Tidewater (TDW) Q2 2026 earnings call transcript

Thank you, Dara. Good morning, everyone, and welcome to Tidewater Second Quarter 2026 earnings conference call. I'm joined on the call this morning by our president and CEO, Quentin Neen, our chief financial officer, Sam Rubio, and our chief operating officer, 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, uncertainties, and other factors that may cause the company's actual performance to be materially different from that stated or implied by any comments that we're making during today's conference call. Please refer to our most recent form 10K and form 10Q 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 it today, August 4th, 2026. Therefore, your advice that any time sensitive information may no longer be accurate at the time of any replay. Also during the call, we'll present both GAP and non-GAP financial measures. A reconciliation of GAP to non-GAP financial measures can be found in our earnings release, located on our website at TDW. com.

And now with that, I'll turn the call over to Quentin.

Thank you, Wes. Good morning, everyone, and welcome to Tied Water's Second Quarter 2026 earnings conference call. I'll begin today with the quarter's highlights, providing update on the Wilson's transaction, discuss our current views on capital allocation and share our outlook for the business. Wes will then walk through our financial outlook and current guidance considerations. Pierce will cover the global market and operations, and Sam will review the consolidated financial results.

Collectively, we will also update you on the impacts of operation epic period. We are pleased to report that Second Quarter revenue and gross margin exceeded our expectations. Revenue was 342.3 million, supported by both higher day rates and stronger utilization. Gross margin was just under 47%, nearly 3% points above our prior expectations.

Excluding 6.8 million of expenses related to operation epic period, gross margin would have been approximately 49%. Day rate momentum was particularly strong in the European and Mediterranean segment. Utilization benefited primarily from the timing of dry docks on seven vessels shifting from the second quarter to later in the year. Operational uptime was also better than expected, which further supported utilization.

But most noteworthy, our weighted average leading edge day rate increased approximately 7.5% sequentially. A clear indication of the relatively tight supply demand balance in the market today.

Turning to operation epic period, while the intensity of the conflict eased during the quarter, we continued to incur costs above pre-conflict levels, totaling approximately 6.8 million in the second quarter. We did not experience any vessel off higher associated with the conflict. In fact, our utilization and day rates in the Middle East were as strong as they have been quite some time.

In our guidance, we continue to include only costs for the current quarter, and we are assuming approximately 4 million of costs in the third quarter. We are actively working these costs down as we identify alternative ways to manage through the conflict. We remain encouraged that our activity in the region has been largely unaffected and that the outlet for the region remains robust, particularly once the conflict is resolved.

Free cash flow improved meaningfully in the second quarter, nearly doubling from the first quarter to 64 million. That improvement was driven by stronger operational performance and the movement of dry docks on seven vessels to later in the year. Even taking those deferred dry locks into account, we expect free cash flow for the legacy time-water business to continue to accelerate in the back half of the year.

We also expect to generate incremental free cash flow from the Wilson's vessels once the acquisition closes. On that note, we now expect to close the Wilson's acquisition around September 1st, as discussed in our recent disclosures, we have completed all necessary regulatory steps and obtained the change of control waivers related to assume the Wilson's debt. We are now working with the banks to finalize documentation for the debt transfer.

In parallel, we have continued to deploy tight water personnel to work alongside the Wilson's team on pre-closing integration planning, which should allow us to move quickly once the acquisition closes. We believe the ability to affect the smooth and swift integration is to quote competency of our organization and we see every reason to expect the Wilson's integration to be as successful as the integrations we have completed in the past.

Our balance sheet remains very strong with net debt essentially at zero at the end of the second quarter. We expect net leverage to increase to approximately 0.8 times by the end of the third quarter as a result of the Wilson's acquisition.

The quiddity was also strong at more than 850 million at quarter end. We intend to fund the equity portion of the acquisition price with cash after assuming the Wilson's debt and we remain very comfortable with both the strength of our balance sheet and our liquidity profile.

Our 500 million share repurchase authorization remains outstanding. To date, we have held off on repurchases while we complete the Wilson's debt transfer. Although we will deploy a substantial amount of cash to fund the Wilson's acquisition, we still expect to be in a strong cash position after closing and will evaluate the most accretive use of the remaining excess cash or shareholders.

Our philosophy on the buyback program has not changed. We remain opportunistic and will consider repurchasing shares when M&A opportunities are not immediately actionable. We do not view carrying excess cash on the balance sheet as an optimal long-term capital allocation strategy, particularly given the liquidity position we have with the revolving credit facility added last summer. We expect free cash flow from the business to continue to grow through the remainder of this year and into 2027.

