Tidewater Inc.
Q3 2008 Earnings Call Transcript

Published: 1 Feb 2008

[Operator:]

Good morning. My name is Jennis and I will be your conference operator today. At this time, I would like to welcome everyone to the Tidewater Fiscal 2008 Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. [Operator instructions]. At this time, I would like to turn the conference over to Dean Taylor, Chairman, President, and CEO. Pleas go ahead, sir.

[Dean E. Taylor:]

Thank you very much, Jennis. Good morning everyone and welcome to Tidewater's fiscal 2008 third quarter earnings conference call for the period ending December 31st, 2007. I am Dean Taylor, Tidewater's Chairman, President, and CEO and I will be hosting the call this morning. With me today are Keith Lousteau, our Executive Vice President, Chief Financial Officer; Joe Bennett, Senior Vice President, Principal Accounting Officer and Chief Investor Relations Officer; Steve Dick, Executive Vice President in charge of Strategic Relationships, Shipyard Operations and Vessel Acquisitions and Dispositions and Bruce Lundstrom, our Senior Vice President, General Counsel and Secretary. We will follow our usual format this morning. I will start with a few brief comments about our just released earnings. Following my remarks, I will turn the call over to Keith for detailed review of the financial results as well as the status report on our fleet renewal program. I will then return with some observations about our markets and our strategy. We will then open the call for questions. At this time, I will ask Keith to read our Safe Harbor statement and then we can get started.

[J. Keith Lousteau:]

During today's conference call. Dean, I, and other Tidewater management may make certain comments and statements which may be considered forward-looking. I know that you understand that there are risk, 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 may make today during this conference call.

[Dean E. Taylor:]

Thanks, Keith. Okay, let's get started. Early this morning, we reported earnings for the December 31st, 2007 quarter, our third fiscal quarter of 2008 of $89.4 million or $1.66 per fully diluted share. That was $0.14 per share above the First Call Consensus estimate. Company's vessel revenues increased by 4.5% from the previous quarter. And our earnings per share increased by $0.10. Let me make two points about the quarter's results. First, this past quarter's positive results were overwhelmingly driven by strong operations, and in particular strong international operations. The health and growth of the international marketplace enabled us to generate $600 sequential quarterly increase in our overall international fleet average day rate. That mirrors on similar $600 day rate increase for our international based towing supply… supply fleet in the September quarter. Looking forward, we expect further positive rate momentum internationally, as international markets remain strong. Overall, fleet utilization this quarter was essentially flat with that of the second. So, our day rate improvement was truly about having the right vessels in the right markets and working for the right clients, we are willing to pay for Tidewater's operational expertise and on the ground supervision. Second, we generated only minimal gains from asset sales during the December quarter which tax adjusted accounted for only $0.01 of earnings compared to $0.03 in the previous quarter and $0.13 in the year ago quarter. As many of you know, we generally post pre-tax gains on sales of about $1.5 million to $2.0 million per quarter. At last quarter a number of vessel sales we anticipated slipped into the current quarter. Therefore, our quarterly results reflect real operational earnings and suggest that we are starting to hit our stride with growing contributions from our fleet renewal programs as we also benefit from our worldwide operational equipment. With respect to our safety program, this year has been a more difficult year than year's past. We continue to be disappointed with our Lost Time Accidents. So, our total recordable incident rate is the second best in the company history. The fatalities that have occurred are unacceptable. Although two occurred while trying to save the lives of crewman, were abandoned to rig in distress. Workplace safety is an area where we must do better and our pledge to our employees, our owners, and our customers is to continue to work to provide an accident free work place in an industry that is not without risk. With that I will turn the call over to Keith to walk through the numbers.

[J. Keith Lousteau:]

