the increase in revenue was largely offset by
a $4.9 million increase in operating costs ($2.7 million attributable to the
acquired vessels), a $1.1 million increase in depreciation and amortization, and
a $0.5 million increase in general and administrative costs. The increase in
costs were primarily a result of the five average vessels acquired in the SPO
acquisition and addition of the SPO Dubai office.



Europe/Mediterranean Segment Operations. Vessel revenues in the
Europe/Mediterranean segment increased 44.5%, or $10.0 million, during the
quarter ended June 30, 2022, as compared to the quarter ended June 30, 2021. The
increased revenue was attributable to four more average active vessels (one from
the SPO acquisition, which had revenue of $1.8 million) combined with
21.3% higher average day rates. Active utilization decreased slightly from 90.6%
to 88.1%.



The Europe/Mediterranean segment reported an operating profit of $4.3 million
for the quarter ended June 30, 2022, compared to an operating loss of
$2.0 million for the quarter ended June 30, 2021. The higher operating profit
was due to the revenue increase offset by $4.0 million in higher operating costs
associated with the increase in average vessels. The SPO vessel incurred
$1.1 million in operating cost for the period. Depreciation and amortization
also decreased by $0.3 million due to lower drydock amortization.



West Africa Segment Operations. Vessel revenues in the West Africa segment
increased 180.0% or $30.5 million, during the quarter ended June 30, 2022, as
compared to the quarter ended June 30, 2021. The West Africa average active
vessel fleet increased by 24 vessels (16 from the SPO acquisition) during the
comparative periods. West Africa segment active utilization increased as well
from 61.8% during the quarter ended June 30, 2021 to 82.9% during the quarter
ended June 30, 2022. In addition, average day rates increased 25.8%. The
increases in revenue are the result of the additional SPO vessels, which added
$19.5 million in revenue and higher demand caused by reduced restrictions from
the pandemic and the higher price of crude oil.



West Africa reported an operating profit of $9.3 million for the quarter ended
June 30, 2022, compared to an operating loss of $5.4 million for the quarter
ended June 30, 2021. The increase in operating results is largely due to the
increase in revenue partially offset by $13.7 million ($11.9 million
attributable to the acquired SPO vessels) in higher operating costs primarily
related to the increase in average active vessels. In addition, general and
administrative costs increased by $0.7 million due to additional costs
associated with the SPO acquisition and our acquisition of the remaining 51% of
the Angolan joint venture in January 2022. Depreciation and amortization
increased by $1.4 million due largely to the addition of the SPO vessels.



                                       31
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Results for six months ended June 30, 2022 compared to June 30, 2021




Americas Segment Operations.  Vessel revenues in the Americas segment increased
32.7%, or $16.3 million, during the six months ended June 30, 2022, as compared
to the six months ended June 30, 2021. This increase is primarily the result of
a two average vessel increase and a 29.3% increase in average day rates largely
due the demand recovery with higher crude oil prices and the reduction of
COVID-19 restrictions. Average utilization decreased slightly from 82.4% in the
first six months of 2021 to 81.4% in the first six months of 2022. The SPO
acquisition added less than one average vessel in the Americas segment that
contributed 77.0% utilization and a $15,226 average day rate. The additional
vessel added $0.7 million to revenue.



Vessel operating profit for the Americas segment for the six months ended June
30, 2022 was $5.8 million, compared to a $6.6 million operating loss for the six
months ended June 30, 2021. The increase in operating profit was largely due to
the increase in revenue partially offset by a $4.8 million increase in
operating expenses ($0.8 million from the additional SPO vessel), resulting
mainly from reactivation costs. Depreciation and amortization decreased slightly
due to lower amortization of deferred drydock costs.



Asia Pacific Segment Operations.  Vessel revenues in the Asia Pacific segment
increased 151.8%, or $12.8 million, during the six months ended June 30, 2022,
as compared to the six months ended June 30, 2021. Average active vessels
increased by seven, entirely as a result of the acquisition of SPO. Average day
rates increased 25.4%. The vessels from the SPO acquisition added $15.0 million
to revenue.



The Asia Pacific segment reported an operating profit of $1.3 million for the
six months ended June 30, 2022, compared to $1.7 million for the six months
ended June 30, 2021. The increase in revenue was offset by a $9.7 million
increase in operating costs ($10.2 million increase attributable to SPO
vessels), a $0.5 million increase in depreciation and amortization, and a
$3.0 million increase in general and administrative costs primarily due to the
addition of the SPO Singapore office.



Middle East Segment Operations.  Vessel revenues in the Middle East segment
increased 16.9%, or $7.0 million, during the six months ended June 30, 2022, as
compared to the six months ended June 30, 2021. Average active vessels increased
by four, with three vessels added from the SPO acquisition that added $6.2
million in revenue. Active utilization for the quarter ended June 30, 2022,
decreased to 82.1% from 85.6% but average day rates increased 7.5%.



