Tidewater Inc. (TDW) Earnings Call Transcript & Summary

Hello, and welcome to our next fireside chat session at the UBS Global Energy Conference. I'm delighted to introduce Tidewater to this presentation slot, and we have Quintin Kneen, President and CEO, here with us today. Quintin was appointed President, CEO and Director of Tidewater in September 2019. He's a veteran of the energy services sector, having served in various senior executive positions at various firms, including Grant Prideco and of course, GulfMark before it merged Tidewater in 2018. So Quintin has certainly seen a few cycles and is in a great position to talk us through what's in store for Tidewater and the offshore support vessel market. So Quintin, I'll turn it over to you for a quick summary of where Tidewater stands now before I go into my questions. [Operator Instructions] So with that, I'll turn it over to you, Quintin.

Amy, thank you for allowing us to present today. It's a pleasure to be here. I'm excited to always to talk about Tidewater and the transition that we've been going through since about 2014. As many people know, the offshore sector was hit hard going into the downturn that began late in 2014 and really through the beginning of a recovery in early 2020 before the pandemic hit. So Tidewater has grown through a merger with GulfMark and has really refocused itself on becoming the most cost-efficient operator in the offshore space. Obviously, this industry, the offshore industry has been shrinking around us. So we had to shrink with it. We had to shrink our overhead. We had to shrink our fleet. We have become more efficient in the execution of everything that we do. So a big part of the Tidewater story is getting through that downturn that began in 2014 becoming a cash flow positive entity again and then beginning to grow. Obviously, we're faced with a new challenge in today's world, which is the ongoing energy transition and how Tidewater navigates into that transition is yet to be fully established. Obviously, we're a hard-to-abate sector, the shipping segment. But working with the technology and the efficiency that we have engaged in, efficiency exercises and efficiency technologies that we've engaged in over the past 4 or 5 years, has allowed us to share information with our customers to show them how to become more fuel efficient. So a real exciting story with Tidewater. I'll give you a couple of quick recent highlights just to get you up to date, but we have been free cash flow positive over the last 5 quarters. We generated about the $64 million -- sorry, $84 million in free cash flow last year. Our G&A run rate is down to $64 million from $253 million on a pro forma combined basis with GulfMark. So doing a lot to control costs and a lot to control whole capital discipline. So in 2019, our CapEx spend was north of $90 million. This year, it will be just around $20 million. So very efficient in the execution of dry docks and other capital-intensive exercises for the company. All the year towards making sure that we can be a free cash flow positive company cycle in, cycle out. In the worst of the pandemic, we were free cash flow positive, and we were able to do that because we leverage technology and we became more efficient operator globally. As we look towards the future, Tidewater is really focused on how it can participate actively in the contribution of a lower carbon environment. As I mentioned earlier, obviously, the ships are a hard-to-abate sector, but that doesn't mean that we can't contribute. We look to ways to utilize our routing technology and our circuit technology on our vessels to make sure that we can work with our customers to figure out how to burn less carbon in the journeys that we're involved in with the E&P companies. The one nice thing about the vessel companies relative to other people at field service space is that we have a natural entree into offshore wind. Offshore wind has been around in Europe since early 2000s. It's really starting to take hold here in the U.S.. We're starting to see a pickup in Asia as well. So very excited about how we can participate in the energy transition from an offshore wind standpoint. From an overall vessel technology standpoint, there's certainly a lot of exciting things that are happening with engine technologies. Right now, everybody is still earning some form of carbon, whether it's diesel or natural gas, but the idea is that we can move these ships in the longer term to some form of carbon-free or certainly much more carbon-friendly energy source, most likely at this point looking to be hydrogen, but that's yet to be determined. So that's a quick overview on Tidewater and opening it up to talk about the business.

Great. Thank you very much for that overview, and lots of things to pick up on. I'm going to start on your point on being free cash flow positive. Do you -- how do you see -- you will put that cash to use? Is it going to be more organic investments in your own business? Or are you looking to maybe potentially for inorganic growth?

