Tidewater Inc.
Q3 2018 Earnings Call Transcript

Published: 13 Nov 2018

[Operator:]

Welcome to Earnings Conference Call Third Quarter 2018. My name is Adriane and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Jason Stanley. Jason Stanley, you may begin.

[Jason Stanley:]

Thank you, Adriane. Good morning, everyone and welcome to Tidewater’s earnings conference call for the period ended September 30, 2018. I am Jason Stanley, Tidewater’s Director, Investor Relations and I would like to thank you for your time and interest in Tidewater. With me this morning on the call are our President and CEO, John Rynd; Quinn Fanning, our Chief Financial Officer; Jeff Gorski, our Chief Operating Officer; and Bruce Lundstrom, our General Counsel. Following a few formalities, I will turn the call over to John for his initial comments to be followed by Quinn’s financial review. John will then provide some final wrap up comments and we’ll then open the call for your questions. During today’s conference call, we may make certain comments that are forward-looking and not statements of historical facts. There are risks, uncertainties and other factors that may cause the company’s actual future performance to be materially different from that stated or implied by any comment that we make during today’s conference call. Please refer to our most recent Form 10-Q for additional details on these risk factors. This document is available on our website. Also during the call, we will present both GAAP and non-GAAP financial measures. The reconciliation of GAAP to non-GAAP measures is included in last evening’s press release. Finally, with regards to our planned merger with GulfMark, Tidewater and GulfMark have filed a joint proxy statement with the SEC. Investors are advised to carefully read the proxy statement because it contains important information about the transaction, the parties and the associated risks. Investors may obtain a copy from the SEC website and from each company. The stockholder vote is scheduled for November 15th. While we are continuing to plan for the integration of GulfMark, pending required approvals, comments related to the transaction will be limited to our prepared remarks. If there are updates related to the deal, we'll announce them broadly. With that I'll turn the call over to John.

[John Rynd:]