The Middle East segment reported an operating loss of $2.2 million for the six
months ended June 30, 2022, compared to an operating loss of $3.3 million for
the six months ended June 30, 2021 primarily due to the increase in revenue
partially offset by a $5.3 million increase in operating costs ($2.7 million
attributable to the acquired vessels) and a $0.9 million increase in
depreciation and amortization.



Europe/Mediterranean Segment Operations. Vessel revenues in the
Europe/Mediterranean segment increased 51.5%, or $19.2 million, during the
six months ended June 30, 2022, as compared to the six months ended June 30,
2021. The increased revenue was attributable to six more average active vessels
(less than one from the SPO acquisition, which had revenue of $1.8
million) combined with higher average day rates and higher active
utilization largely due the demand recovery with higher crude oil prices and the
reduction of COVID-19 restrictions. Active utilization increased from 86.5% to
89.7% and average day rates increased 11.3%.



The Europe/Mediterranean segment reported an operating profit of $1.8 million
for the six months ended June 30, 2022, compared to an operating loss of
$10.0 million for the six months ended June 30, 2021. The improved results are
from the increase in revenue partially offset by $8.0 million in higher
operating costs associated with the increase in average vessels and a
$0.3 million increase in general and administrative costs. The SPO vessel
incurred $1.1 million in operating costs during the period. Depreciation and
amortization decreased by $1.0 million due to lower drydock amortization.



West Africa Segment Operations. Vessel revenues in the West Africa segment
increased 126.8%, or $41.3 million, during the six months ended June 30, 2022,
as compared to the six months ended June 30, 2021. The West Africa average
active vessel fleet increased by 16 vessels during the comparative periods. The
SPO acquisition added eight vessels to the average vessel count and contributed
$19.7 million in revenue. West Africa segment active utilization increased as
well from 60.8% during the six months ended June 30, 2021 to 81.3% during the
six months ended June 30, 2022. In addition, average day rates increased
15.7%. The increases in revenue are due to the addition of the SPO vessels, the
higher demand caused by reduced restrictions from the pandemic and the higher
price of crude oil.



West Africa reported an operating profit of $12.5 million for the six months
ended June 30, 2022 compared to an operating loss of $12.1 million for the six
months ended June 30, 2021. The increase in operating results is due to the
increase in revenue partially offset by $15.6 million ($11.9 million
attributable to the acquired SPO vessels) in higher operating costs primarily
related to the increase in average active vessels. In addition, general and
administrative costs increased by $0.4 million and depreciation and amortization
increased by $0.6 million due largely to the addition of the SPO vessels.



                                       32
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Vessel Utilization and Average Day Rates by Segment




Vessel utilization is determined primarily by market conditions and to a lesser
extent by drydocking requirements. Vessel day rates are determined by the demand
created largely through the level of offshore exploration, field development and
production spending by energy companies relative to the supply of offshore
support vessels. Specifications of available equipment and the scope of service
provided may also influence vessel day rates. Vessel utilization rates are
calculated by dividing the number of days a vessel works during a reporting
period by the number of days the vessel is available to work in the reporting
period. As such, stacked vessels depress utilization rates because stacked
vessels are considered available to work and are included in the calculation of
utilization rates. Average day rates are calculated by dividing the revenue a
vessel earns during a reporting period by the number of days the vessel worked
in the reporting period.



Total vessel utilization is calculated on all vessels in service (which includes
stacked vessels, vessels held for sale and vessels in drydock) but does not
include vessels owned by joint ventures (one and three vessels at June 30, 2022
and 2021, respectively). Active utilization is calculated on active vessels
(which excludes vessels held for sale and stacked vessels). Average day rates
are calculated based on total vessel days worked.





                                       33
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The following tables compare day-based utilization percentages, average day rates and average total, active and stacked vessels by segment for the three and six months ended June 30, 2022 and 2021:




                                                   Three Months Ended                       Six Months Ended
                                            June 30, 2022       June 30, 2021       June 30, 2022       June 30, 2021
SEGMENT STATISTICS:
Americas fleet:
Utilization                                           73.0 %              51.0 %              66.9 %              56.1 %
Active utilization                                    86.8 %              76.4 %              81.4 %              82.4 %
Average vessel day rates                   $        16,569     $        13,162     $        16,091     $        12,444
Average total vessels                                   34                  38                  34                  39
Average stacked vessels                                 (5 )               (13 )                (6 )               (13 )
Average active vessels                                  29                  25                  28                  26

Asia Pacific fleet:
Utilization                                           67.9 %             100.0 %              74.3 %              90.9 %
Active utilization                                    70.4 %             100.0 %              76.4 %              90.9 %
Average vessel day rates                   $        13,748     $        10,704     $        12,864     $        10,260
Average total vessels                                   19                   5                  12                   5
Average stacked vessels                                 (1 )                 -                   -                   -
Average active vessels                                  18                   5                  12                   5