So in our business, we have to figure out what investments make sense for us longer term. As I mentioned, the -- in a world where technology is quickly evolving to be a lower carbon future, we have to be very mindful of anything that we were to build today has to be viable 20 to 30 years from now because ships have that long of a life. And generally, the returns on ships are calculated over those periods. So we're real focused on things that can help us augment the -- our lower carbon footprint in the near term. So we've been investing in battery technologies. So you can see that on about half a dozen of our boats, and we'll continue to evolve that technology going forward. The other thing that we look to is anything that can make us that much more efficient. So fuel tracking software. Anything that we can integrate the technologies on the boats in more of a big data format, so that we can analyze our global fleet and look for ways to become more fuel-efficient are things that we focus on. So I wouldn't see us as building any more ships today. Quite frankly, the world has more ships than it's going to need for a long period of time. Even -- we probably disposed of over 100 ships in the past couple of years. Most of those are the legacy conventional dry vessels, very few hungry vessels. And so we won't be investing in new ships at this point, but we will be investing in our existing technologies to make the ships more efficient. And to some extent, investing in shore-based technologies to help us augment those technologies on both.

When you talk about making your fleet more efficient, how do you then end up splitting those efficiencies? Do they accrue to you? Or do they accrue to your clients?

Unfortunately, right now, everything is accruing to my clients. It's the nature of the supply and demand of our business. So coming out of the downturn in 2014, we were just emerging out of it at the beginning of 2020 when we saw day rates beginning to lift up. We were able to increase prices. Utilization levels have been steadily increasing over the last couple of years like '17 to '19. And at that point, then I was starting to accrue some of the benefits. But the pandemic hit, that took business down about 25% globally. And so now we're pushing our way back up. So right now, when we bring on a new technology, like it's a battery technology or something that a customer would be excited about, generally, what it means is I get the work. So I get the work, I get volume, but I don't get price. And -- but as we kind of build an install base, we'll eventually be able to push price as well. So over the longer term, I do expect that we'll be able to push price. Getting into like the 2019 time frame. There -- especially in the latter part of 2019, boats that could offer a better carbon footprint. We're getting about $1,500 a day more than their legacy hydrocarbon counterparts. And as a result, that accrue to the boat owner. And so I expect to see that come back as we go through '21 and '22.

Are you seeing your clients put more stringent kind of emissions, kind of terms and conditions into the contracting and the pricing as well?

Definitely into the contracting, but it varies by region. So probably no surprise in areas that were early adopters in renewables technology like the North Sea, so call it Denmark and Norway, very strict and very high standards on efficiency operations, not just carbon emissions, but noxious emissions of all sorts, and noise pollution. All of those technologies are -- were early adopters by the sector -- the geographic sector. You go down into Africa and people aren't at interested, okay? You get down to the Mediterranean and people are kind of interested. So it's working its way around the world. We'll say that the companies like BP and Shell and Total are very voice-oriented and seem to be following through with that voice. Other E&P companies and NOCs not as much yet. Starting to see it grow in Southeast Asia as well. So Taiwan, Japan, all seem to be growing in their awareness and desires, but it hasn't resulted in new standards or an elevated performance statement.

Okay. Particularly, as your clients are trying to reduce their Scope 1 and Scope 2 emissions, I can see how that is starting to kind of permeate into their supply chain as well. So I guess, the question then on that is you talked about your CapEx profile, how it's quite minimal now compared to where you were before. Is there a risk that -- not saying you're going to build new vessels, but is there an upgrade cycle coming for vessels?

Well, I definitely focus on that. So no, I see a world 15 years from now where people are going to be demanding much more carbon-friendly technology, which means that something has to happen with the boat technology in existence today, which is largely diesel in 95%, 98% or something like that. And so as a result, there is something that will change. I don't know that it's a whole ship rebuild cycle or if it's a renovation cycle on the vessels. So how do you want to see? A lot of that's going to be determined by which technology takes hold. There were reports out earlier this month tended to dissuade people from making investments in LNG, which seem to have a bit of an advantage maybe 2 or 3 years ago. But people are seeming to want to step over that technology, waiting for an even lower carbon technology to do that, how you can people sell ammonia or whatnot. And so we'll have to see. Because those technologies are still emerging, we don't know when they're going to come online. And as a result, we have to be very cautious about any initial investment that we make here in the next couple of years. So yes, I do see some form of shipping renewal occurring over the next, call it, 15 to 20 years. When it starts and when it takes hold is difficult for me to say. But I'm certainly making sure that we're in a position to take advantage of it, both from a balance sheet standpoint and just overall geography, customer and supplier relationship.