Good morning, and thank you everyone for joining the call. Making today's financial presentation is certainly a joy on my part as I think, the numbers as we walk through will review certain number of positive trends that are inherent in the Tidewater numbers as we speak today and hopefully will be there as we go forward. We have had in the last two days, just a reminder, we've actually put out three press releases. Yesterday we announced a new Director had joined the Board, yesterday we had an announcement of our normal routine dividend having been declared, and an increase to the company authorized stock buy back program, the program that is outstanding at the moment, and this morning we put out the expanded version of our earnings release with many of the supplemental tables included in it. As we will not be filing our 10-Q until perhaps mid-next week, which is when we do anticipate filing it, so we wanted to give out as much of a statistical information as possible. We think there are many positive trends that we are going to get into here, I even need to thank that the calendar makers a little bit, and remind those who follow the company very closely, that this is a leap year. Generally our March quarter is one where we suffered two less revenue days than the previous quarter and this year whenever we are reporting on the March quarter, we will have had 91 days of activity, versus 92 days for the last quarter. That extra one day is not an insignificant event now that worldwide revenues are approaching $3.5 million per day. Looking at the numbers themselves, as Dean mentioned briefly, overall marine revenues were up 4.5%. Of significance was the overall income tax rate, for the year is now anticipated to coming in at about 18% and you can appreciate to closer we get to year end, the better our estimate can be on that number so, I would anticipate the tax rate in the full quarter being right on the same 18%. I am also glad to say that, vessel operating cost which came in at a $148.7 million for the first time in a couple of quarters hit right within the range of the guidance that we did give on this phone call a quarter ago. Earnings, as Dean commented were $1.66, up 6.4% from the previous September quarter, when we reported a $1.56. We had about $53.8 million shares outstanding for the quarter and a quick bit of information on the March quarter going forward we were quite aggressive in the stock buy back arena. During the last quarter we expended $116 million, we bought back 2.3 million shares of stock, so I would anticipate even if we don't no additional acquisitions of stock, during the next quarter, that our average shares for purposes of calculating EPS in the March quarter will be right at 53 million shares. That would include the current shares outstanding plus what we think would be the stock equivalents, so we think the number on go forward basis, will be about 53 million for any additional stock purchases that might take place. Looking at the details of revenue for the quarter as we mentioned, revenues were up 4.5% but I think significantly varied in the numbers as just the fact that domestic revenues at 36.7 million only accounts for 12% of Tidewater's current revenue base. International operations for the December quarter now will account for 88% of our revenues. Going back 1 mirror year ago, going back to the December quarter of '06, domestic revenues made up 20% of our revenues and obviously international made up the other 80%. So it's a trend from 20% a year ago to 12% now. We think it will continue in regard to that and that we will be talking here, but the domestic market being a little bit static whereas we think our growth is certainly still to be forthcoming in international operating arenas. Operational profits were even more significant, in that our domestic operating profit only accounted for 2% of our worldwide operating profits. So 12% of our revenues down from 20 operating income at 2% international operations making up 88% of revenues and 98% of operating income. Operating cost coming in at $148.7 million as we mentioned accounted right in the range of where we anticipate it being. One of the other items we would like to point that the total increase from $142 million last quarter up to the $148 million this quarter actually came from new boats delivered during the quarter. We felt like R&M was going to be down a little bit. R&M numbers... we anticipated, I am sorry, them having been up about $2 million. It came in right where we anticipated and then the excess of growth in cost was not from any specific trends on the cost line but it came in from additional vessels being delivered, as I mentioned seven during the quarter. We anticipate four vessels being delivered during the March quarter. We anticipate R&M being down a little bit in the March quarter based on budgets, as we know them today. Giving guidance on the March quarter, we think something in the 149 to 151 range is the safe guidance number at the moment, but please be aware that items such as insurance depending upon your safety program because we do have such a large in-house deductible program, emergency dry-docks could cause that number to fluctuate a little bit but based on the trends, based on the scheduled R&M as we see it, numbers of about 143 to 151. Looking at some of the individual classes of vessels during the quarter and one of the things is now that we put out the kind of expanded version of the press release many of you already have these numbers and have noticed them. Looking into Deepwater segment of the domestic operations where we continue to have about eight vessels operating, day rates were pretty much static during the quarter. We are reporting a number of 23,250 which was almost perfectly in line with last quarter's 23,382. Utilization for the quarter was down a little bit as we actually dry-dock three of those bigger boats and day rates still held pretty steady. Utilization holds [ph] at about 90%. We are glad to report that during the latter part of the quarter of December and through January we currently are operating at a 100% utilization in that class of vessel. The domestic, what used to be the old backbone of the old Tidewater number years ago to supply towing supply vessels showed a noticeable drop in average day rate during the quarter, whereas in the September quarter where we reported an average day rate of $11,856 the December quarter we are reporting a number to you of about $10,400 and as we sit here today we think that number is more in line with about $10,000 per day average is where we are operating at as we sit here today. Not only were day rates in that class down domestically but the utilization was also down. We averaged about 46.1% during the quarter as we are now. We are not doing a lot better. We are operating at about 48% of utilization in the Gulf of Mexico now. So our story from a revenue base is one where revenues were actually down during the quarter domestically from earnings potential tied to the… specifically to the dry docking of the three bigger boats. But once again, a market that now accounts for no more than 12% of our overall worldwide revenues. Looking at the international market as Dean has already mentioned to you, the trends continue to be very positive for Tidewater and as we now have 368 vessels assigned to international operations versus only 56 domestically, certainly the area that's much more meaningful to Tidewater and its future economic performance. Our 30 deepwater vessels during the quarter, we are reporting an exceptionally high increase in day rate there of $2557. You remember on the conference call, last quarter we spoke a loss revenue due to the dry docking of some of the larger international vessels, we count those days as revenue generating days, we count those as having no revenues, so they do affect your average day rate that you're reporting. We are happy to say that, that increase up to 24,980 that we are reporting in our statistics continues though today. Today we are averaging a number of that somewhere in the $25,300 per day range. Utilization today continues as good as it did last quarter. Today we're running at about, 91.5%, 91.6%. Last quarter we reported 91.4%. So an area that remains quite strong. Our bigger vessels are bigger handling towing supply vessels are all on term contracts at the moment. It's an area that should stay stable for quite a period of time. Our international supply... towing supply vessels once again this is the segment that showed about a $600 increase in average day rate last quarter. This quarter, we are showing an additional $375 increase in day rate, the average day rate was $10,455. Utilization was strong last quarter at 79.2%. And going forward, as we sit here today, we're still averaging right at 79%. Of significance, as Joe remind me this morning, in this class, many people concerned about Tidewater's older fleet, its earnings capacity in today's market, we'll have the 226 vessels in this class, we estimate between 175 and 180 are the vessels that fall within our mature class with vessels. So, almost $1000 a day increase in a class that's supported by almost 80% of the vessels being our older matured vessels. As Dean mentioned, total of 368 vessels working internationally, on a worldwide basis the average day rates was up $600 per day. Looking a little bit at balance sheet, obviously balance sheet remains quite strong, cash is down a little bit quarter-on-quarter by about $100 million directly tied to the stock back. As I said we were rather aggressive during the quarter buying back $116 million worth of stock. A note here just to show the world that stock buyback is not something Tidewater is paying lip service to. We started a stock buyback program a little over two years ago. We refer to them as our 2006, 2007 and 2008 program. To-date over that period of time, we've bought back 8.2 million shares of stock, we've expended $443 million of money returning it to our stockholders. That's an average price over that period of $54. Had those shares not been purchased, had we not made that additional investment in our own marine operations, today's shares outstanding would be about 13.5% higher than they actually are. We continue to carry $300 million of debt on the books; since stockholders' equity has remained relatively flat because we did buy back the $116 million worth of stock, our gross debt to total capital ratio about 13.8% on a net basis, after taking off some cash we're down in the 3.5% to 3.7% range. Just a quick liquidity comment, we will address kind of liquidity in the 10-Q. But, we have been meeting with our banks, we've been meeting with our historical sources of capital and liquidity. And at this stage of the game it is our view that the current subprime market and some of the lending crisis going on around the world have certainly not risen to the point of affecting Tidewater's ability to attract capital. If we needed for the right acquisitions or for new bills and certainly rates available in the capital market to us are still at historical that just slightly operates. So, not a situation that's causing much concern to us at the moment. Our total new build backlog at December 31st, as you will see from the disclosures, this morning we've got 43 vessels under construction. That's made up of 17 vessels that are being built for the deepwater segments of world. 21 vessels that are anchor handling and towing-supply. We've got two crew boats under construction and three tugs under construction around the world. We published a schedule today that, when we anticipate deliveries, one quick administrative note, our engineers this morning gave us an update and... on the table that we published going out from March of '09, one of the anchor handling towing-supply vessels that was anticipated at that point has been moved into the 2010 fiscal year. So that there is a two there, should be a one, but the table will show that we've 17 vessels scheduled for delivery in the next fiscal year. Cash commitments, as you'll be able to see from the tables, we've got about $793 million of commitments to build those 43 boats. $250 million of that has already been funded. We have about $543 million yet to fund. That funding looks something like the March of '08 quarter right at a $100 million of cash to be funded. Fiscal '09 cash disbursements are scheduled to be about $266 million, and in the fiscal 2010, about $169 million of capital commitments are anticipated. And then, that would just leave us beyond 2010 with very little commitments on the books something between $8 million and $10 million. Dean, I think that wraps up the comments I was planning on making this morning as I have told you we are going to be publishing substantially more information than we've generally would have had before the conference call, so that some information that's already out there, that's pretty much my comments. Just be reminded, in next quarter we've got one less table, we've got a noticeable difference in the number of shares we should have outstanding.