Thank you, Jason. Good morning, everyone and thank you for joining the Tidewater call. For the third quarter of 2018, we reported a net loss of approximately $31 million on revenues of approximately $99 million. Consolidated EBITDA for the quarter ended September 30 was approximately $8 million, which excludes approximately $17 million in non-cash impairments, but includes approximately $4 million of stock-based compensation expense, and approximately $3 million in general and administrative expenses, related to the proposed combination with GulfMark. Excluding these two items, adjusted EBITDA for the September quarter was approximately $15 million. Quinn will discuss our financial results in more detail in a few minutes. Before I get into our operating results for the quarter, I'd like to provide an update on our pending deal with GulfMark. We anticipate favorable outcomes to both company stockholder votes on November 15th, and we hope to close the transaction on November 15th as well. Post closing our combined team looks forward to executing the integration plan that has been refined over the last four months. Our intent is to quickly and fully realize cost and other synergies that have been identified and to collectively capitalize upon what we believe to be a recovering offshore market. With a large young and high specification OSV fleet and strong positions in key markets such as the North Sea, the U.S., Mexico and Brazil, West Africa, the Mediterranean Sea and the Middle East the combined company would be a global offshore leader that is well positioned to support our customers in any geo market or in any water depth. Overall Tidewater’s increased scale and scope of operations, strong financial positions and more efficient cost structure should be a competitive advantage over other company. We are confident that the combination of Tidewater will benefit all stakeholders. High quality, idle assets and a strong cash position, pre and post combination with GulfMark also allows us to support sensible vessel reactivation as the market continues to improve, provided our customers can help us make the business case to do so. In particular, a combined Tidewater GulfMark will have approximately 30 vessels that are available for reactivation generally within 60 days, if it is economically rational to add capacity to the OSV market. In addition to expectations for better utilization of the active fleet, in future market recovery driven momentum and average day rates, currently idle equipment should be a source of organic revenue growth for Tidewater. For the just completed September quarter, market dynamics generally fell in line with our expectations. Overall activity levels while slightly down from the June quarter, seem to be on a generally positive trajectory. Rate pressure in several regions, primarily driven by continuing overcapacity in OSV sector contributed to lower sequential revenue in vessel operating margin. Ongoing cost reduction efforts however, have allowed the company to generate reasonable margins in percentage terms and to generate positive EBITDA and cash flow from operating activities, for both the quarter and the nine months ended September 30th. As to the outlook, while the trend in commodity prices since early October has been negative, the longer term supply demand story all remain supportive of offshore development. As a result, a number of industry analysts indicate that offshore spending should continue to rise through 2022, with incremental offshore CapEx largely driven at least in the intermediate term by non-domestic deepwater development. Despite the recent volatility in commodity prices, the global offshore working rig count has been relatively stable, and analysts expect the pace of FIDs to accelerate commencing sometime in 2019. While next year’s budget remain a work in progress, tendering activity, requests for quotes, and recent dialogue with key customers and drilling contractors, lead us to expect at least a modest uptick in the working offshore rig count as we move into the second half of 2019. An increase in the working rig count will obviously drive an improvement in OSV utilization, and ultimately an improvement in OSV day rates. For Tidewater, our long standing relationships with the leading national oil companies and IOCs have remained strong, if not improved during the difficult offshore market in the last couple of years. With recent and expected contract awards giving us confidence, that Tidewater will be a primary beneficiary of an increase in offshore activity by companies such as Pemex, Petrobras and Saudi Aramco as well as BP, Chevron, Equinor, Exxon Mobil, Shell and Total. The offshore market is moving in the right direction, but continues to be highly fragmented and [burdened] [ph] with excess capacity, as demonstrated by continued rate pressure in an otherwise improving markets. As a result, we think the pace of improvement will be gradual. [Indiscernible] also suggests that the path toward a broad based energy recovery will likely include a number of twists and turns. Industry costs and financial leverage remain too high, and access to capital, particularly debt capital will likely remain very limited for the foreseeable future. As to the worldwide operating results, vessel revenue was down approximately 7% sequentially. On average, we had 140 active vessels during the September quarter or down one vessel quarter-to-quarter. Active vessel utilization and average day rate were down approximately three