Conference Call, 01/26/98 - Tidewater Q3 1998 Conference Call

FOOL CONFERENCE CALL SYNOPSIS*
By Greg Markus (TMF Boring)

Tidewater Q3 1998 Conference Call

Revenues (continuing ops):
Q3 '98 $280.7 million (+52.5%)
Q3 '97 $184.1 million

Earnings per share (continuing ops):
Q3 '98 $1.15 (+74.2%)
Q3 '97 $0.66

TIDEWATER INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDW)") else Response.Write("(NYSE: TDW)") end if %>
1140 Canal St.
New Orleans, LA 70112
(504) 568-1010
http://www.tdw.com/

ANN ARBOR, Mich. (Jan. 26, 1998) /FOOLWIRE/ -- Tidewater Inc. owns and operates in excess of 700 vessels, the world's largest fleet serving the international offshore energy industry. The company today reported results for its third quarter of fiscal 1998, which ended on Dec. 31, 1997.

THIRD QUARTER SUMMARY. Third-quarter net earnings including the discontinued compression operations were $74 million, or $1.21 per share (diluted), on revenues of $280.7 million. For the same period last year, net earnings were $43.2 million, or $0.69 per share (diluted), on revenues of $184.1 million. Net earnings in the immediately preceding quarter were $64.3 million, or $1.06 per share (diluted), on revenues of $270.4 million.

CONTINUING OPERATIONS SUMMARY. Revenues from continuing marine operations in the quarter totaled $280.7 million, versus $184.1 million a year ago. Earnings in the quarter were $70.3 million, or $1.15 per share (diluted), compared to $41.1 million, or $0.66 per share (diluted), for the same period a year ago. Earnings from continuing marine operations in the immediately preceding quarter were $61.1 million, or $1.01 per share (diluted).

NINE-MONTH RESULTS. For the nine months ended Dec. 31, 1997, net earnings including discontinued operations were $189 million, or $3.10 per share (diluted), on revenues of $781.5 million. That compares with net earnings of $100.5 million, or $1.61 per share (diluted), on revenues of $498.5 million for the year-ago period. For the nine month period, earnings from continuing marine operations were $179.5 million, or $2.95 per share (diluted), compared to $94.5 million, or $1.52 per share (diluted), a year ago.

COMPRESSION OPERATIONS SALE. Earlier, Tidewater announced the pending sale of its gas compression operations for approximately $360 million. That transaction was anticipated to be completed in early March, but it may now close somewhat sooner than that. Tidewater will use some of those proceeds to pay down debt. Depending upon the Tidewater stock price, the company may reactivate its share repurchase plan, also. Tidewater continues to look at prospects of international acquisitions, as well.

RECENT ACCIDENT. Approximately two weeks ago, one of Tidewater's vessels was involved in a collision with a small fishing boat in the Gulf of Mexico, resulting in six fatalities. Tidewater's position is that they are not at fault; in any event, the company is well-covered by insurance against any adverse litigation, so there would be very little impact on the company's financial position.

FINANCIAL HIGHLIGHTS. At Dec. 31, the company had $354.9 million in debt outstanding, approximately $95 million less than at Sept. 30. During the quarter, Tidewater sold nine vessels for a $10 million gain. The company also had a $1.1 million gain as a result of a final settlement under Tidewater's old pension plan. Tidewater's 10-Q statement is being filed with the SEC today; further financial details are available in that statement.

SUPPLY & TOWING SUPPLY ACTIVITY. This group of vessels represents 75% to 80% of Tidewater's revenue volume. Domestically, Tidewater had 148 supply and towing supply vessels in operation during the December quarter at an average day rate of $7853 and a 91.8% utilization rate. That compares with an average day rate of $7532 and utilization of 91.1% in the September quarter. Internationally, Tidewater operated 227 supply and towing supply vessels during the December quarter at an average day rate of $5655 and an 88.9% utilization rate. That compares with an average day rate of $5440 and utilization of 88.0% in the September quarter.

TOTAL FLEET ACTIVITY. Revenues from vessel operations totaled $264.1 million, split 46% from domestic operations and 54% from international operations. Cost of operations totaled $122.8 million, broken down as: crew costs, $63.8 million; repair and maintenance, $33 million; insurance, $8.3 million; fuel and lubrication, $8.8 million; and other costs, $8.9 million. Across all classes of vessels, Tidewater had 638 vessels in operation during the December quarter at an average day rate of $5380 and an 83.7% utilization rate. That compares with an average day rate of $5127 and utilization of 84.2% in the preceding quarter. Tidewater had 136 vessels in West Africa (excluding some small inland towing vessels), 46 in the Middle East, 99 in Latin America, and 43 in the North Sea.

SOUTHEAST ASIA. Excluding Australian operations, Tidewater has 42 vessels in this market (51 including Australia). Revenues in the quarter, excluding Australia, were approximately $18 million there, with operating income (excluding G&A and depreciation was) just under $10 million. Average day rate was $5100 and utilization rate was just over 90%. So Tidewater has relatively little exposure there, and what exposure it has is generally with U.S. customers operating there or with large international oil companies.

CRUDE PRICE DROP. So far, the drop in the price of crude has had no impact on activity at all. Tidewater knows of no customers who are curtailing their activity because of the drop in oil prices.

OTHER MARINE ACTIVITY. Brokered vessels, shipyard activity, and other marine activity brought in $16.6 million in revenues and gross profits of $3.4 million. That compares with revenues of $15.0 million and gross profits of $3.8 million in the preceding quarter.

INTERNATIONAL GUIDANCE. Vessel utilization continues very strong, with very few of Tidewater's vessels available for hire. Increases in rates are still being recorded in many areas of the world in which the company operates. Internationally, Tidewater expects very high vessel utilization internationally in the current and next quarter, and probably through FY99. About the only exception is in Nigeria, where there has been some slowdown due to the Nigerian government's unwillingness to meet the cash requirements expressed by the exploration and production companies there. Tidewater has moved some vessels to other locations in West Africa and in some instances to South America to offset that situation.

DOMESTIC OUTLOOK. Domestically, Tidewater is very busy in the current quarter and is considering the possibility of announcing a day rate increase in perhaps one month. Additional vessel capacity is expected to come on line in the middle or late summer in the Gulf of Mexico (GOM), although some of that may be delayed. When that new capacity enters, it will probably affect day rates. Tidewater intends to maintain its market share and its employee base, and the company will do "whatever is required" to guarantee that, in terms of adjusting its pricing. A substantial part of Tidewater's fleet is under term contracts that run in some cases into 1999 and will be unaffected immediately; but other vessels will be. Tidewater has no plans to move any of its vessels from GOM to international markets, nor will it scrap vessels merely to accommodate competitors. Longer term, as new drilling rigs come on line, that could soak up any excess capacity in the GOM for vessels; the vessel capacity will probably enter before the new rigs do, however.

OTHER GUIDANCE. Tidewater expects marine operating costs in the March quarter to run approximately $124 million. The March quarter contains two fewer days than the December quarter did, which translates into approximately $6 million in revenues at current rates.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.