Middle East fleet:
Utilization                                           80.8 %              83.4 %              81.8 %              80.3 %
Active utilization                                    80.8 %              86.8 %              82.1 %              85.6 %
Average vessel day rates                   $         9,490     $         8,213     $         8,887     $         8,270
Average total vessels                                   41                  33                  37                  35
Average stacked vessels                                  -                  (1 )                 -                  (2 )
Average active vessels                                  41                  32                  37                  33

Europe/Mediterranean fleet:
Utilization                                           82.8 %              64.7 %              80.3 %              54.5 %
Active utilization                                    88.1 %              90.6 %              89.7 %              86.5 %
Average vessel day rates                   $        15,776     $        13,005     $        13,989     $        12,570
Average total vessels                                   27                  29                  28                  30
Average stacked vessels                                 (2 )                (8 )                (3 )               (11 )
Average active vessels                                  25                  21                  25                  19

West Africa fleet:
Utilization                                           72.7 %              38.1 %              68.7 %              36.1 %
Active utilization                                    82.9 %              61.8 %              81.3 %              60.8 %
Average vessel day rates                   $        10,721     $         8,521     $         9,960     $         8,611
Average total vessels                                   67                  57                  60                  58
Average stacked vessels                                 (8 )               (22 )                (9 )               (23 )
Average active vessels                                  59                  35                  51                  35

Worldwide fleet:
Utilization                                           75.5 %              57.0 %              73.5 %              55.0 %
Active utilization                                    82.5 %              78.4 %              82.5 %              78.0 %
Average vessel day rates                   $        12,544     $        10,435     $        11,738     $        10,219
Average total vessels                                  188                 162                 171                 167
Average stacked vessels                                (16 )               (44 )               (18 )               (49 )
Average active vessels                                 172                 118                 153                 118






                                       34
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Average active vessels exclude stacked vessels. We consider a vessel to be
stacked if the vessel crew is furloughed or substantially reduced and limited
maintenance is being performed on the vessel. We reduce operating costs by
stacking vessels when management does not foresee opportunities to profitably or
strategically operate the vessels in the near future. Vessels are stacked when
market conditions warrant and they are no longer considered stacked when they
are returned to active service, sold, or otherwise disposed. When economically
practical marketing opportunities arise, the stacked vessels can be returned to
active service by performing any necessary maintenance on the vessel and either
rehiring or returning fleet personnel to operate the vessel. Although not
currently fulfilling charters, stacked vessels are included in the calculation
of utilization statistics. We also include our assets held for sale in stacked
vessels as they continue to incur stacking related costs. We had 14 (nine held
for sale) and 40 (14 held for sale) stacked vessels at June 30, 2022 and 2021,
respectively. The decrease in stacked vessels is attributable to vessel sales
and reactivation of vessels. We also reclassified three vessels in 2021 and one
vessel in 2022 from assets held for sale to the active fleet. Total stacking
costs included in vessel operating costs for the three months ended June 30,
2022 and 2021, were $0.7 million and $3.8 million, respectively. Total stacking
costs included in vessel operating costs for the six months ended June 30, 2022
and 2021, were $2.1 million and $9.2 million, respectively.



Vessel Dispositions



We seek opportunities to sell and/or responsibly recycle our older vessels when
market conditions warrant and opportunities arise. The majority of our vessels
are sold to buyers who do not compete with us in the offshore energy industry.
Vessels sales during the first six months of 2022 included nine vessels that
were classified as assets held for sale.



Liquidity, Capital Resources and Other Matters




As of June 30, 2022, we had $91.8 million in cash and cash equivalents
(including restricted cash), including amounts held by foreign subsidiaries, the
majority of which is available to us without adverse tax consequences. Included
in foreign subsidiary cash are balances held in U.S. dollars and foreign
currencies that await repatriation due to various currency conversion and
repatriation constraints, partner and tax related matters, prior to the cash
being made available for remittance to our domestic accounts. We currently
intend that earnings by foreign subsidiaries will be indefinitely reinvested in
foreign jurisdictions in order to fund strategic initiatives (such as
investment, expansion and acquisitions), fund working capital requirements and
repay third-party and intercompany debt of our foreign subsidiaries in the
normal course of business. Moreover, we do not currently intend to repatriate
earnings of our foreign subsidiaries to the U. S. because cash generated from
our domestic businesses and the repayment of intercompany liabilities from
foreign subsidiaries are currently deemed to be sufficient to fund the cash
needs of our U.S. operations. The SPO acquisition closed in April 2022 and
decreased our net cash position by $28.5 million.