percentage points and down approximately 4% respectively. Vessel operating expenses were down approximately 4% sequentially, and vessel operating margin was down approximately 2 percentage points sequentially to approximately 33%. As of September 30th our stacked fleet was sixty two vessels, down four vessels quarter-to-quarter. Moving on to the reporting segment level operating results, average active vessels in the Americas segment at 27 vessels was unchanged quarter-to-quarter. Vessel revenue for this segment however was sequentially down about 14%, primarily reflecting the completion of several projects, utilizing larger Tidewater vessels at attractive rates. In addition, as we discussed in our last earnings conference call, a number of vessel chartered with Pemex in Mexico were extended a lower average day rates. As a result, active vessel utilization and average day rates for the Americas segment were sequentially down approximately one percentage point and down approximately 13% respectively. Vessel operating margin, which had been at relatively high levels in recent quarters, was down approximately $4 million or about 8 percentage points quarter-to-quarter. America’s vessel operating margin for the September quarter was approximately 35%. For the Middle East, AsiaPac segment, which is driven by a larger Middle East operations, vessel revenue in the September quarter was down by about 11% sequentially. As we discussed in our last earnings conference call, this was expected and was driven primarily by pressure on the average day rates, particularly in Saudi Arabia. More recently, we have also observed a pullback in construction activity and other shorter term work across the Arabian Gulf. This also contributed to a sequentially weaker quarter, with the average active fleet down one vessel and utilization of active vessels down about four percentage points quarter-to-quarter. Looking forward, our active fleet count, active utilization and active day rates should be at least stable with shorter term construction related contracts providing some potential upside. For Europe Mediterranean Sea segment, vessel revenue was off approximately 6% sequentially and operating expenses were essentially flat quarter-to-quarter. As a result, vessel operating margin was off approximately $800,000 quarter-to-quarter or approximately five percentage points. Within the European Mediterranean Sea segment North Sea activity remained relatively robust in the third quarter as anticipated with average day rate in the September quarter up approximately 14% relative to the March quarter. Unfortunately, vessel reactivations and return of additional tonnage to the North Sea for the summer month stalled anticipated the momentum in rates. As a result vessel revenue and average day rate were relatively flat sequentially. While we have the reasonable mix of terms and spot vessels in the North Sea active utilization and average day rates should be seasonally weaker for a couple of quarters, and we will look to selectively move equipment to other markets until the 2019 summer season. In our view this will be a difficult winter for a number of more highly levered North Sea Centric vessel owners. Moving to the Mediterranean Sea, vessel revenue for the September was off 10% sequentially. Like the Middle East construction-related activity was somewhat softer than expected. Scheduled and unscheduled payers also contributed to lower utilization of active vessels and higher-than-expected operating cost for the September quarter. With vessel operating margin at or below 20% in recent quarters the Europe Mediterranean Sea segment has been challenging for the last couple of quarters. The recent commitment of new charters for a handful of our larger vessel should however support a positive trend for vessel revenue and vessel operating margin generated in the Med at least for the next quarter or two. In addition incremental scale in the North Sea resulting from a proposed combination with GulfMark should provide opportunities for better cost absorption and improved profitability particularly as we move into the seasonally warmer second and third quarters of 2019. Overall, our West African operations were relative bright spot for the September quarter with modest increase in vessel revenue and modest reduction in operating expenses each contributing to sequentially better vessel operating margin both in dollar and percentage terms. Vessel operating margin for the West African segment in the September quarter was approximately 37%. Nigerian Angola are generally term markets for Tidewater and activity levels in those markets are generally expected to be flat in the near term to intermediate term. As we discuss during our last call upside or downside in vessel revenue for a West African operations will likely be driven by better or worse-than-expected utilization and/or average day rate of vessels that are pursuing short term charge in markets other than Nigerian Angola along the West African coast. Turning now to our ongoing focus on expense management, G&A was again in line with our quarterly targeted $25 million and run rate, cash G&A for the September quarter which excludes stock-based compensation expense and professional service cost related to the proposed combination with GulfMark was less than 19 million or bit less than $75 million annualized. And now, we’ll turn the call over to Quinn to cover some additional details on our financial performance during the just completed September quarter.