The M&A landscape remains active, a healthy operating environment and an improving outlook are important factors in establishing a productive dialogue with potential targets. We remain interested in acquiring the right vessels of the prices that create immediate value for our shareholders. At the same time, we're not interested in acquiring vessels that are premium to our view of their current value simply for the sake of adding scale.

We are in the advantageous position of being the largest global OLSV provider, and we continue to believe that in the absence of value of creative acquisitions, the best way to increase shareholder value is to run the business efficiently, maximize free cash flow, and repurchase shares when appropriate.

With the balance sheet liquidity and expected cash flows all in a healthy position, we will continue to apply the same capital allocation framework we have followed, weighing the relative merits of a given M&A opportunity against the return opportunity from repurchasing our own shares.

Looking ahead, the near-term outcome of the conflict in the Middle East remains uncertain. Market volatility can be challenging to navigate, but we believe there are important underlying reasons to remain optimistic about the offshore activity outlook.

For some of our customers, broader strategic considerations, such as proximity to hydrocarbon resources, and the ability to provide strategic reserves that can help mitigate future supply disruptions are more frequently mentioned in planning discussions. These factors are more difficult to quantify, but they can also be more durable, because they are driven less by near-term economics and more by long-term energy security considerations.

This backdrop points to a more robust view of the long-term offshore activity environment than we had last year. And we see that momentum continuing to build. Tender and pre-tendering activity have increased significantly in recent months. Importantly, this increase in activity is evident across all of our vessel support services. Industry commentary around a strong, rig-tendering cycle supports this level of activity, and we are seeing similar momentum across all of our subsidy support and production support offerings.

Our conviction in the next leg-up of the cycle is growing, particularly given the strategic resource and energy security elements of the outlook. Most of the activity uplift we have seen today reflects projects and opportunities that were already taking shape before the conflict in the Middle East began.

Discussions regarding future projects in response to the conflict have begun and remain in the early stages, but the tone is urgent and serious. Offshore projects are inherently long, lead-time investments, and the desire to accelerate these projects is what gives us increased confidence and the duration of the current cycle.

Turning briefly to vessel supply, there has been little movement over the past quarter and frankly very little over the past two years. To our knowledge, there have been no meaningful new-build order activity in recent months. A handful of new-build vessels are expected to deliver towards the end of the year, with a few more in early 2027.

The lead-up fleet remains essentially unchanged, and we do not anticipate meaningful reactivation given the lead-up fleet's age profile and specification mix. We believe much of the lead-up fleet is effectively scrapped in place as evidenced by the limited number of reactivations we saw from that fleet in 2023 and 2024.

We continue to believe the state of vessel supply will support increasing day rates as demand again begins to approach parity with available tonnage, and we expect day rates to accelerate further from what we saw in the second quarter. We continue to see a realistic path to a year-over-year increase in average day rates of 3,000 to 4,000 per day in both 2027 and 2028.

In summary, we are pleased with our second quarter performance. While we will continue to navigate near-term volatility related to the conflict of the Middle East, we are increasingly encouraged by the activity we see ahead. We look forward to completing the Wilson's acquisition and to bringing the Wilson's organization and fleet on to the Type 1 platform. As always, we will remain disciplined and allocating capital to the opportunities that we believe can create the greatest value for our shareholders.

And with that, let me turn the call back over to West.

Thank you, Quinn. As Quinn mentioned, we do not repurchase any shares during the second quarter ahead of the Wilson's acquisition closing and funding. We anticipate to fund approximately $270 million cash consideration for the equity component of the Wilson's acquisition, assuming a closing date of around September 1st, 2026. We plan to use cash on hand and do not anticipate utilizing our revolving credit facility to fund the cash consideration portion of the purchase price.

At the end of the second quarter, we retained our $500 million share repurchase authorization. Our philosophy guiding capital allocation remain consistent, such that we will put share repurchases on an opportunistic rather than a programmatic basis, weighing the market value of our shares with our internal view of the intrinsic value of the business. We will contrast this against the relative return profile and other qualitative considerations that an M&A target may present.

We retain the option of evaluating M&A and share repurchases concurrently. Given that the offshore vessel market has stabilized at a healthy level, along with the constructive outlook for offshore activity broadly, the M&A landscape remains favorable. However, we will remain disciplined on pursuing M&A opportunities that we view as value-creative and consistent with our view of intrinsic value.