Sure. Okay. Maybe just one more question on cost before I move on to talking about your business on the commercial side. Inflation, I mean I think you're not a manufacturing business, but you still probably are exposed to some commodities and how does that work through your cost right now? And do we need to worry about some margin pressure without if you're not able to pass some of that on to clients?

Yes. It's actually coming initially in the form of labor cost. So this industry has been hard on its labor supply. It's a very volatile industry. And as a result, even though the pay was nice prior to 2014, people just got fatigued by the volatility and the constant layoffs and rehires. And so since that period of time, people have found other shipping jobs or other jobs onshore. And so as we begin to see activity levels increase, as we kind of recover from the pandemic, we're already starting to see labor pressure. So I wouldn't say that I see it in our commodity pricing elements. We're not as exposed. Fuel is a pass-through to our customers. So we see it at only tangentially when we're moving the ships on our own account. But where I'm seeing it initially is on labor cost. Starting to see it in the North Sea sectors. I'm starting to see a little bit of it in the U.S. Gulf of Mexico. Right now, I'm experiencing a little bit of that because a large portion of just under 10% of our labor comes from India. And those mariners are off-line at this point because they're dealing with the pandemic. And as a result, it's getting harder to find mariners in areas like the Middle East. So starting to see wage pressure. Some of it, I think, is temporary and still COVID pandemic related. Some of it may be structural and we'll have to deal with that going forward. But I do worry that the industry has a habit of hiring mariners from one another and just keeping the prices escalating. And the industry is -- labor is disconnected from the actual customer relationship. So just because I have additional labor cost doesn't mean I can quickly pass it on to my customers. Although that will happen, but it usually takes 3 quarters or so before you get caught up.

Got you. Okay. Okay. I promise I'll go back to your competition behavior in a bit. Switching over a bit to kind of your pricing and pricing power, day rate trends. Can you take us around the world and talk about what you're seeing in the various regions? Like where it's the tightest, where you're seeing a bit better day rates and where things perhaps aren't moving forward as quickly as you would like?

So I'll take you around the world because it's a good time to go around the world and think about it because certain areas are emerging faster in this post-pandemic recovery than others. And I'll start with Norway because we just touched on it when we talked about the labor costs. But in the Norwegian market is actually quite nice. You have spot day rates in the USD 20,000 range, and that's respectable. I mean they need to be earning in the high $20,000 a day range throughout the life of the boat to really justify a new build, but it's a lot better than where we were, which was in the subteen level of the depths of pandemic. So seeing the substantial improvement in day rates. Utilization levels are quite good. I don't even know of any excess PSVs in the Norwegian market at this time. And as a result, that's why you start to see the labor cost tighten up here as well. But just across the way in the U.K. sector, it's not a strong market. Some of that is because of the Norwegian vessels, which are generally a higher spec vessel. They went to work in the U.K. sector during the depth of the downturn, pandemic downturn. And as a result, they're still there, and there's a little bit of excess supply in the U.K. market and therefore, less vessels to operate in the Norwegian market. We may see that balance out over time as the U.K. market begins to strengthen. But the U.K. market has improved and it's off the bottom, but not as strong. I would say areas like Africa have been hard hit in the pandemic. We had a real tough situation in Nigeria where we have, in fact, had to shut down our operations in Nigeria midway through the pandemic. But areas like Angola, Rwanda are doing well. And areas like the Middle East really didn't slow down throughout the pandemic. Saudi Aramco continued to drill offshore. And as a result, activity levels stayed relatively robust. Brazil is picking up a bit. We've generally been pulling out of Brazil, but we're starting to see day rates pick up in Brazil. Day rates in the Middle East didn't go up or down just because it didn't -- there wasn't real volatility there. So it's -- but areas that I would say are strong but still subject to adjacent region oversupply, which is I think in the Southern Caribbean. So in the Southern Caribbean, there's a nice development led by Exxon, but others are there as Apache and others. It's a large boat market. And I would say that during the pandemic, the activity levels continue to be very strong. But because of the excess supply in basin areas like the U.S. Gulf of Mexico proper, the rates went down maybe about 15% to 20%, call it 15%, 20% is too much, but 15%. And then they've begun to pick back up again. Areas like Southeast Asia has always been relatively tough for PSVs and so the pandemic didn't actually make it any worse, and we're starting to see that area come back to life a little bit. So a little bit of improvement there. U.S. Gulf of Mexico is beginning to show some signs of life. Hence, the reasons for some of the labor cost increases there. So a nice mix. Mexico has been real stable, too. So around the world, a variety of situations, call it Mexico, Trinidad, certainly Guyana and over to the Middle East being relatively stable throughout the pandemic. Very reactive in the North Sea market and Africa and a little bit of just business as usual in a gradual recovery time perspective in the U.S. Gulf of Mexico and Southeast Asia.