[Quinn Fanning:]

Thank you, John. Good morning everyone. As was highlighted in our earnings press release and 10-Q concurrent with the completion of our financial restructuring, the company adopted “fresh start accounting” and will continue to report its financial position and results of operations through July 31, 2017 as predecessor activities. We will report our financial position results of operation subsequent to July 31, 2017 as successor activities. I will also call your attention to the financial tables included with last evening’s press release. Financial results, balance sheet data and selective operating statistics are presented covering five quarters or equivalent periods straddling both predecessor and successor activities. Similarly, operating and financial detail is presented by asset class and based on our four geography based reporting segments. We’ve also included consolidated EBITDA as a non-GAAP performance and liquidity measure as well as reconciliations to the most directly comparable GAAP financial measures. As John noted vessel revenue was down approximately 7% quarter-over-quarter. The average active fleet was down one vessel sequentially to 140 vessels. Active vessel utilization was off approximate three percentage points or approximately 78%, and average day rates were down approximate 4% quarter-over-quarter to approximate $9600. Active utilization in each of the Middle East Asia Pac, European Mediterranean Sea and West African segments was off between two and four percentage points, but active utilization in each of our four reporting segments was no worse than the high 70s in percentage terms. In each of the U.S. Gulf of Mexico, Mediterranean Sea and Arabian Gulf we had assets mobilizing to known work or in dry-dock in advance of starting or restarting contracts. So the negative quarter-over-quarter trend in active utilization for those markets should be somewhat self-correcting in the December quarter or in early 2019. Less clear and the early stages of a market recovery will be utilization of vessels chasing shorter-term contracts which were Tidewater is generally in the North Sea the Middle East and along the West African coast. As we work our way through the December quarter seasonal weakness in average day rates and market such as the North Sea and the US, Mexico should be somewhat mitigated by other markets where we see some modestly positive trends in vessel pricing. We are continually evaluating the profitability of spot vessels, we will relocate or idle additional vessels if we can consistently generate reasonable cash margin based on utilization just a day rates in a particular geo-market or region. As John noted we are also trying to be disciplined in a reactivation of currently idle equipment. While recovery of 100% of our reactivation cost is not always feasible on the initial charter for our previously stacked vessel particularly on a shorter-term charter we do try to preserve current vessel operative margins and recover reasonable portion of reactivation costs that will be incurred by the company to bring stacked vessels back into active service. In some cases the customer may reimburse the company for all or our portion of the reactivation cost as lump-sum mobilization fee. In other cases cost recovery is built in to the agreed day rate. The negative quarter-over-quarter trend in average day rates is most pronounced in the Americas reporting segment. As John highlighted a number of larger vessels rolled off of relatively high day rate contracts in U.S. Gulf of Mexico and in Canada during the September quarter. Results for the September quarter also reflect the re-pricing of vessels working for Pemex in connection with contract extensions that were agreed to earlier in the year. With the exception of lower average day rates in the Middle East which like Mexico reflect previously disclosed rate concessions rates were generally flat quarter over quarter in our other operating areas. Total vessel operating expenses were down approximately 4$ quarter over quarter with lower insurance and loss cost somewhat offsetting high crew costs as a percentage of vessel revenue again driven by rate -- by the recent rate concessions. With that contacts we reported that a net loss for the three months ended September 30, 2018 of $30.9 million or $1.16 per common share. The net loss include $16.9 million or $0.63 per share in non-cash asset impairments that resulted from the impairment reviews that were undertaken during the just completed quarter. In addition general and administrative expense in the September quarter of $25.5 million included $3.2 million or $0.12 per share for professional services costs related to the proposed combination with GulfMark. Also noted in earnings press release was an updated mix of common shares in Jones Act Warrants outstanding which reflects continued progress in the conversion of Jones Act Warrants in the common shares. As discuss in our last earnings conference call we consider the Jones Act Warrants each of which is exercisable to acquire share of common stock at a price of 110% to be the economic equivalent to common shares. As of September 30 the sum of outstanding common shares in Jones Act warrants was approximate $30.3 million. I call this to your attention part to highlight that the reported loss per share is based on weighted average common shares outstanding of $26.6 million and generally excludes outstanding Jones Act warrants. Returning to operating results, vessel revenue and vessel operating margin for the quarter ended September 30 was 97 million and $31.8 million respectively. As a percentage of vessel revenue, vessel operating margin for the quarter was approximately 33%. Vessel operating margin is down approximately $4.4 quarter-over-quarter and vessel operating margin is percentage of vessel revenue was lower by approximately 2% quarter-over-quarter. As John noted, consolidated EBITDA for the three months ended September 30, was $7.9 million. EBITDA on the September quarter excludes a $16.9 million and as impairment charges but includes $3.8 million as stock based compensation expense and $3.2 million of professional services cost related to our proposed combination with GulfMark. Excluding these two items, adjusted EBITDA for the September quarter was $14.9 million. For