As a reminder, under the bonds, we are limited in our ability to return capital shareholders, provide our net debt to EBITDA's less than 1.25 times, perform it for any share repurchase. Under our revolving credit facility, we are also limited in our ability to repurchase shares, provide that net debt to EBITDA does not exceed one times. However, to the extent that we exceed one times net leverage, we still retain the flexibility to continue returns to shareholders, provide the free capital generation as an excess of cumulative returns to shareholders.

We expect to be at 0.8 times net leverage performed for the Wilson's acquisition, and expect that our capital generation should continue to improve throughout the back half of 2026, reducing our net leverage level.

Turning to our leading edge day rates, I will reference the data that was posted in our investor materials yesterday. Across the fleet, our weighted average leading edge day rate accelerated from the inflection we observed in the first quarter of 7.5% sequentially. During the quarter, we entered into 25 turn contracts with an average duration of approximately 12 months.

Turning to our financial outlook, we are modestly revising our full year 2026 revenue guidance to 1.42 to 1.47 billion dollars, in a full year gross margin range of 49 to 50%.

The reduction in our revenue guidance is attributable to the expected closing of the Wilson's transaction approximately two months later than previously anticipated. Offset and part by higher than anticipated year to date, the legacy tied to water revenue. Our guidance now assumes that we closed the Wilson's acquisition around September 1st, 2026.

The updated gross margin guidance similarly assumes the loss of two months of high margin revenue from Wilson's due to the timing of the closing of the acquisition.

Additionally, we expect to incur more complex related costs in the third quarter and was contemplated in the last quarter's guidance, which assumed the conflict concluded by the end of the second quarter. We now expect third quarter revenue to be up about 3% inclusive of one month of revenue from Wilson's. We expect legacy tied water revenue to decline about 2% due to dry docks moving from the second quarter into the third quarter, consuming about 1% of utilization, along with higher than anticipated down for repair time that will consume another 1% of utilization.

We expect a third quarter gross margin of about 46%. So we now anticipate complex related costs of approximately $4 million, along with higher fuel expense due to the dry docks that moved in the third quarter and higher R&M expense than previously anticipated. Our expected complex related costs in the third quarter are nearly half of those incurred in the second quarter.

We remain in a position to rebuild any direct conflict related costs incurred to date or in the future. In summary, we're pleased to be able to reiterate a strong four-year financial outlook in the continued volatility in the market. Our expectation remains that there is potential for uplift to our full year guidance depending on the strength of the offshore activity picking up towards the end of the year.

Looking to the remainder of 2026, first half 2026 revenue plus firm backlog and options for the legacy tie water fleet, along with the Wilson's backlog for the September through December 2026 period, represents $1.3 billion of revenue for the full year, representing approximately 91% of the midpoint of our updated 2026 revenue guidance.

Approximately 69% of remaining available days for 2026 are captured in firm backlog and options, inclusive of the Wilson's fleet.

Our full year revenue guidance assumes utilization of approximately 80% inclusive of the Wilson's fleet, leaving us with approximately 11% of capacity to be chartered if the market tightens quicker than we are anticipating. Our small and mid-sized anchor handlers, the medium classes of PSVs, retain the most opportunity for incremental work followed by our smaller and largest class of PSVs.

Contract cover is higher in the third quarter with more opportunity available in the last quarter of the year. The bigger risk to our backlog revenue is on anticipated downtime due to unplanned maintenance and incremental time spent on dry docks.

With that, I'll turn the call over to peers for an overview of the commercial landscape.

Thank you, West, and good morning, everyone. First off, our overall long-term outlook for the offshore space remains positive and has continued optimism in the long-term strength of the market, has helped our teams be successful at either maintaining or pushing both utilization and day rates in most of the basins and vessel classes in which tide water is active in what has been a challenging first-of-the-year for some of our regions due to Operation Epic Fury.

And as Quentin mentioned earlier, we now feel very well placed going into the second half of the year and into 2027 to be able to push rates and utilization significantly higher as we build momentum in the upcoming quarters in years ahead. The fundamentals for the OSD market remain strong. The sector remains supply side constrained with little prospect of capacity expansion from the stack fleet or from the negligible orderbook. And from a demand perspective, we're starting to see a decent uptick in requirements in all the sectors in which we support our customers as well as in the majority of basins in which we currently operate.

Working through our various regions and starting with Europe, the North Sea, ATS spot market continued to strengthen through the quarter with large ATS spot rates averaging over 160,000 pounds per day, the average levels, the highest average levels on record. With some fixes concluded well above 200,000 pounds per day during the quarter. The PSE market was slightly more subdued during the quarter.