[Dean E. Taylor:]

Keith, Thanks very much. I would point out to everyone, I was confused in a couple of conference calls so, and Keith gave some guidance on costs and someone is looking on revenues. I just want to point out again that the guidance that Keith gave was for costs, we do not give guidance either for revenues or for income. As Keith’s review of the quarterly numbers suggest, we are starting to hit our stride, as we thought we would during this fiscal year, although it's coming a little later than expected. Activity on the Gulf of Mexico shelf is yet to measurably improve, and we continue to right size our fleet there. Whenever we have opportunities to shift vessels to contracts to other markets at higher day rates and/or longer terms. We will continue to improve our cost structure in the interim. As Deepwater and the Gulf remains the domestic industry's focus for now, we will continue to upgrade our fleet to better serve it. As of the end of December... of the December quarter, we had 17 vessels under construction that are designed to serve the worldwide deepwater market when delivered over the next several fiscal years, including three vessels that can serve the domestic market. Though shallow water activity remains depressed in the gulf, my belief is that between the delivery of additional jack-ups into the worldwide fleet, and an eventual increase in the price of natural gas, exploration and development activity in the region will recover. We remain well placed for that day without sacrificing meaningfully our near-term earnings power. Today, however, the story for Tidewater and the oil service business is about international business opportunities, whether it's offshore Mexico where NX [ph] is ramping up its drilling program, North Africa with its huge discoveries encouraging both new exploration and new development activity, or in Brazil where the latest giant oil discovery was recently announced by Petrobras. The oil service industry is being presented new and expanding business opportunities. While the pace of ordering of new offshore drilling rigs has slowed, approximately 160 rigs are under construction for delivery over the next four years, a nearly 30% expansion of the high performance segment of the offshore rig fleet. Those new rigs will challenge the offshore vessel industry to upgrade its fleet to meet the needs of these hi-tech, high performance rigs. As Keith has documented, as things now stand, Tidewater has 21 new high performance vessels scheduled to be delivered over the next five quarters, including four in this current quarter, another 20 in the fiscal year ending March 2010, with the last two vessels under our current construction program to be delivered thereafter. The company is also in advanced negotiations to construct 8 additional very large deepwater PSVs. That if consummated will bring our outstanding commitments for new build vessels greater than $1 billion. The new vessel segment of our fleet, those added since the year 2000, now accounts for just over a quarter of our total fleet. We generated 56% of our operating profit in the December quarter. Our fleet renewal program is in high gear. Our financial results are demonstrating positive returns on the moneys we have invested. Keith also covered with you the significant number of shares that we repurchased under our current share repurchase program during the December quarter. Since we had used the majority of the funds originally authorized by our Board of Directors in our current program yesterday management side and received authority from our Board for an additional $50 million allocation to this program, bringing our available funds yet to be spent to $72.5 million. We will again re-evaluate the program for another renewal sometime before the expiration of the present programs on June 30th, 2008. Although our preference remains to acquire vessels or fleets at the right price, we believe that stock buybacks remain an appropriate tool for providing returns to our shareholders, and we will remain opportunistic and proactive in our authorized share repurchase programs. As I've discussed before, Tidewater strategy is straightforward. We will remain the leader in the global offshore supply vessel industry, striving to provide our clients with the right equipment in the right markets in order to help them achieve their objectives. We will invest in new vessels in order to renew our fleet to sustain and ultimately grow our earnings generating capacity. We will strive to provide the safest workplace for our 8,000 employees and we are dedicated to operating with the highest of ethical standards and could be known as an employer of choice. We will work to achieve these goals while retaining our strong balance sheet and financial flexibility. We will remain prepared to capitalize on the right acquisition opportunities that may present themselves, if priced correctly, and it would enable us to achieve our goals faster. Lastly, we are committed to creating shareholder value through our dividend payments, stock repurchases, and a higher share price. With that let's open the line for questions. Janet? Question and Answer

[Operator:]

Thanks. [Operator instructions] Your first question comes from Bill Herbert of Simmons & Company.

[Dean E. Taylor:]

Hi, Bill.

[William Herbert:]

Thanks, good morning. How are you, Dean?

[Dean E. Taylor:]

Doing well, thanks. How about you?

[William Herbert:]

I am well, thanks. The international markets continue to be really strong and they have been stronger for longer than most have expected, especially in light of the fact that we can… we continue to have a decent onslaught of new boats being introduced into the fleet and I guess, that means that people have underestimated the international demand pool, as well as the obsolescence factor. Going forward, given the amount of capacity that's coming on, do we still expect this pricing strength to persist and why?

[Dean E. Taylor:]

Bill, I am haven't been surprised or at least that surprised by the strength of the international markets, I think I have been saying in the last few conference calls, it's obvious by the performance of our share prices, nobody was believing me I think that at any rate… no I felt like we still continue to feel like that the obsolescence factor in the worldwide fleet is something that's hard to ignore, but it's not... that is not factored into sort of some individuals, some individual's calculations as to what's going to happen as the new vessels come into the fleet.

[William Herbert:]

I would agree.

[Dean E. Taylor:]

So, you know there are 160 rigs on order, there are 70 plus FPSOs, FSOs, Spars [ph] TLPs etcetera. The deck load capacities is something also I think that was brought to my attention by one of our Board members. He was telling me that he felt like more rigs would be… more vessels were being needed at these deepwater locations simply because of the model of equipment that operators were asking rig contractors to keep on their rigs.

[William Herbert:]

Right.

[Dean E. Taylor:]

So that there is... so all those things I think are leading to a situation where when you are asking if I am concerned about the capacity coming into the marketplace, I am.

[William Herbert:]

Okay.