the nine months ended September 30, 2018, adjusted EBITDA was $28.8 million. Tables reconciling EBITDA to our net loss and cash provided by or used in operating activities were on Page 31 of our press release. Looking at the fleet, the average number of vessels in our fleet for the September quarter was 201 vessels, which is down four vessels from the average number of vessels for the 3 months period ended June 30, 2018. Average active vessels in the September quarter were 140 vessels, which is down one vessel quarter-over-quarter. The stacked fleet at quarter end was 62 vessels or down four vessels quarter-over-quarter reflecting seven vessel dispositions, six newly stacked vessels and three vessel reactivations. As we’ve reported throughout the year, our team continues to prune our stack fleet to ensure our core asset base remains relevant in best positions to support our customers around the world. Year-to-date, Tidewater has disposed of 34 stack vessels, 20 of which were sold as scrap. An additional 13 Tidewater vessels are in the process of being sold, five of which will be sold as scrap. Following the combination with GulfMark, this fleet rationalization process is expected to continue. We cover the importance of scale and we offer services market during our last call. Tidewater will remain well positioned to further lead consolidation in the overseas sector post combination with GulfMark and will continue to actively evaluate additional asset acquisitions and corporate M&A opportunities. Dialogue in regards to acquisition opportunities seems to have picked up in the last couple of months particularly with a number of our Europe and Asia based competitors in the mids of financial restructurings. We are evaluating a number of situations that may make sense to more seriously pursue. As with GulfMark we will pursue additional acquisitions or investments the extent of such acquisitions or investments are accretive to asset quality, improve absorption of shore-based costs, do not materially relever the balance sheet and do not materially deplete available liquidity. We maintain the view that sustained improvement in day rates will require higher utilization of at least the plus or minus 2400 OSVs in the industry that are currently active, available for work or idle but not efficiently designated as in layup status with relevant classification societies. These vessels which generally should not require significant recertification and other maintenance costs tend to be the vessels that are no more than 15-years old and are considered to be the vessels that are most relevant to the end-user customers. In regards to the quarter end balance sheet, as mentioned in our last earnings conference call and again at the top of my remarks today, balance sheet values as of September 30, reflect the delivering associate with our plan of reorganization and fresh start accounting adjustments. Our cash balance at the end of the third quarter at $469 million continue to grow sequentially. Net debt was a negative $26 million at 9/30. Networking capital excluding cash was approximately $146 million at quarter end. Amounts due from related parties, net for amounts to two related parties at 9/30 was approximately $126 million which is down approximately $8 million quarter-over-quarter. Cash provided by operating activities during the nine month period ended September 30, was $22 million. Excluding GulfMark related professional services costs, adjusted CFFO through September 30, was approximately $27 million. Investing activities generated approximately $7 million of cash stream in the nine month period ended September 30 as year-to-date as position proceeds exceeded additions to property and equipment. Financing activities used approximately $14 million of cash and primarily reflects approximately $8 million in cash paid to creditors during the March quarter pursuant to our now completed financial restructuring, schedule principle payments on term debt at our Norwegian subsidiary of approximately $4 million. As noted on previous earnings conference calls, we have no significant debt maturities until 2022. At September 30, we are now remaining on funded capital commitments with the delivery of our final new built PSV on July 31. Looking at long-term assets net properties and equipment which primarily reflect the curing value of 198 ships owned at September 30 was $775 million, which equates to approximately $4.7 million per active ship and approximately $2.2 million per stack ship. As additional data points, I'll further note that on average the carrying value of our 42 deep water PSVs with cargo carrying capacities above 3800 dead weight tons, is approximately $8.6 million per vessel. 22 of those 42 vessels are less than 5-years old and have an average carrying value of approximately $9.5 million per vessel. 16 of the 42 vessels are between five and 10-years old and have an average carrying value of approximately $9 million per vessel. And the remaining four vessels which are plus 10-years old have an average carrying value of approximately $2 million per vessel. On average, the carrying value of our 61 5500 to 10000 brake horsepower AHTS vessels was approximately $2.3 million per vessel. 41 of those 61 vessels are less than 10-years old and at September 30 had an average carrying value of approximately $2.6 million per vessel. In some, our leverage is low, our liquidity is strong, our assets are carried and aggregate value that we believe to be significantly less than both replacement costs and current market values. And we have generated positive EBITDA and cash flow from operating activities for the quarter-end in September 30, as well as year-to-date. Stockholders' equity at September 30 was approximately $943 million or approximately $31 per common share in John's act related warrant outstanding. Based on the trading range this morning of approximately $24 to $25 per share, we seem to trade the plus or minus 20% discount to book equity. If we are in the early stages of an offshore recovery, I suspect that the recent pullback will provide an attractive entry point for longer-term investors based upon both our stand alone NAV and the incremental value that we believe can be secured through a combination with GulfMark. With that, I will turn the call back over to John.