However, day rates continued to remain above 2025 levels after the strong start in Q1 with both PSE spots and term activity holding steady throughout the second quarter. In the med, we saw strong utilization and day rates in the quarter with the med region really helping to drive overall revenue and margin for the Europe region as a whole.

We do expect small lullum activity in the med region at the beginning of Q3 as we wait for a number of drilling and EPCI programs to kick off in September. But once these all begin, we expect Q4 and into 2027 to be very strong for the region.

In Africa, even with the expected drop in utilization in the quarter, the team was still able to maintain healthy day rates across the region. In expectation of the pick up in demand that we see coming in the second half of Q3 and into Q4. Increased demand will primarily come from drilling campaigns restarting at the end of Q3 in Namibia, as well as a number of production renewal contracts in Angola that are expected to commence in Q4. In addition, there are still several OSV tenders out in Nigeria from all of the IOCs operating in country that we expect will create incremental global demand for the larger PSE classes, as well as the medium-sized HTS classes with all the tenders expected to commence by end of 2026.

Looking further out, strong upstream driving forces appear set to continue to support OSV demand in West Africa. For instance, the Zool Energy's $5.1 billion greater patch project of Angola reached FID in late June, and its 95,000-barap a day FPSO is scheduled to be delivered and installed late 2028. And in Nigeria, the nation's Africa Energy has recently announced a major offshore oil discovery in OML 74.

All in all, we feel very positive for the long-term health of the region. In the Middle East, even with the very challenging backdrop of Operation Epic Fury effect in the quarter, the team still managed to improve both utilization and day rate across the fleet, and although increased operating costs brought down margins, we've not yet seen any slowdown in demand in the countries in which we operate.

We have fact saw a little uplift and short-term requirements as our customers have struggled to find OSV supply to fill gaps in their projects. However, we have seen a pause on some of the longer-term tenders that we were expecting awards on in the cure quarter, but still expect these longer-term charters to still be awarded. However, the NOCs are waiting for a little more parity before committing on some of those longer-term awards.

Overall, sentiment is still positive in the region, but we're obviously watching closely what may or may not happen in relation to the Iran conflict in the coming months.

In the Americas, as mentioned on our last call, we remain excited for the long-term outlook in Brazil, although the market is facing some short-term headwinds related to petribus OSV long-term tendering activity. As Brazilers in the election year, and this is slowing down some decision-making. However, the expectation from the market is that once the elections are finished in Q4, we will start to see a pick-up in tenders again at the end of the year.

Their rates remain healthy in the country, and for our medium-sized-class PSVs are still in excess of $42,000 per day levels, supported by increased activity from the IOCs and EPCI contractors operating in the country. Demand in the Gulf of America has been flat most a year, and we expect that flatness to continue into 2027. But this has been offset by the increase in demand in the Caribbean, and us, as such, will be moving some of our Jones Act vessels to support customers and Suriname Guiana at the end of the year.

We will still maintain a presence in the Gulf, but until we see a significant pick-up in demand again, we will use our global operating platform to look for margin-enhancing work elsewhere in the world.

Lastly, in Asia-Pacific, day rates and utilisation were modestly down compared to Q1. However, we continue to see an upturn and pre-tendering and tendering activity, driven in part by long-term energy security concerns in Asia-Pacific, with particular focus coming from Malaysia, Indonesia and Australia, which all bodes well for the longer-term health of the region going beyond 2027. In the short term, we have several of our larger PSEs commencing work, NQ3 early Q4 in the region, which should mean a solid upturn in utilisation towards the end of the year, and an improvement in day rates as we move into 2027.

Overall, we are very pleased with how the market continues to move in the right direction and fully expect that positive momentum to continue into next year and beyond. And with that, I'll hand over to Sam.

Thank you. Thank you, Pierce, and good morning, everyone. I would now like to take you through our Q2 financial results. My discussion will focus on the sequential quarterly comparisons between the second quarter and the first quarter of 2026, including key operational factors that affected our second quarter performance. Q2 results exceeded our expectations, driven by higher day rates, higher utilization, due to stronger demand and timing of dry dogs, partially offset by temporary conflict-related operating costs, as noted in our first release filed yesterday.

We reported net income of 21.7 million or 43 cents per share. Revenue was 342.3 million, compared to 326.2 million in the first quarter. The increase was driven by one additional day in the quarter, average day rates that were approximately 3% higher than the first quarter and active utilization, improving to 81.4% compared to 80.6%. Rose margin was 160.5 million in the second quarter, compared to 159.3 million in the first quarter.