[Dean E. Taylor:]

And I have said that every call for the last four or five calls. But by the same token, I am not as concerned as some others might be, and I think we look at our contract cover going forward and it's pretty good, including not just the new boats but the old boats and we are continuing to see rates roll over in a positive direction. So, one day I mean... I'm not even sure that this is right, but I just [inaudible] one day there is going to be too much capacity out there. People have been saying that for the last three years.

[William Herbert:]

That's right. Yes.

[Dean E. Taylor:]

And I think that maybe they will one day, but I don't see it anytime soon. I think the obsolescence factor is... you know and some of those are ours.

[William Herbert:]

Sure.

[Dean E. Taylor:]

But I think that is a factor that has not been given enough attention in sort of the analysis of the supply demand balances.

[William Herbert:]

So really as far as you can tell, it sounds like your outlook is continued methodical, steady improvement?

[Dean E. Taylor:]

Certainly for this company, that's our target.

[William Herbert:]

That's great. Thank you very much Dean.

[Dean E. Taylor:]

Thank you.

[Operator:]

Your next question comes from James Crandell of Lehman Brothers.

[Dean E. Taylor:]

Hi Jim.

[James Crandell:]

Good morning Dean.

[Dean E. Taylor:]

Sounds like you got a cold.

[J. Keith Lousteau:]

Sounds like he disappeared.

[Operator:]

Yes. Mr. Crandell your line is open. Please proceed with your question.

[James Crandell:]

Hello, can you hear me?

[Dean E. Taylor:]

Jim, we hear you now.

[James Crandell:]

I'm sorry. Dean or Steve, what's been your experience with Tidewater and anecdotally what do you hear about the industry on vessels being delivered on time, on budget?

[Dean E. Taylor:]

Steve will take a crack, and I'll add to it. Steve has got more hands on experience at this moment.

[Stephen W. Dick:]

Jim for some quarters back, we were pretty much on target. We are beginning to see some of the erosion in the delivery times and almost to an instant, yes it is tied to equipment delivery, there was one that was not, it was the wrong equipment that was delivered, but we are seeing a little bit of slippage. Sometimes a month could be up to three months on some of the deliveries that we have coming out. For a long time, we were on time with everything or even a little early. That's getting to be a little bit more of a struggle. As far as budget, we've been on budget or under all of the deliveries so far and I don't think we se anything that will change that. The delivery on time is a little concerning for us, but it's an industry-wide thing, but I think having our supervision on the ground as we do, we get to not have some of the other problems where people leave it to the shipyard to manage the projects. We are hands on, so we do get the information in a timely manner, but there are some delays on the equipment.

[Dean E. Taylor:]

Jim, on the industry side, last year, there was supposed to be about 200 vessels delivered, in 2007. But our calculation is only about 140 were delivered. So, that means there was... certainly there was 60, it looks like 60 are late. I think this year there is supposed to be 230 plus delivered not including, I don't know whether that number includes the 60, the work delivered last year or not but the last number I saw was about 230 this year. And I would estimate and this is just a pure rank guess. But I would estimate probably the 60 to 75 probably won't be delivered this year, just a guess. And I think the 38 jackups that are supposed to be delivered this year. Last thing I saw are most of those seemed to be on schedule. Some late deliveries [inaudible]. That's what I know about sort of the industry wide as we speak.

[James Crandell:]

Are you aware Dean that either you are at late deliveries or the industry late deliveries have forced delays in that joint programs?

[Dean E. Taylor:]

I don't think so. I think what happens is that all boats that may have been shoved out of the marketplace sooner are staying in the marketplace until some of those new boats are delivered.

[James Crandell:]

Okay. Dean, question number two is what are the largest sort of cost/manpower issues that you face here in 2008?

[Dean E. Taylor:]

Well, I have to be careful. We are getting ready for annual salary reviews. Anything I say, Crandell will be used against me. I think the biggest challenges are in sort of dry-docking some of our older ships, the ones that we want to continue to invest money and we are seeing some cost pressures there. Certainly, we had seen a year-and-half ago in the United States Gulf, a lot of pressure on crude cost, but that has diminished substantially as we moved equipment out of the Gulf. There is certainly pressure on the international marketplace on our shore side personnel, people who are trying to build the business, what they try to do is take people from people who are already in the business and that's us. And with our worldwide international footprint there are a lot of people trying to rate… lot of companies are trying to rate our company for personnel, supervisory personnel as well as [inaudible] masters and chief engineers. So, there are cost pressures internationally and I don't expect that they will diminish as in the near future. I think we will continue to see some cost pressures on personnel side and we are going to see cost pressures on the dry-docking side. If you... when you get to queue or you look at our numbers, you will see that most of the cost pressures that we've seen in the last few quarters have at least in our numbers have related to either dry-docking some of our big ships or putting new vessels into the fleet. And on the whole, I am relatively satisfied with what we have been able to contain the cost pressures?

[J. Keith Lousteau:]

Jim, this is Keith, right. Our cash operating margins have remained quite stable for the last six months. One of the evolving trends that we are not certain what the overall effect is going to be yet, but it has to do with China and China's currency. China's currency is being allowed to float, it's becoming more expensive versus all other currencies. So, new construction activity non-contracted both in China as Steve just returned from a trip there again. The shipyards are starting to be quite concerned and shipyards are trying to escalate either prices or to roll contracts into the local currency and against the U.S. dollar. We are proud and we are glad to commit to you or comment to you that every contract we have in China is U.S. dollar, it's U.S. dollar denominated. There is no adjustment for the local currency but it may have a dampening effect on additional new orders by anybody coming out of that country. It has been kind of the place of choice for new construction in the last couple of years. They are seeming to have some new significant internal cost pressures and it deals with currency exchange more so than labor or anything else.

[James Crandell:]

Okay. Last question. Dean, I was under the understanding that given these significant number of deepwater vessels you had under construction that your main focus was going to be to build new international class anchor handlers. Now, you say you are under advance negotiations to build eight new deepwater vessels, could you elaborate a little bit on that?