[John Rynd:]

Thank, Quinn. Based on our conversations with customers and the volume of request for tenders and quotes, we think the offshore market is moving in the right direction. However, we expect this to be a gradual improvement. Additional offshore activity will lead to additional vessel demand and higher vessel utilization. But further rationalization of the global OSV fleet is required to support materially higher average day rates. Since emerging from our financial restructuring last year, our team has worked to crave more nimble organization with an intense focus on both cost management and preparation for an offshore recovery, which again we expect to get some traction as 2019 unfolds. Our combination with GulfMark furthers our strategy ensuring we had the right assets, cost structure, financial profile, and operating footprint. I look forward to completing the deal with GulfMark and to leading our combined team as we build upon the two companies' respective strengths in market positions. We will work together over the coming months to quickly and fully realize identified synergies and to create long-term value for our stockholders. Thank you again, for joining on the call today. Adrien, we can now open the lines for questions.

[Operator:]

Thank you. [Operator Instructions] And our first question comes from Turner Holm from Clarksons. Please go ahead, your line is open.

[Turner Holm:]

Hey, good morning, gentlemen.

[Quinn Fanning:]

Good morning.

[Turner Holm:]

Quinn, in your prepared remarks, you talked about some modestly positive trends in vessel day rate but then in at the press release you talked about not expecting any meaningful improvements in day rates until second half of '19 or potentially later. So, I just wanted to dig into that, those two statements and maybe you can help me understand how they quote there.

[Quinn Fanning:]

Sure. We saw your note this morning. We think you're basically on the trail here in the sense that there is probably a distinction in these we made between average day rates and leading edge day rates. Obviously every market is a little different. The North Sea obviously where you got a lot of experience and exposure to is a unique beast as well. We can get to that in a second. And also, there is a contract facing to use your terms. We have seen relatively significant fleets that have been re-priced within the last couple of quarters, we had called these out on our prior earnings call. And that was in regards to Mexico, we're essentially re-pricing of the fleet lagged, the market as a whole primarily because of the political season in Mexico. So, I would say that we were essentially above market rates in Mexico for at least a couple of quarters and that kind of work this way through the wash at this point. Saudi Arabia, where we have another re-pricing exercise on the relatively large fleet. I would say primarily reflects both a customer with high expectations and certainly no shyness in terms of continuing to [quote] [ph] prime rates down. And I would say the influx of Asian competition into the Middle East largely was a cause for rates to move down because of essentially Saudi Aramco was able to press rates given the excess supply there. I think those are two interesting markets in the sense that we see an upswing in activity in both markets and ultimately made the decision to preserve market share in anticipation of incremental activity coming on shorter-term contracts which will allow us to blend rates upwards. If you look at the North Sea, which is a market, you probably know as well better than we do. Our rates year-to-date, if you look at 3Q relative to 1Q are up 14% which is relatively consistent with Clarksons Platou's global survey. So, I guess that’s a positive. Quite frankly we would have expected rates to be up significantly higher than that during the summer season of '19 but obviously with a number of reactivations that took place that served as a bit of a party pooper if you will with in terms of the North Sea. So, I guess we see some positives and we see some negatives out there. Africa is an interesting market for us in the sense that we perceive some vessel tightness which is generally conducive to positive rate trajectory but it's going to be tough to pick a quarter where you see activity move up. But my gut tells me it's going to be within the next couple of quarters. So, to reconcile that back to our comments in the press release in John's comments. We have a lot of dialogue going with customers and the drilling contractors, I think the real needle move here is when you can see the floater count move up and at least where we sit today, we think that that's more likely than not to happen in the second half of '19. It doesn't mean we can make some progress towards better utilization rates between now and then but at least our sense is the needle moves when the floater activity steps up and obviously the recent sell off in commodity prices is not helpful during the budget season but at the end of the day, you can't wish away decline curves and we think that the big guys, i.e. the NOCs, the IOCs are going to start up their deep water drilling programs in '19 and ultimately that flows to the drilling contractors and the OSV companies and we think will be a primary beneficiary. Hopefully that responds to your question but.