Rose margin percentage was 46.9%, nicely above our Q2 expectation, and as expected below our Q1 margin of 48.8%. What percentage decline was primarily due to higher vessel operating costs. Operating costs for the second quarter were 181.8 million, compared to 166.9 million in Q1. An increase was expected due to higher R&M work that was pushed from Q1, and higher crew wages and supplies and consumables impacted by the Iran conflict.

In Q2, we encourage approximately 6.8 million of additional costs due to the continuing impact of Operation Epic Fury. And here today through June 30th, we have incurred approximately 9.2 million. Cost directly impacted were insurance costs, and higher crew wages, primarily war, bonus pay.

Indirectly, we continue to see elevated fuel and travel costs increases due to increased commodity price. We will work to minimize these costs, however we do expect to incur additional costs as the long-term conflict continues.

Fuel expense has been heavily impacted since the beginning of the conflict. In Q2, we saw a sequential increase in fuel expense of over 50%. And importantly, we took steps to contractually limit the amount of war-related pay owed to our mariners working in conflict affected areas. This effort led to lower than expected crew costs, beginning in the second half of Q2, and for the remainder of the year.

In total, we are forecasting another 4 million of war-related costs in Q3. We estimate a similar amount of direct costs related to crew wages and insurance costs. In addition, we expect similar increased fuel and travel expenses due to higher global commodity prices.

These fuel and travel estimates are based on our forecasted activity and current commodity prices. Elevated costs related to the conflict likely continue in the near term, though it is uncertain how long this disruption may last.

We are contractually permitted to invoice customers for reimbursement at direct conflict related costs, which includes war insurance and war-related crew wages, which total approximately 5 million through Q2. Currently, we have been invoised close to 1 million and have collected less than 100,000. We have not included any assumed reimbursements in our guidance. However, we will continue submitting invoices for reimbursement for all contractually allowed amounts.

Just at EBITDA for Q2 was 133.8 million compared to 129.3 million in the first quarter. Total G&A cost was 34.8 million in second quarter, which includes 2.7 million of transaction costs related to the Wilson's acquisition.

G&A cost in Q1 was 33.6 million, which included 2 million of transaction costs, including excluding the transaction costs. G&A increased by about 500,000, due primarily to higher personnel costs.

For 2026, excluding M&A transaction costs, we expect tie water four-year G&A costs to be about 126 million, which includes approximately 14 million of non-cash stock compensation.

In addition, we expect to incur approximately 7 million in additional G&A costs in the second half of 2026 related to the Wilson's acquisition.

On the second quarter, we incurred 750 dry-dock days and 23.3 million in dry-dock costs compared to 949 dry-dock days and 36.4 million in cost in Q1. Dry-dock days and Q2 impacted utilization by about 4 percentage points, compared to 5 percentage points in Q1. Our full-year, 2026 dry-dock costs, expectation remains at approximately 122 million.

Typically, the bulk of our dry-dock costs occur in the first half of the year. However, the timing of some projects in 2026 has shifted to the right, resulting in higher costs and days in the second half of the year. Additionally, we expect incur approximately 7 million of additional dry-dock costs in the second half of the year related to the Wilson's acquisition.

In Q2, we incurred 14.9 million of capital expenditures, mainly vessel modifications and upgrades. For the full-year 2026, we expect to incur approximately 52 million of capital expenditures. This amount includes a planned 15 million major upgrade to one of our Norwegian vessels. We also expect to incur about 4 million in additional capex spend in the second half of the year related to Wilson's acquisition. We generate at 64.4 million of free cash flow in Q2 compared to 34.4 million in Q1. Sequential increase was mainly attributable to lower dry-dock spend, higher proceeds from the sale of two vessels and lower cash per machine by working capital.

As a reminder, the following debt refinancing we completed a year ago, we only have small principal payments each quarter, about 6 million per year, that are related to the financing of constructed smaller crude transport vessels. We have no principal payments due until 2030 on our new and secured notes, following the anticipated closing of a Wilson's acquisition.

Our debt maturity and repayment profile will change to accommodate the newly assumed Wilson's debt. We conduct our business through five operating segments. Please refer to the press release and the thank you for details of our segment results.

In Q2, we saw a decrease in consolidated gross margin of close to 2 percentage points compared to Q1. Originally, gross margin increased by 8 percentage points in Europe and Mediterranean offset by 3 percentage point declines in the Middle East and Americas, 4 percentage points in APAC, and about 9 percentage points in Africa.

