Tidewater's Q3 2025: Contradictions Emerge on Share Repurchase, Drilling Demand, Fleet Strategy, and Market Dynamics

Date of Call: November 11, 2025

Financials Results

• Revenue: $341.1M, essentially flat sequentially vs $340.4M in Q2 2025; ~4% above expectations
• EPS: Net loss of $0.8M, $(0.02) per share; included a $27.1M charge for early extinguishment of debt
• Gross Margin: 48%, about 200 basis points better than guidance, down from 50% in Q2 2025

Guidance:

• FY2025 revenue narrowed to $1.33B–$1.35B and gross margin 49%–50%.
• FY2026 revenue guidance $1.32B–$1.37B and gross margin 48%–50%.
• Firm backlog/options: $316M for remainder of 2025; $925M for full-year 2026 (~69% of 2026 midpoint).
• ~57% of available days for 2026 are booked; 2026 guidance assumes ~80% utilization (~11% spare capacity to charter).
• Share repurchase authorization $500M; net debt/EBITDA 0.4x at Q3-end; plan remains opportunistic on buybacks vs M&A.

Business Commentary:

* Revenue Growth and Earnings Surplus:

- Tidewater reported revenue of $341.1 million for Q3 2025, exceeding expectations due to higher-than-expected average day rates and slightly better-than-anticipated utilization. - The growth was driven by a benefit from fleet rolling onto higher day rate contracts and improved fleet utilization from investments in drydock and maintenance.

• Free Cash Flow Generation:
• Tidewater generated $83 million in free cash flow during the third quarter, contributing to a total of nearly $275 million for the first 9 months of 2025.

• The ability to generate free cash flow alongside balance sheet enhancements provides confidence in capital deployment for shareholder value.

• Fleet and Market Dynamics:

• The company has seen a positive impact from the substantial drydock and maintenance investment, which improved fleet uptime performance.

• The structural growth in non-drilling markets like FPSO support and EPCI, combined with vessel attrition, is expected to constrain supply and enhance leverage for vessel owners.

• Guidance and Financial Outlook:

• Tidewater initiated a full-year 2026 revenue range of $1.32 billion to $1.37 billion, with a gross margin range of 48% to 50%.
• The guidance is based on a consistent quarterly revenue generation and margin profile, with potential uplift depending on the strength of drilling activity in the latter part of 2026.

Sentiment Analysis:

Overall Tone: Positive

• Management: "Third quarter revenue and gross margin nicely exceeded our expectations." Q3 free cash flow $83M and nearly $275M YTD; "We are optimistic about the long-term outlook" and initiated 2026 guidance while highlighting strong balance sheet and ability to deploy capital.

Q&A:

• Question from James Rollyson (Raymond James & Associates, Inc., Research Division): Do we need rig levels to return to 2024 peaks to get pricing back, or could pricing recover sooner given capacity soaked up by production support and construction?
  Response: FPSO/EPCI demand plus vessel attrition can bring pricing recovery sooner than waiting for rigs to return to 2024 levels, though sustained high rig activity would maximize day‑rate upside.

• Question from James Rollyson (Raymond James & Associates, Inc., Research Division): You didn't repurchase shares this quarter — is that because you are holding dry powder for M&A opportunities?
  Response: Management disclosed they had material nonpublic information during the quarter, implying active M&A discussions and helping explain the pause in repurchases.

• Question from Fredrik Stene (Clarksons Platou Securities AS, Research Division): Can you give regional granularity on the 69% revenue coverage and 57% of available days for 2026 — which regions are more exposed?
  Response: Africa and Asia have more exposure into 2026; other regions (Europe/Middle East/Americas) have relatively stronger coverage going into the year.

• Question from Fredrik Stene (Clarksons Platou Securities AS, Research Division): Can you split firm backlog vs options and comment on whether options are likely to be exercised?
  Response: No firm split at hand, but management is confident that many of the older options will be exercised when called.

• Question from Fredrik Stene (Clarksons Platou Securities AS, Research Division): The 10‑Q references a Venezuela case ~ $80M — is timing and collectability near-term and meaningful to cash?
  Response: The dispute is longstanding (~12 years); management believes resolution may be approaching but timing is uncertain and not assured by year‑end.

• Question from Joshua Jayne (Daniel Energy Partners, LLC): Do customers have more clarity now versus a year ago and greater confidence for the next 12 months?
  Response: Yes — customers appear to have clearer plans, evidenced by more tenders and pre‑tender activity, supporting a more constructive outlook into H2 2026.

• Question from Joshua Jayne (Daniel Energy Partners, LLC): The quarter saw 34 term contracts averaging 7 months — is that intentional or just market-driven?
  Response: Contract durations reflect current market willingness; shorter (~7‑month) terms are strategic to preserve flexibility ahead of an anticipated market uplift in H2 2026.

• Question from Joshua Jayne (Daniel Energy Partners, LLC): Regarding newbuilds and attrition, how do current orders (~3% of fleet) stack up against expected retirements and net supply?
  Response: New orders are ~3% of fleet while annual attrition potential (~4–5%) suggests net supply remains constrained even if current orders deliver, supporting tighter market dynamics.