[Dean E. Taylor:]

Well, Jim I think my feeling is that we will continue to build mid water anchor handlers. But, I feel like when you look at order book for deepwater rigs, all but one of the deepwater rigs on orders are DP. Some are dual purpose, some are DP [ph] and more but I think 79 out the 80 or 74 out of 75 whatever the number is all but one of the new deepwater rigs of the... are going to DP, deep. So I actually think that very large high end deepwater anchor handlers market runs the risk of being over built. The other thing that I think is that that segment of the marketplace has all new vessels. So there is no obsolescence factor could be... that one could consider old vessels falling out of that market, the very large deepwater anchor handling market is composed of vessels, for the most part all ten years old or newer. So it's not like other portions in the marketplace where there is some obsolescence that I think will help the overall supply/demand situation. Since the most of the deepwater rigs are going to be DP. We feel like particularly the specifications of these vessels that we are in advance stages of negotiation are very, very impressive. And I think that cost is... are reasonable. And I think that when we... if we can finalize this contract negotiation, we are going to be very competitive with these vessels. So that is my thinking, I don't know where you got the idea that we were going to be in very deepwater large anchor handlers. I think I have always said that our focus was mid water anchor handlers.

[James Crandell:]

Yes. I thought I understood you to say that these new... eight new vessels were deepwater vessels, what class are the eight new vessels that you are going to get?

[Dean E. Taylor:]

They are deepwater, but they are PSDs.

[James Crandell:]

Deepwater PSDs, and how much would those cost ballpark per vessel?

[Dean E. Taylor:]

Jim, I'd rather lay off of that for the time being but the... we think... we think, if we can conclude the negotiations, we will have nice returns on those vessels.

[James Crandell:]

Okay. Nice job in the quarter, and thank you, Dean.

[Dean E. Taylor:]

Thank you, Jim for talking to you.

[Operator:]

Your question is from Jud Bailey of Jefferies & Co.

[Dean E. Taylor:]

Hi, Jud.

[Judson Bailey:]

Good morning. First of all Keith, I apologize if I have missed it, but did you give us the current day rates for your US deepwater fleet and also the international supply towing supply?

[J. Keith Lousteau:]

Yeah, the deepwater fleet in the Gulf is fairly consistent where we reported the quarter. We reported the quarter at 23,256 and we are within a few of dollars of that. We are still running in the 23,200, 23,250 range, and we are running a 100% utilization. The international supply… towing supply, we are running after the substantial increases over the last two quarters. We are up about another, it looks like about $70 today, we... we finished the year and went into January averaging about 10,514 is the exact number I have here. So, that looks like it was up about $69, $70 from where we ended the quarter, but remember those numbers we compile kind of early in the months that are they exactly where we are today versus where they kind of where we ended the quarter versus the average and somewhere between where we ended the quarter and today's actual number is what we calculate.

[Judson Bailey:]

Okay, thank you. Next question, Dean, another stab at the international demand question. If we look back over the last twelve months, as you've noted without 140 vessels delivered during that same time, the offshore rig counts may be up marginally. I just like to get your thoughts aside from perhaps more vessels being used per rig, what are the other pieces of demand out there that are absorbing some of the vessels? I mean is it construction, is it other applications all together, I'd be just curious to get your thoughts on what are the other demand drivers that are more difficult to quantify?

[Dean E. Taylor:]

Sure. If you look seismic backlogs, probably never been high. Construction backlog is probably never been high, if you look at construction companies, their backlogs are tremendous, seismic companies, their backlogs are tremendous, and then you look at production and the development and the exploration parts that. So, those five segments really comprise the things that we do and normally construction is a trailing indicator, Seismic is a leading indicator and we were in a situation where both the leading indicator and the trailing indicator are… the backlogs are at all-time highs. So, those are the five things that… those are the five segments that our vessels participate in, certainly the construction, but one of the thing... nicer things about the construction market is that customers aren't quite as demanding like year built of the vessels of some of our older equipment works quite well in that segment. Same with some of the vessels that participate in the seismic operations, the chase boats and other support vessels in seismic, they are not too hung up on year built and the year the vessel is built so some of our older vessels did well in that category. And I think as some of the FPSO, FSO, Spars, TLP and they continued to be sort of inter-stitched into the fabric of the industry, let’s demand that it used to not be there, so all of those things I think are contributing to, and I do think obsolescence is taking… is having an effect. We are seeing more and more contracts around the world where the customer is specifying nothing older than 20 years old nothing older than 15 years old, nothing older than 10 year old and sometimes, sometimes they are able to do that and sometimes they are not simply because there is no new vessels available, so those are all the contributing factors, I can't hardly be more specific.

[Judson Bailey:]

Okay, and that's very helpful, and if I may ask one more, maybe sort of, better for Steve. What's the longest lead time item for new vessels as far as components in generally, what’s sort of lead-time you are looking at now for things like thrusters and engines?

[Stephen W. Dick:]

Well and that's... you've hit the nail on the head, it's the thrusters and the Z-drives that are driving or at least the longest delivery items and it’s anywhere from 24 months, to 36 months now.

[Judson Bailey:]

So mid to late 2010 I guess?

[Stephen W. Dick:]

That's right but, there is... the stuff that's building now they've got that equipment delivering from now until then but the placement order today with a slot, as somebody was going in coal, without any other equipment then that's the lead time they’d have unless there were some cancellations on some of the programs and some of the projects, then it'd probably be a minimum of 24 months.

[Judson Bailey:]

Okay, great. Thank you.

[Stephen W. Dick:]

Thanks, Jud.

[Operator:]

Your next question is from David Smith from J.P. Morgan.

[Dean E. Taylor:]

Hello, David.

[David Smith:]

We are seeing a pick up in jack-up utilization in the Gulf of Mexico, have late in the summer months. And I realize it's a small contributor to your overall picture but are you seeing anything incremental for vessels in this market maybe going forward?

[Dean E. Taylor:]

We've seen... we are not let me see, Keith’s figures don't, the figures that Keith just announce don't show any pick up in our towing supply vessel fleet domestic. But I would say we are sort of expecting that that's going to firm up a little bit. We are not seeing it in the figures we just announced but I think, there will be some firming. I don't think there's going to be much firming, because as we continue to leave the Gulf, it just makes puts more vessels available per rig but I let go... we do think that for the time being at any rate, the jack-up, the vessels that support the jack-up fleet in the Gulf, rates have hit bottom.

[David Smith:]

Okay also wondering if you are seeing any trends in the average contract duration for your international fleet?

[Dean E. Taylor:]

Longer.

[David Smith:]

All right thank you.

[Dean E. Taylor:]

Okay. Thank you.

[David Smith:]

Any details around that?

[Dean E. Taylor:]

I would say that it used to be that average contract length in the international marketplace was 12 to 15 months and probably more of 15 to 18, 50 to 20 months now on average, and some are much longer, some were shorter, on average they are longer.