While margins were down compared to Q2, compared to Q1, they exceeded our expectations, particularly in the Middle East, despite challenging circumstances related to the conflict. The gross margin increase in our Europe and Mediterranean region was primarily due to an 8 percentage point improvement in utilization, driven by fewer idle days and dried updates. The improvement in utilization together within 11% increase in day rates delivered strong results in Q2.

Full operating expenses increased 11%, largely due to the addition of two vessels to the region. Gross margin decreased about 3 percentage points in the Middle East region, while day rates and utilization both improved. Those gains were more than offset by higher costs related to the Iran conflict. Our forecasts contemplates war related costs to continue into Q3. The decrease in the Americans gross margin was primarily due to a decrease in revenue, resulting from a 2% decline in day rates and having fewer vessels in the region. Revenue fell about 8%, and totally operating costs declined about 4%.

Gross margin in the APAC region was 4 percentage points lower than Q1. Day rates declined modestly by about 1%, and utilization was down about 3 percentage points.

However, revenue was up 3%. Due to more vessels operating in the regions compared to Q1. Operating costs rose 4% versus previous quarter, primarily due to the increase in vessels and the mix of vessels operating in Australia.

Gross margin in our Africa segment decreased by about 9 percentage points. You primarily to a 9 million revenue decline costs mainly by an 8 percentage point decrease in active utilization, while day rates remained flat. Utilization was affected by higher idle days. In addition, operating costs increased due to higher R&M costs and higher fuel costs due to the higher idle days.

With respect to the Wilson's acquisitions, we now expect the transaction to close around September 1st, 2026. We are confident in our ability to integrate Wilson's in a smooth and efficient manner, consistent with previous acquisitions. We remain strong believers in the importance of the Brazilian market and are excited about the opportunities there.

From capital allocation perspective, our priorities remain maintaining balance and strength, investing in the fleet, completing and integrating the Wilson's acquisition and evaluating opportunities to return capital to shareholders or pursue additional strategic growth. While we have not repurchased shares this year, our 500 million share repurchased authorization remains available. We will continue to evaluate all avenues for capital deployment and execute on the opportunities we believe provide the greatest long-term value for our shareholders.

In summary, we outperformed expectations despite the headwinds from the conflict in the Middle East. Industry fundamentals remain strong, our balance sheet is in excellent condition and we remain optimistic about the opportunities to lie ahead for tide water.

With that, I'll turn it back over to Clinton.

Thank you, Sam. Dara, we'll go ahead and open it up for questions.

Hey, Jim. Yeah, I will tell you that I'm probably more bullish now than I've been in the last six to nine months. The amount of tendering activity and pre-tendering activity is quite strong around the world.

I was in Asia about five weeks ago and the talk in Indonesia and Myanmar and Malaysia. It's all much stronger than I've seen in a while. So I'm getting really confident about this next leg up in the cycle. But let me turn it over to Pierce, too, because he actually has more contact with the customers than I do, and he may have some other color he'd like to add.

Thanks, Quentin. Hi, Jim. Morning. Yeah, no, I think Quentin hit the mail on the head. We're seeing a stronger improvement. It's probably slightly, you know, we were seeing that at the beginning of the year. So there's been a slight improvement. I think, obviously, Asia Pack, as Quentin mentioned, is very positive. We're also seeing a little bit more work in the Med and also down in Namibia and Angola and a very strong uptake in Nigeria. I mean, like all things, Jim, as you follow this ask for a long time, you know, things can sometimes move a little bit to the right. So you might see a few projects moving to the right. But no, I mean, there seems to be, I would say, better than we expected from the beginning of the year, but maybe a couple of projects, like Nigeria, West African, things never start on time.

So maybe we see a push to, you know, a little bit to the right. But no, I think overall it's very positive. And Brazil, yeah, we're expecting, you know, Brazil to come back pretty strongly and beginning of next year once we get through the elections and put for us already starts re-tendering as well, probably at the end of this year or beginning of Q1. So overall, we're pretty optimistic.

Yeah, well, you know, there's a lot of game day decisions, just because this is all relatively new and everybody's trying to figure out the best way to do it. Pearson and team have been really good at working with the labor force and the Mariners in the area. And in the beginning, we were, there were significant premiums put into place to track and maintain personnel. We've been able to modify that a little bit to bring down those levels.

Insurance is something that our team here works on with our insurance agents that try to keep that a little bit more manageable than it otherwise could be. It was very, everyone was very excited at the beginning of the process. So managing the crew is very important.