How would you view that recovery? You think it's -- what you're seeing now is more of a cyclical nature, but kind of what are you thinking about kind of a new normal for offshore after we kind of work through some of the backlog we've had in the last 15 months or so? Once we kind of get this recovery, 2021 over 2020 and maybe the first half of 2022, what do you think can be the trajectory of a normalized business?

Yes, that is a good question. So let me tell you what I see happening right now and over the next couple of years, and then we'll talk about where I see it going from there. So what generally happens in our industry when you have a strong pullback like the downturn in 2014 or the pandemic is everybody stops doing anything that they can stop doing. So even if it's regular maintenance, they stop doing it. Absolute you required maintenance, they'll definitely do. Anything that's critical, they'll definitely do. But for the most part, they take anything to the right that they can. And we saw that over the summer of last year. So it's canceling -- companies canceling contracts left and right. And so you saw the level activity levels come down. What I've seen happen in the first part of '21 is that maintenance coming back. So that planned maintenance that wasn't critical that got kicked to the right's now coming back. And that's why I see increasing activity levels in the first half of '20. And what I see happening in the -- I'm sorry, '21. And then in the second half of '21, what I see happening are projects that got delayed coming back online. So maybe that's in the kind of late Q3, early Q4 stage of the second half of '21. So what I see happening is a recovery from the pandemic as we get through '21 and into '22. And all along, what we've had are vessels attritioning out of the industry. For all the reasons that we've been talking about, there hasn't been any new boat additions in any magnitude in the past 5 years. So boats are continuing to get older out of the pandemic through a lot of vessels into the scrap yards, and we're going to continue to see that number attrition over time. And so the supply and demand balance -- imbalance that we've experienced over the last year is beginning to tighten up. And my sense is that we'll see that in the shipowners' favor by the time we get to '22. And so when I see a normalized market from my perspective, one that's got a nice supply and demand balance by the beginning of '22. And then we have to see where the offshore sector goes. Obviously, offshore wind is beginning to pick up, which is a new and exciting and that's helped them to absorb some vessels. But there's also been just a substantial lack of investment in offshore fields. And my sense is, based on the tender activity that we're hearing, although no commitment at this point, is we're going to start to see new projects come online in '22 that's going to drive that demand even higher. So I'm expecting to see vessel activity increase nicely as we get into that '22, '23, '24 time frame as we're starting to get a catch-up on delayed fields, on the hydrocarbon side as well as a pickup in activity in offshore wind around the world. After 2025, it really has to do with how aggressive the world gets in trying to curtail their use of hydrocarbons. I don't see a real path for that today, so I'm not expecting that to occur. But it's something that we keep our eyes on just because the world is looking for an alternative to hydrocarbons. It hasn't found one yet. And my sense is that it will continue to grow even past 2025, even though there's going to be a renewed emphasis on offshore wind.

