Tidewater is about where it thought it would be in its latest earnings report, despite the pandemic, but the offshore vessel giant revealed that its business in Africa is suffering.
Fleet utilisation in the Houston-based company's West Africa segment fell to 55% in the second-quarter from 76% a year ago.
Tidewater reported a $4m operating loss in the unit, reversing an operating profit of $3.1m a year earlier, and the company recorded impairments of $42m from its Angolan joint venture, Sonatide.
"Although all the regions of the world have been impacted by the downturn in the oil market and the pandemic, the offshore oil and gas industry of Africa has been impacted disproportionately," chief executive Quintin Kneen said on the company's second-quarter earnings call on Friday.
In its quarterly filing, Tidewater said it had previously written its investment in Sonatide, a joint venture with Angola's state oil company Sonangol, to zero and that late last year it was informed that Sonangol was looking to divest from the outfit amid a privatisation push.
During the quarter, Sonatide paid out all its cash in a dividend, with Tidewater receiving $17.1m.
In Nigeria, Tidewater expected its joint venture, DTDW, to operate numerous vessels, but is running just one as coronavirus and the oil price collapse pushed its main customer to cancel all operations for the year.
Tidewater said at a June board meeting that neither it nor its Nigerian partner was willing to cover DTDW's debts, pushing Tidewater to impair a further $14.1m.
Still positive
As TradeWinds has reported, the company posted a $111m loss in comparison to the $16m loss it reported for the second quarter of 2019.
However, Tidewater filed a $900,000 adjusted profit after impairment charges on assets held for sale, affiliate credit losses, affiliate guaranteed obligations and administrative severance.
Kneen said the company was still on track to generate free cash flow for the full year, with estimates coming in at $64m versus the $65m he forecast alongside the company's first-quarter results.
Tidewater expects to produce $390m in revenue, down $5m from first-quarter expectations, and to produce $136m in cash from operations.
Kneen said the offshore sector, struggling after cheap oil pushed producers to slash production and project budgets, would bottom out in either the fourth quarter of this year or the first quarter of next year.
"The draconian pullbacks ... are being revisited," Kneen said.
The company still expects to scrap or sell 46 ships by year end, generating $20m.
“We’re generating more cash by operating fewer vessels at higher day rates at lower operating cost per vessels and lower [general and administrative] costs per vessel," he said.
"We’re doing this while carefully minding the capital expenditure and working capital investments.”
Tidewater shares were down $0.29 to $5.90 during midday trading on Friday in New York.