The fuel costs themselves are just going to be a product of, you know, the environments. My hope is that all settles down. But, you know, for us, we're learning as we go through this conflict. And I think that our suppliers and our employees are as well. So we're finding new ways to bring that down. And then, of course, you know, Sam talked to a little bit, you know, we're going to begin to build back to our customers, but Saudi Aramco is a strong customer, an important customer and also a difficult customer.

So there's a lot of paperwork involved and it takes a long time to get that rebuilt in place. But my hope is that we'll see all of that come through fruition as we go through the next several months.

Hey, Frederick, thank you. So, the MNA landscape is evolving, and, but there continues to be some really attractive opportunities out there. I will say that, for us, when we think about MNA, you know, we're looking for some strategic element to it. You know, Brazil got us into that market with Brazilian tonnage, and I'm really excited about that. And the full-stand deal that we did really empowered us from a larger vessel standpoint, as well as the hybrid vessel standpoint, and of course, we got back into Asia with a swire acquisition, so it's getting things at the right price, but there's also got to be a good strategic rationale for it as well.

Price is, of course, very important to us. But, yeah, no, I fully expect to see other opportunities develop. They, you know, they take time to work out, and they take time to close, and so forth, but, yeah, my hope is that we'll be able to continue to demonstrate value of creative growth through acquisition in the next year or so.

But, again, you know, the other thing I'll say, Frederick, is, you know, I'm not going to consolidate this entry all by myself, so I do need other people out there doing something, and there hasn't been too much of that. But, you know, everything you hear about, we're not going to be able to participate in or do. But, we're certainly looking for those things that, you know, can have a strategic element, have a good demonstrated strong history attached to the generation.

Yeah, so Frederick, I think I mentioned it on the last column, or maybe the call before last, but, you know, I was looking in the US for a long while. I just couldn't find anything that I thought it was at the right value point for us. So I'm less interested in the US today, but always interested in a good opportunity.

I think the opportunities that are developing throughout West Africa and India, Asia are probably more attractive today.

Well, I'll tell you, you know, West and Pure have a well-built strategy, and they call that real closely. So let me give it over to them, and let them speak to it.

Yeah, hi, Josh. Yeah, I mean, I think I'll let West sort of pine afterwards. But we're still going to, you know, we believe in this market is probably clear from our comments, so we're going to keep a decent amount of ships. Generally, the larger vessels, the larger PSVs, which need support drilling on the large anchor handlers, that's always been the big driver for us. In terms of being able to drive day rates.

But I think, you know, once we start, really, it's going to mention getting to that, really driving that $3,000 to $4,000 a day, uplift on the rates as we go through the gears next year. Then we may start looking to, you know, as we get into 28, go a little bit longer and things like that. But I think in the short term, we're looking to keep a decent amount of availability in the fleet to take advantage of what we see coming in 27 and 28.

So we're not going to change that strategy of going, looking for the shorter term contracts and turning vessels over, because we need to improve contract terms, and we still need to obviously push day rate as well on that side. So that's what we're focusing on as we go into 27.

I don't know, West, do you have any other thoughts on top of that? I want to item and, you know, something we've talked about in the past, which is not all of our vessels are the biggest and best vessels in the world. And so there are a subset of vessels that we are, you know, happy to put on longer term contracts. They just won't necessarily exhibit the same type of relative demand and day rate amplitude that some of our other vessels will. And I think there's a component of that in this quarter's average length of contract, is that there are some vessels that we were happy to put away for a little bit longer. And this is often the case from, you know, a quarter of a quarter with this measure is, you know, there can be some both regional and vessel class.

I want to use the term noise, but noise in there that can do that. And so that's what I'd say, that there are some vessels in there that we're happy to take away on longer term contracts, I think for the larger vessels.

You know, as Pierce mentioned, I think our general philosophy is to continue to go relatively short, as we do believe in the market and continue to push those day rates and contract terms.

Yeah, so I actually think that the show more strength in the future than it's shown in the recent past.

The conflict certainly has the inherent result of actually improving activity levels as you move jackups in and out and around and relocate things. So it's posed a conflict I expect to see a bump in activity, but I also expect to see further developments in activities in that region as people reposition assets and redeploy other hydrocarbon basins into kind of throughout that region. So from my perspective, the customers have not side away from any thinking about what they're going to do in the future and everybody's just excited to get the conflict resolved so they can get back to work.

But Piers, you've probably had more recent conversations with them if there's anything you'd like to add, go ahead. No, I think it's still, sentiment is still pretty strong. I think this is very much short term. I think there's going to be, as Quinn mentioned, when we come out of this conflict, there's going to be a short term bump as people sort of get the products back up and running. A little bit like we sort of post COVID in some ways, where you saw a big kick of people just catching up with what they've had to pause a little bit.