[David Smith:]

So we are not seeing any let off in light of the new vessels to enter the market?

[Dean E. Taylor:]

At all end, one would think that that would be a sign, that operators feel like things are about ready to get soft, but to the contrary, contract terms are lengthening.

[David Smith:]

Sounds great, thank you.

[Dean E. Taylor:]

Thank you.

[Operator:]

Our next question from Pierre Conner of Capital One Southcoast.

[Dean E. Taylor:]

Hi, Pierre.

[Pierre Conner:]

First question that actually Keith... just on the cost guidance, just to be clear. I think make sure how right, is it sort of 149 to 151 range and [inaudible] might be down a little bit. So two components is the increase then just the new vessels being delivered, are there some other inflationary cost in there?

[J. Keith Lousteau:]

Well, it's just a dual effect. We had seven delivered last quarter. So they weren’t in full operation the whole quarter so the percentage of the quarter, so to speak, that they are going to be there, plus we have four more delivering and one of them actually delivered on January the 2nd. So it will have a full quarter Pierre. So, yes, we expect R&M to be down a little bit which would obviously benefit... would be beneficial on the revenue side because we've been talking in the last couple of quarters about lost revenue due to dry docking. So we expect it to be down a little bit, but all of the increase that we are talking about this quarter can be attributable directly in our minds to the cumulative effect of those 11 vessels.

[Pierre Conner:]

Got it. And then I guess that implies that the dry docks that you had planned and scheduled in the last quarter you did actually get them completed?

[J. Keith Lousteau:]

We got them completed. We did and we had a couple of surprises as you'd always have a couple of that came in more expensive at last minute adjustments. We were running, we thought we were going to beat out estimates by a little bit, but we had a couple of negative adjustments right at the end of the quarter. So, we think as we’ve mentioned that's kind of worldwide operating cost and pressures other than scheduling dry docking and being some difficulty in getting into certain yards where we've historically gone it's just, except for new vessels, we're not experiencing any noticeable real pressure in any area.

[Pierre Conner:]

Okay. Thanks, Keith. And then, Dean, I wanted to drill down a little bit into some of the international markets in general, clearly we are the seeing the international demand drivers [inaudible] supply at least as you indicate bidding in case everyone in the operating side sees if that is the case, but a couple of things are interesting to me, one... I know the North Sea is not where you operate, I'm sure you watch it. The spot rates are down significantly, I don't' get a lot of color on what took end market on the term, to the extent that if that’s weak those boats could compete with you in West Africa. What's your color on the weakness in the spot on the North Sea in the term market there?

[Dean E. Taylor:]

Part of it's seasonal. Although we didn't see it last year at this time. Last year, if you recall, North Seas' spot market had in the wintertime was actually very strong. There have been some vessel deliveries in the North Sea, that's putting some pressure on spot rates. I don't know whether there is some pipe laying contracts have ended or what, but certainly since Christmas time, rates have softened significantly in the North Sea. And I noticed I was reading a broker report earlier this morning and I noticed that some of the traditional North Sea operators had fixed some of their larger PSPs at rates that I would just say were so, so on term. So I don't know whether they are thinking that the market is not going to pick up by the spring which when it normally picks up sprig, summer. It picks up, I don't know what their thinking is there but are we concerned about some of those vessels Laking [ph] in December with the markets where we traditionally are, of course we are. They are tough competitors but we've competed against them in most of the markets in which we serve for a long time. So we're concerned but not to such an extent that we think that the sky is going to fall or anything like that.

[Pierre Conner:]

Okay. Thanks then another Then another market, I wanted to ask you about Dean is Latin America, lots of things going on for PEMEX and then also they got a 100 some vessels between in Central and South America but exposure in Brazil, in Petrobras isn't very aggressive on deep water equipment [inaudible] recent discoveries, too early for boats in that area and then related to that one. What is going on at PEMEX?

[Dean E. Taylor:]

As far as the Mexico [inaudible]. I think in Mexico what's happening is typically the first year of an administration the... new administration gets their people lined up and so typically the first year of an administration and this is we are just getting into the second year of the administration, but first year is typically slower than the middle four years in a six year Mexican administration. So I actually think and when you look at the completion of the Cantarell Field and you noticed a couple of days ago PEMEX announced that their production was down rather significantly year-over-year. I think fundamentals are going to drive the issue and in Mexico and I think that they will get busy, what month, what quarter, exactly they will get busy I am not sure. But I think the PEMEX will get busy, I think they will contract some of the new jack-ups, which we delivered to market as well as some of the jack-ups that are presently in the Gulf of Mexico and I think that they will be busier and of course that will create more opportunities for us. And as far as Brazil goes, we've noticed that Petrobras has been trying to tie up our equipment for longer terms for about the last year. And I don't know whether they had advanced notice of their big find or not, but last year or so... well I think it was all profitable when Transocean removed some of their rigs from Brazil. I think Petrobras became concerned if they weren't going to have the equipment that they were going to need to fulfill their programs. So they became very aggressive both on the rig side and the boat side in terms of signing stuff up. And I think the new discovery is just going to augment that.

[Pierre Conner:]

All right. Okay, thanks gentlemen. I will turn it back.

[Dean E. Taylor:]

Great, thank you, Pierre.

[Operator:]

Your next question from Dan Boyd of Goldman Sachs

[Daniel Boyd:]

I'd like to go back to cost for a second, a number of the offshore drillers are talking about year-over-year cost inflation estimates for a fourth quarter calendar year over fourth quarter calendar of next year in the 10% to 15% range, is that something that we would think will be similar in the OSV market or would it be less than that?

[Dean E. Taylor:]

The question is our thoughts on what cost might be 12 months out from now?

[Daniel Boyd:]

Yes, as you are looking out. I would expect labor cost inflation to pick up as new builds are delivered and the industry [inaudible], number of new builds what are your thoughts on that?