[Turner Holm:]

Yes, I think so. I guess one more thing to clarify, Mexico and Saudi, the two markets that you called out that they kind of had an impact here in the third quarter on global day rates. Is that impactfully priced in to the third quarter numbers or is there going to be some continuing kind of rolling onto lower prices in those markets that might have an impact on the total over the next couple of quarters?

[Quinn Fanning:]

I believe it's worked its way through the numbers at this point. It was partially reflected in the second quarter and then I think fully in the third quarter. And as John mentioned, other items in the third quarter impacted those markets, i.e. the lower construction activity. But I think the repricing both in Mexico and Saudi are in the numbers at this point.

[Turner Holm:]

Okay, I appreciate it, Quinn. I'll jump back. Thank you.

[Operator:]

[Operator Instructions] And we have no further -- Turner Holm is in the queue with his question. Please go ahead.

[Turner Holm:]

Sure, I guess I thought I will use the opportunity to get one or two more in. Quinn, you kind of called our Africa there in your response and perceive some market tightness there and there has been market talk about some of the suppliers and so that was the operators in that region running short on capacity and that’s potentially translating into some better day rates. Clearly an important market for you guys, I guess close to 40% of revenue. Could -- it sounds like you're seeing the same things but have you actually seen anyone confirm higher pricing in that market. I mean, where how do you sense the contours about what's happening in Africa right now?

[Quinn Fanning:]

Yes, I would say leading edge rates though there is not a huge number of data points point higher. Really what we see in a lot of business that there is a one well program or other short-term work, so somewhat difficult to extrapolate rate trends. Quite frankly our biggest challenge in Africa and this is kind of transition period from the trough to something that's approaching a normal market hence the recovery in a lot of real-estate excluding Nigeria and Angola trying to play a spot market where it can be very lucrative to do so. But last quarter or so we kind of felt the other edge of that blade which was lower utilization. Hopefully that corrects itself as you get more consistent work and it's less one well or two well programs or short production related work. So, I think most sides point to a positive trend in Africa, I think it's going to be choppy for a couple of quarters though. Which may be good news, may be bad news but it's very difficult to predict the non-Nigerian and non-Angolan activity levels. That said, in Angola and Nigeria but relatively good stories for us in terms of putting additional capacity to work as well.

[Turner Holm:]

Sure. And then just one more for me on the Gulf of Mexico when your competitors has talked about enough swing and then activity and Gulf of Mexico, Caribbean, North and South America, Mexico type market is and talked about actually some improvements on day rates on in some larger vessels is. Are you seeing the same things?

[Quinn Fanning:]

We've had some contracts roll off recently without more very good rates. We've got a couple of vessels and drive out preparing for additional contracts that I would say are attractive. But I wouldn’t call or declare a victory in terms of the market correction in the U.S., Gulf of Mexico but obviously as you continue to expand that includes Mexico, the Caribbean et cetera -- I guess, you can always expand the definition of the problem in order to find plausible solution. But I would say Gulf of Mexico is a market that we're comfortable. We'll see additional drilling activity and oversee demand where we said it seems to be a market with still structurally over supplied, which I assume is why some of these other companies that have had calls or at least public statements are talking about moving equipment from the Gulf of Mexico and the international markets which we agree are probably going to lead recovery. I guess like good news for Tidewaters, we actually have 60-years of experience operating overseas and not all of our competitors can say that.

[Turner Holm:]

I appreciate it. Thanks, so much.

[Quinn Fanning:]

Thanks, Turner.

[Operator:]

[Operator Instructions] And we have no further questions. I'll turn the call back over to Jason Stanley for final remarks.

[Jason Stanley:]

Thank you, Adrien. Thank you everybody for your time and interest in Tidewater today. Have a good rest of the day and feel free to reach out to myself if you would like to schedule any further Q&A at a later time.

[Operator:]

Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating and you may now disconnect.