But no longer term, we're still seeing tending activity from all the NOCs we work for in the region. The EPCI guys are, you know, maybe there's a bit of projects pushing to the right, but, you know, there's still FIDs in place, there's no slowdown. And then there's, you know, continue to talk about, you know, putting more dollars into the region as well.

You know, with the, obviously, UAE leaving OPEC and things like that, you know, that's going to cause a, for us, we feel a big uptick in terms of huge demand as well. So no, we're not, you know, we're seeing a, you know, it's going to be positive in the region. I mean, it's always a, as I mentioned, on previous calls, it's always a tough region, just because it's highly fragmented in terms of competition, et cetera, et cetera. But I think from an investment in the region, we're not seeing any slowdown or any expected slowdown from our big customers that we work with.

Sure. So, you know, before the downturn in 2014-15, you know, we were routinely operating vessels into, you know, the high 20s, early 30 year range. And there's no reason why vessels can operate that long. You know, there certainly was in that same time frame, like so, kind of 11 to 14, a bit of a transformation in the sense that vessels got larger. They all stepped up to be about a 1,000 square meter deck or 300, you know, put length overall.

Everybody went to diesel, electrical, and a lot of them went to DP2 and so forth. But there's no technological transformation that's happening today. So, what we saw during the worst part of the downturn, so 16 to 18 in that timeframe, where people putting up age restrictions as a way just to call the number of vessels that were being tendered in every situation.

And so, I fully expect all of that to go away. And right now, it's already started. So, I expect to see the fleet aid still to run for another five or six years before people need to rebuild. And now, what is the price that it takes? Well, in today's market, in today's cost structure, it's in the low 30s that would justify building today.

And, you know, we may get there in a couple of years. I think that takes a couple of strong years to achieve. And maybe a lot of time we get to 29, that can make some sense. But no, the fleet has a lot of duration left in it, in our perspective.

We did, Greg. We had that in our prepared remarks and I'll update you. Let me just grab that for you. We have about 69% of the remaining available days for 20, 26 or captured in our backlog and options, which includes the Wilson's fleet. So, you know, you can look at the remainder of that, if you will, as to what, you know, capacity and just to be clear, what's contemplated in our financial guidance of 80% utilization. So, you know, I think you can use those two data points to determine that answer.

Yeah, probably about right. I think it's a little bit more than that, that's, yeah, we're sort of with, as sort of a wet nudity, there's certain, obviously, some are smaller, less than class, as we've gone a little bit longer term. But, you know, we've tried to keep the the biggest ships available, so it can really push in for 20, 27, but yeah.

I think that's right. I mean, the amount of work it takes to do a three vessel transaction is about the same as it takes a 20 boat transaction, so we've been focused on larger deals. And as I was indicating earlier, if there's a real strategic reason for a particular vessel location or vessel type to be acquired, I'm definitely, you know, very interested in those types of opportunities. But, you know, I made a joke in common earlier that I just can't consolidate the industry all by myself. So I'm glad for some people that started helping me do it.

And so that's great. But, no, not that hustle just won't work for us.

Well, you know, we are doing some of that. And in fact, we're doing some of it in the North Sea right now. But, you know, peers may have a better perspective on whether customers are asking for. There were certainly a couple of opportunities where we're making large investments in vessels, but we're generally pushing them out of the PSP space and into a more specialized space.

I mean, Greg, I mean, I think we're in touch with on the previous comments, I think, to Keith, I mean, there's not being a big technology from advanced in terms of vessel designs or anything. I mean, the only thing that's coming in, I suppose, is putting batteries on the back of the ships and we've obviously got the largest hybrid fleet.

We're seeing a few customers sort of asking about that. But, you know, to be honest, it really comes down to what they're prepared to pay and, you know, cost money to go and retrofit batteries onto, you know, our vessels. And there's a cost to that. And, you know, that needs to be formed by the customer. So, yeah, some of the tenders, they certainly come out and, you know, we've seen some in Brazil and some in the Middle East, they're asking about that.

We'll just have to see if that sort of bears out, but there's nothing in terms of the sort of, you know, do you want to put meth and all or ammonia or these things and, you know, that sort of discussion has really gone away in the last couple of years. It's just not being financially viable, really, in terms of how our businesses set up today.

Thanks, Rick.

Well, thank you, everyone. And we will update you again in November. Goodbye.