TIDEWATER Q4 FY25 earnings call TDW

Tidewater achieved its best year in recent memory in 2025, with year-over-year revenue growth, gross margin expansion, and average day rate growth. The company generated nearly $600 million in EBITDA and $430 million in free cash flow, significantly exceeding 2024. This strong performance was driven by scalable infrastructure and operational excellence, despite softer offshore drilling demand and general macro uncertainty^🌐.

The company generated $151 million of free cash flow in Q4, ending the year with $580 million in cash. This robust cash position enabled the $500 million acquisition of Wilson Sons Offshore Ultratug, which is expected to be funded by cash on hand and assumed debt with a weighted average cost of 3.6%. The acquisition aligns with the company's capital allocation strategy to deploy capital for high-return opportunities while maintaining a healthy balance sheet, targeting below 1x net debt-to-EBITDA pro forma for the transaction.

Tidewater anticipates an exciting outlook for the offshore vessel industry, driven by increasing demand from observable offshore drilling leading indicators and a declining resource base for E&P companies. The global fleet of vessels has been essentially unchanged or slightly declining, with limited newbuild orders due to long lead times and structural limitations. This inelastic supply-demand dynamic is expected to lead to accelerated pricing leverage as demand slightly exceeds supply, particularly in the second half of 2026.

Europe and the Med are expected to be very active in 2026 with several oil majors tendering for drilling programs and EPCI projects. The North Sea shows early signs of strong large AHTS spot rates, cresting over $100,000 per day. Africa, particularly West Africa and Namibia, is poised for strengthening drilling activity and field development. The Middle East remains tight and supply-constrained, allowing for continued rate pushes, though geopolitical risks are being carefully monitored.

The Gulf of Mexico market outlook for 2026 is flat at best, with potential pressure due to limited East Coast work. However, growing demand in the Caribbean and anticipated increases in tendering activity in Mexico are expected to offset this. In Asia Pacific, Australia is flattish, but increased tendering in other countries like Indonesia, Myanmar, and Vietnam should allow for rate increases for larger PSVs in the latter part of 2026. Brazil is highlighted as a key long-term growth market, reinforced by the Wilsons acquisition.

Tidewater's financial policy emphasizes returning to net debt zero in approximately six quarters post-capital outlay and maintaining a target leverage of 1x net debt-to-EBITDA. The company retains a $500 million share repurchase authorization and capacity, representing 13% of shares outstanding, and remains opportunistic on buybacks when suitable M&A targets are not available or when net debt-to-EBITDA is below specified thresholds.