Our objective in financing our business is to maintain and preserve adequate
financial resources and sufficient levels of liquidity. In addition to our cash
on hand, we also have a $25.0 million revolving credit facility which matures in
2026. No amounts have been drawn on this facility. As of June 30, 2022, we had
$175.0 million of long-term debt on our consolidated balance sheet of which none
is due until 2026. The 2026 Senior Secured Notes and the revolving credit
facility contain two financial covenants: (i) a minimum free liquidity test of
the obligors (as defined) equal to the greater of $20.0 million or 10% of net
interest-bearing debt and (ii) a minimum equity ratio of 30%, in each case for
us and our consolidated subsidiaries. We are currently in compliance
and anticipate being able to maintain ongoing compliance with these two
financial covenants. Cash and cash equivalents, our revolving credit
facility and future net cash provided by operating activities provide us, in our
opinion, with sufficient liquidity to meet our ongoing operational requirements.
In addition, we have available a "shelf" registration under which we may offer
and sell up to $300.0 million of any combination of common stock, debt
securities, depository shares, preferred stock or warrants from time to time in
one or more classes or series or amounts, at prices and on terms that we will
determine at the time of the offering. We also have an "at-the-market" offering
registered with the SEC under which we may offer and sell shares of our common
stock, having an aggregate offering proceeds of up to $30.0 million from time to
time through the agents acting as a sales agent or directly to the agents acting
as a principals. We expect to use the net proceeds from the sale of the
securities covered by these offerings for general corporate purposes, which may
include repayment or refinancing of indebtedness, working capital, capital
expenditures, investments, additional acquisitions and other business
opportunities.





                                       35
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Operating Activities


Net cash provided by (used in) operating activities for the six months ended June 30, 2022 and 2021 was $(33.2) million and $10.6 million, respectively.




Net cash used in operations for the six months ended June 30, 2022 reflects a
net loss of $37.3 million, which includes non-cash depreciation and amortization
of $58.4 million and net losses on asset dispositions of $1.1 million. Combined
changes in operating assets and liabilities used $41.1 million in cash, and cash
paid for deferred drydock and survey costs was $31.1 million.



Net cash provided by operations for the six months ended June 30, 2021 reflects
a net loss of $65.2 million, which includes non-cash depreciation and
amortization of $58.3 million and net losses on asset dispositions of $2.9
million. Combined changes in operating assets and liabilities and in amounts due
to/from affiliate provided $17.0 million in cash, and cash paid for deferred
drydock and survey costs was $6.8 million.



Investing Activities


Net cash provided by (used in) investing activities for the six months ended June 30, 2022 and 2021, was $(26.7) million and $27.7 million, respectively.




Net cash used in investing activities for the six months ended June 30, 2022
reflects the payments of $29.5 million for the acquisitions of SPO and a 51%
equity interest in Sonatide and the receipt of $8.2 million primarily related to
the sale of nine vessels. Additions to properties and equipment were comprised
of approximately $3.8 million in capitalized upgrades to existing vessels and
equipment and $1.6 million for other property and Information Technology
equipment purchases and development work.



Net cash provided by investing activities for the six months ended June 30,
2021 primarily reflects the receipt of $29.6 million primarily related to the
sale of 13 vessels. Additions to properties and equipment were comprised of
approximately $1.1 million in capitalized upgrades to existing vessels and
equipment and $0.8 million for other property and IT equipment purchases and
development work.



Financing Activities


Net cash used in financing activities for the six months ended June 30, 2022 and 2021 was $2.5 million and $39.6 million, respectively.




Net cash used in financing activities for the six months ended June 30, 2022
included $0.3 million of debt issuance costs and $2.2 million in taxes paid on
share-based awards.


Net cash used in financing activities for the six months ended June 30, 2021 included $11.8 million of repurchases of the Secured Notes in open market transactions, $26.1 million of scheduled semiannual principal payments and prepayments on Troms offshore debt and $0.9 million of debt modification costs.

Contractual Obligations and Other Contingent Commitments




We did not have any material changes in our contractual obligations and
commercial commitments since the end of fiscal year 2021. Refer to Part II, Item
7 in our Annual Report on Form 10-K for the year ended December 31, 2021, for
information regarding our contractual obligations and other contingent
commitments.



Application of Critical Accounting Policies and Estimates




Our Annual Report on Form 10-K for the year ended December 31, 2021, filed with
the SEC on March 9, 2022, describes the accounting policies that are critical to
reporting our financial position and operating results and that require
management's most difficult, subjective or complex judgments. This Quarterly
Report on Form 10-Q should be read in conjunction with the discussion contained
in our Annual Report on Form 10-K for the year ended December 31, 2021,
regarding these critical accounting policies.


                                       36
--------------------------------------------------------------------------------

New Accounting Pronouncements

For information regarding the effect of new accounting pronouncements, refer to Note 2 of Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

© Edgar Online, source Glimpses

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