[Dean E. Taylor:]

That's the tough one. We've had some pretty good budgeting sessions. We have had our world management team in New Orleans already in this late last year. So we've got a preliminary budget for the April through the next year, but it’s just preliminary and I can't tell you that as I sit here today I am prepared to talk about those numbers. We... the one thing that has hit Tidewater this year that... I wouldn't call it a surprise, but that's been a little cost on the higher side than we would have anticipated and our budget has been dry docking and it has been dry docking of some of the older vessels and we're learning the... we always talk about our new fleet and the 130 or so that we now have in the fleet that are brand new vessels and they are all starting to hit their first year dry dock and we're learning as we go that those things are a little bit more expensive than perhaps we would have wanted to. So, we're just not seeing it except for the new vessels. I have a hard time with your question because we've got so many, we've got four vessels this quarter, we've got 17 new ones scheduled over the course of the year. Even if I know what my operating cost number was today for a year from now, I'm not sure I could break it out between new vessels that are scheduled to be delivery or excess cost. It just... I can't answer, I just don't have a feel for it. Joe, do you have any idea?

[Joseph M. Bennett:]

No. I agree that doing an apples-to-apples comparison of our operating cost this year to the end or currently to the end of the year is difficult because of so many vessels being added and so much cost associated with it. I think in general terms what we've seen looking back is I don't believe that our inflation wage or shipyard type inflation has been what I hear the drillers talk about. I don't think it's been in that number. I think another number that people or item that people haven't considered is, we have local currency cost around the world, and obviously with the weaker dollar that has increased our cost in U.S. dollars around the world. Now, is that inflation, is it… I consider that something else but that has creped into our numbers also. Now with that, we usually in a lot of places of the world have day rates, portions of day rates that are in those local currencies also and have reaped the benefits of that. So, they offset but as people look at just the operating cost line, it does have an impact. I would say overall Dan that if I had to kind of take a guess at a range, I don't think would be at the upper end of that range. I think it would be at the lower end of that range, maybe in the 10%.

[Daniel Boyd:]

And you can say 8% to 10% on a per vessel basis or is that you are including the number of new bills that you have?

[Joseph M. Bennett:]

I'm not including the new bills.

[Daniel Boyd:]

Okay. So, it's...

[Joseph M. Bennett:]

Start looking at it, unfortunately if you try to do it on a per-vessel basis, we have so... we can have dramatic differences on a per-vessel basis depending on the type of vessels that are being added at any point in time. So, it's a difficult process to kind of look at.

[Dean E. Taylor:]

Dan if we look at it year-on-year, we're up about 10% to 15%, but much of that is just a function of the new vessels coming in. We look at our total crew cost year-on-year, we are up about 10% to 15%. But the large portion of that would be because of new vessels coming into the fleet and old vessels not going out of the fleet. If… you asked about pressure around the world, one thing we've done pretty well is we have seen them from all over the world and in many of the countries where we work of course we are required to use indigenous seaman [ph] of those countries. I don't think... I fully agree with Joe, I don't think that we're seeing the pressure that the rig companies are seeing on... in the same proportion. Is there pressure? Yes. Will there be pressure? Yes. Is it manageable? We think so. I know you're trying to put a plug in your models, but we think... what you think crew costs are going to do going forward, but I would guess just a remodel sake and this is another... this is gas, but I would say 8% to 10%, I wouldn't say 15%.

[Daniel Boyd:]

All right. So, that's very helpful. And then looking at the deepwater gulf, it sounds like things are pretty good there. It sounds like you're comfortable with that market and you've three vessels that are going to be delivered into the deepwater gulf market. Do you plan on keeping them in the US Gulf or would you look for international opportunities you want?

[Dean E. Taylor:]

Well, we… every ship, every opportunity we've evaluated on an ad-hoc basis. So, if we have a better deal for a deepwater vessel internationally, we'll take it rather than keeping in the gulf. We've got, I guess we've probably got 40 of our newer ships or US flag are working internationally that we could always bring back to the US Gulf. Dan, statistically the first one of the... we had three under construction domestically. The first one was delivered on January the 2nd and it left for an overseas assignments. So, you don't need to model it in. The other two have just begun construction. They are not going to be delivered until late '09 at best, so it's a question where are those two going to go. At the moment, we don't have anything under construction that we would be entering that market unless we've got something back from overseas.

[Daniel Boyd:]

Now the one that you decided to take to international market, so, it's safe to assume that you're still getting better terms international than you are in domestic deepwater?

[Dean E. Taylor:]

Yes. Overall better economics. Remember, when we take a vessel overseas similar to that, we're going to keep the US flag on it, so that it could return to the Gulf. But, when you get into that situation, that's your income tax effect on that vessel is dramatically different. The boat owner is still going to have a return, a nice return, that's taxable in the US, but the boat operator will become a foreign flag operator. So, it’s not unusual for that type of arrangement, even if we went for the same, as you would call it economic scene, same day rate, same operating cost that we could pick up anywhere from $800 to $1,000 a day of economic benefit from the tax number generally, internationally depending on where it goes, we've got an effective international tax rate of 12% to 14%. So, generally we go for better rates and but when you putting the whole picture together, that's where the real economics comes from.

[Daniel Boyd:]

Helpful. And then one last one, just if you can try and… you already talked about the increasing demand coming out of PEMEX. Can you tell me what numbers on, what you might see as incremental demand over the next 12 months? And then maybe also have your discussions changed at all following some of the incidents that they've had with some of their older vessels? Are they looking to renew the fleet or reduce the average age of their fleet?

[Dean E. Taylor:]

You probably got a better feel for what... how many rigs will contract from some of the rig companies, but I was in charge of our Mexican division for a long time. I went through, I think, at least four different Presidential, four different Presidential terms in one-way or another. I got the tail end of de la Madrid, Salinas de Gortari, forgotten the officer of the last, Vicente Fox and then the fellow who is called the owners’ president now. So that's at least four and then I may have even got the fellow before de la Madrid. What tends to happen in Mexico is that surprises come along in. Most of the time there are positive surprises. They'll try to talk down the market and say that they are not going to be as active as they end up becoming. And they… like any good purchaser they don't want the seller to know exactly what their intentions are. So lots of times, they will try to talk down what they are about to do, and then yet they'll contract with a lot more equipments than it was previously envisioned. So, I think that I'm not sure what PEMEX is saying these days, it seems to me that the last thing I saw was they were predicting six to seven new rigs to be… jack-ups to be going down there, but it wouldn't surprise me if that number turned out to be 10 or 12, because I think their needs are such, I'm not a geologist, I'm just an English major from Tulane, but I think that… I think that PEMEX is the dynamo of the Mexican economy. It produces about 33% of the GNP, I think. They can afford not to have that company producing oil. So, I just feel they are going to busier than their letting on, and I think particularly since we are now entering the second year of the six-year term, I think we are going to start to see activity increase. How many rigs that translates into, how many boats? I'm not sure. In terms of the age of the boats that they will contract, they will try to get as new equipment as they can economically, but at some point, we’ve also seen that they will back off on the specifications and they will take hold of vessels for cheaper rates. So, like all of us sometimes they would just make a decision, well I don't want to pay that for the newer piece of the equipment, and I will pay that for something a little bit old.