• Question from Gregory Lewis (BTIG, LLC, Research Division): For potential M&A, do you prefer specific asset types or geographies?
  Response: Priority targets are large PSVs and medium/large anchor handlers, with South America particularly attractive; Subsea capabilities would require scale to pursue.

• Question from Gregory Lewis (BTIG, LLC, Research Division): Why are larger vessels maintaining stronger pricing vs medium/small vessels, especially in West Africa?
  Response: Larger PSVs command stronger rates because size matters for EPCI/drilling needs, relative scarcity and customers' willingness to pay mobilization costs and repositioning.

• Question from Gregory Lewis (BTIG, LLC, Research Division): Does 2026 guidance include cushion for unplanned downtime and how will revenue cadence likely split across the year?
  Response: Guidance assumes a fairly even quarterly cadence in 2026 (not back‑half weighted); operational uptime has improved versus 18 months ago, giving greater confidence but upside remains if drilling strengthens in H2.

Contradiction Point 1

Share Repurchase and M&A Opportunities

It involves the company's capital allocation strategy, specifically the balance between share repurchases and pursuing M&A opportunities, which impacts shareholder value and investor expectations.

Is the lack of share repurchases this quarter due to capital being held for potential M&A opportunities? - James Michael Rollyson (Raymond James & Associates, Inc.)

2025Q3: There was a material nonpublic information during the quarter, which is why we didn't execute any buybacks. We're going to look at what our opportunities are, and I can't really talk about the specifics of that. - Quintin Kneen(CEO)

How was the $500 million share repurchase program amount determined? - Joshua W. Jayne (Daniel Energy Partners, LLC)

2025Q2: We feel comfortable that we can execute the $500 million repurchase over the next year or so, considering our strong free cash flow and flexibility in capital allocation. - Quintin Kneen(CEO)

Contradiction Point 2

Drilling Demand and Market Dynamics

It involves the company's outlook on drilling demand and market dynamics, which directly impact vessel demand and day rates, affecting the company's financial performance.

What is your forecast for drilling demand next year and beyond, and how will it affect vessel demand and day rates? - James Michael Rollyson (Raymond James & Associates, Inc.)

2025Q3: We expect an uptick in drilling contracts and tenders as we move into 2026, driven by drilling, subsea construction, and production activity. This will create a strain on vessel supply, enabling day rates to rise once again like in 2023 and 2024. - Piers Middleton(COO)

What is your outlook on drilling demand for next year and beyond, and how will it impact vessel demand and day rates? - James Michael Rollyson (Raymond James & Associates, Inc.)

2025Q2: We're expecting to see -- we've already seen a moderation in the rate of decline in the overall vessel fleet globally, and we expect that to continue on a trajectory where we're going to see a -- it's still going to be a decline in the fleet, but overall, the decline is going to be at a lower rate. - Piers Middleton(COO)

Contradiction Point 3

Customer Confidence and Market Dynamics

It highlights differing perspectives on customer confidence and market dynamics, which are crucial for understanding Tidewater's strategic positioning and future outlook.

Have customers become more confident over the past year? - Joshua Jayne(Daniel Energy Partners, LLC)

2025Q3: Operators have a better sense of the market dynamics, and OPEC's actions are more predictable, leading to improved confidence. - Quintin Kneen(CEO)

Are customers engaging with the expected increase in offshore activity in the back-half of '26 and '27? - Jim Rollyson(Raymond James)

2025Q1: We haven't seen any changes from customers in their outlook. Conversations with customers haven't slowed down. While there's always caution, the discussions remain positive, including pre-tender talks for '26 and '27. - Piers Middleton(COO)

Contradiction Point 4

Fleet Management and Strategy

It involves differing approaches to fleet management and strategic positioning, which are critical for Tidewater's operational efficiency and future growth.

Are the lack of share repurchases this quarter due to potential M&A activity? - James Rollyson(Raymond James & Associates, Inc., Research Division)

2025Q3: We do have a few assets in the process of being recycled. This is really part of our effort to optimize our fleet structure, and we would expect that to be wrapped up by year-end. - Quintin Kneen(CEO)

Explain the decision process for stacking versus keeping a vessel warm or chasing spot work? - David Smith(Pickering Energy Partners)

2025Q1: Decisions are based on vessel's operational sphere, maintenance costs, and fleet management. The alley cats are high maintenance and not core to our revenue. - Quintin Kneen(CEO)

Contradiction Point 5

Market Demand and Supply Dynamics

It involves differing perspectives on the market demand and supply dynamics, which are crucial for assessing potential revenue and pricing trends.

What rig levels are needed to restore previous pricing leverage, specifically 2024 levels? - James Rollyson(Raymond James & Associates, Inc., Research Division)

2025Q3: The increase in activity in production support and EPCI markets should help achieve pricing leverage sooner than the 2024 rig levels, as vessel attrition has also occurred over the past years, which should facilitate better pricing. - Quintin Kneen(CEO)

Has the pause in rate increases changed your market view? Is it a timing issue or a shift in outlook? - James Rollyson(Raymond James)

2024Q4: Demand for hydrocarbons remains strong for 2026 and 2027, and vessel supply is decreasing through attrition. I see 2025 as sideways versus another leg up. - Quintin Kneen(CEO)