[Daniel Boyd:]

Yeah, I apologize if I’ve misspoken, said incremental rigs as opposed to incremental vessels, I meant vessels, but has the conversation changed at all, given that they’ve had some incidents on some of the older vessels? Are they… historically they’ve always gone for… been very price sensitive and gone for the least expensive vessel, but do you see that’s essentially changing going forward? It sounds like that.

[Dean E. Taylor:]

It waxes and wanes. There was a period three or four years ago when the market was in their favor that they would not take anything over than five years. Market went against them. They started taking a little bit of equipment again. I think there are a number of ships scheduled for delivery in the domestic boat marketplace. So, in our domestic marketplace over the next couple of years, they may look at that and think that there is going to be some surplus equipment in the US Gulf and so they may start to specify some newer equipment for their tenders and then it would just depend upon whether people want to move them from the Gulf down to Mexico. We've seen one thing that they do and that has inhibited their ability to get some of the newer equipment, I think is… they’ve been putting price caps on their bid, and that discourages some of the people from moving some of the new equipment down there, and of course it’s not the… shores of Mexico are littered with the carcasses of companies that thought that they could translate to US Gulf business model down to Mexico. It’s not the easiest place to operate. There are a number of challenges there, and so it’s just not going to depend on what they think they can do and what people think that they can operate down there, and it’s going to a dynamic situation, but I think on the whole, I think that the modern equipment that will be needed by PEMEX is more than what people are thinking.

[Daniel Boyd:]

Right. Thanks and helpful.

[Operator:]

Our next question is Michael Farah of Merrill Lynch.

[Dean E. Taylor:]

Hello Mike.

[Michael Farah:]

Hi. I want to touch a bit more on the end of question about deepwater gulf versus international. Deepwater is always been flat here for a few months now and international shut-up this quarter, I think one of the best quarters in recent memory. Why do you think there is a difference there in terms of rate momentum?

[Dean E. Taylor:]

Part of it is we moved some of our deepwater anchor handlers to five that we had built in China a few years ago. We moved them to much better contracts at much higher rates. So, that's part of it. And second we had add some other deepwater boats, contract role and we are able to get significant day rate increases, so that's pretty much to sum it.

[Michael Farah:]

But the anchor handler wasn't that I think back in March of '07 or June of '07, I guess I’m talking more in terms of the last couple of quarters in the Gulf, it has been flattish, yet international has obviously done well. Are you suggesting that deepwater gulf of Mexico, you just haven't see many day rate rollovers in that market because they’ve been under term contracts or-->?

[Dean E. Taylor:]

It’s… in our case, yes. It's been situation for us. We locked most of our deepwater vessels have tend to long-term contracts about a year ago at pretty nice rates and then we have two that there are rolling now, and we think we’ll get some decent rate increases from them.

[Michael Farah:]

Okay, so you think at the leading edge at least on the day rate side that the trajectory in terms of the gulf deepwater versus international is not all that different?

[Dean E. Taylor:]

I didn't say that. I just said that we had... first we don't have a very large class of deepwater vessels.

[Michael Farah:]

Right.

[Dean E. Taylor:]

[Inaudible] and so that it depends on the timing with such a small denominator if you got a couple of the numerator rolling over a decent size increases and it looks very good, you don't have anything rolling over and it doesn't look as good. We do have a couple of rolling this quarter and you should see the results in the next conference call.

[Michael Farah:]

Okay, great. And then one sort of quick general question here, we’ve heard a number of large service companies this earning season express caution about the pace of growth in 2008, setting lack of offshore rig count growth, project delays, some are even calling it a sort of transition year until we get to 2009 and you get a lot of the platform assets delivered, what are your thoughts on the risks of demand growth at least this year, in particular... this calendar year?

[Dean E. Taylor:]

There are some pretty smart people there and their goal is certainly given his opinion and any others that are running very, very fine companies have given there opinions about their business. All I can tell you that our opinion on our business continues to be optimistic and we are not sure at what point if it's it all in the coming year. Day rate momentum now starts to slow down, yes, there is some challenges out there, yes, the vessels are on the horizon – over the horizon, but again I think a lot of those concerns can be tampered by the obsolescence issue in industry.

[Michael Farah:]

Great, thanks Dean.

[Operator:]

Your next question is from Daniel Burke of Johnson Rice.

[Dean E. Taylor:]

Hello, Daniel.

[Daniel Burke:]

Joe, with you after the call, lot of time considerations, thanks.

[Dean E. Taylor:]

Thank you.

[Operator:]

Your next question is from [inaudible].

[Dean E. Taylor:]

I am sorry I didn’t... I didn’t hear the name.

[Operator:]

[inaudible]

[Dean E. Taylor:]

Hi, Fred, how are you?

[Unidentified Analyst:]

Sequentially, your revenue went up $13 million, in the previous quarter, you had I'll call it, lost revenue from dry-docking. What was that number in the previous quarter and this quarter, was it… I assume it's up or down I don't know, and that's becoming a bigger factor as you dry dock and these rigs are having lost revenue significant to the new race.

[Joseph M. Bennett:]

Fred, this is Joe. We don't give the number, I mean we gave some guidance as to the “lost revenue” whether it was going to be up or down sequentially in the last couple of quarters. What we anticipate it happening in the December quarter is that the dry docking cost would go up a bit, which they did, but that’s the negative impact on revenue would actually be less in the December quarter than in the September quarter, and what we found out, and Keith had said we had a few extra dry docks, we had someone stay in the yard a little bit longer, I would say that the negative impact on the revenue was kind of identical in the December quarter as to the September quarter. Now as Keith had said too, with our expected drop in dry docking cost in the March quarter, we expect that the negative impact on revenue to be less in this March quarter.

[Unidentified Analyst:]

Thank you.

[Dean E. Taylor:]

Thanks, Fred [ph].

[Operator:]

And there are no further questions.

[Dean E. Taylor:]

We thank everyone for your participation in our call today, your interest in our company, and we wish you all well. Thanks very much.

[Operator:]

This concludes Tidewater's fiscal 2008 third quarter earnings conference call. You may now disconnect.