I promise to come back to the offshore wind topic as well. It's something I do like to talk about. But just to stick to your core oil and gas business for now, how does the mix between kind of CapEx work versus maintenance work feature into your margin profile? And how do you see that changing over the next 18 months?

So this year, we'll spend about $20 million on dry dock, which is the big maintenance that we do on vessels on a regular basis. The normalized number -- or it's probably closer to $35 million. So you look at 2021 as a year where we've really tightened the balance, but that will increase over time. And I see that normalizing at about $35 million for a fleet of our size. And we generally have about as much running through our piers and maintenance on the P&L. So we capitalize dry dock, so you'll see that come through additional depreciation. But on an all-cash basis, right now, we're probably heavier on regular routine maintenance that goes through the P&L, lighter on the dry dock. It should be about -- it should be about equal. And I think that by the time we get to 2023, we'll see that normalize.

Actually, my question was really more on your exposure to your clients' work on their drilling and production versus, say, kind of life of field maintenance and their call on your vessels. Like how does that impact your business mix?

So right now, our mix is probably 70% production-oriented, 30% nonproduction-oriented. So this could be construction support. It could be drilling support. It could be other activities moving people and personnel, that type of thing. What I see happening over the next couple of years is an increase in the amount of that nonproduction-oriented activity. So additional drilling activity, additional IMR type of activity, additional ferrying the people back and forth as fuels come back to life. And as a result, my sense is that mix will go a little bit -- activity levels overall will increase. But that's going to be coming from these nonproduction-oriented activities and so that production-oriented activity as a percentage will come down.

All right. And are the specifications of the vessel very different, whether you're servicing production versus -- no?

No. I mean the -- there are certain drilling activities that require a larger vessel. A vessel that has perhaps particularly heavy mud-carrying capacity. And as a result, you may see certain specifications for some advanced drilling activity. But for the most part around the world, the PSVs are interchangeable from production-oriented work to drill and support work. So -- and quite frankly, most of the vessels that we have today doing -- that are really built for drilling support are doing production work today. They're a larger vessels. They're generally more fuel-efficient. They have more deck space and people like them because there's a little bit more option value. If they need to use them to send them out to a rig, they can do that. So for the most part, no, no real differential. On very extensive deepwater and high-temperature, high-pressure drilling, you will have some advanced vessels. But generally no.

Okay. So one of the questions that investors are always trying to figure out is this trend towards less greenfield but IOCs are squeezing out every single drop out of existing fields, doing longer tiebacks to keep the -- keep utilization up. And so what you get is less of these big multibillion hubs being built, which historically attracted a lot of resources. You've got more construction activity, means more supply vessels, more things going back and forth. To the smaller marginal field satellite field developments, which the onesies and twosies or they would describe it. So where are we in that kind of cycle of like less greenfield? And are we at the bottom of that now? Or still can we lose much more activity?

No. I mean definitely really beginning in 2015, you saw everybody going to incremental tiebacks. Whatever they could do to tap into an existing field, they were doing. I think that we're beyond that now. I think really for the next stage, really, you see this in Guyana. Certainly I wouldn't trend that. I mean is all the...

Yes, there are a couple of -- but yes.

Yes. So my belief is that what we're going to see in this kind of, call it, '24 to '27 timeframe is really new developments, not anything that's related to tiebacks. I think a lot of that's been drilled out, if you will.

Right, right, right. Okay. That's interesting, something to keep an eye on because, yes, I certainly feel like we haven't seen -- other than Guyana, Brazil and some of these areas where big platforms have been put in, we haven't really seen any other big activity elsewhere. There have been some gas developments, but other than that. So it's the big question really. When are we going to need to put some of those FID, some of these large projects?

Yes. And it will also vary by geography from a standpoint of political instability. I mean there was a nice development in -- more of a greenfield development in Mozambique.

Of course.

And unfortunately, that got curtailed. So we're definitely going to see those areas come back to life, East Africa. I suspect that we'll see some throughout Africa.

Okay. All right. Let's move on a bit to your offshore wind exposure. I mean I think you've put some numbers out there. You break out the revenue line from there as well. Talk a bit about your capabilities there. And do they actually -- are they different from -- are the vessels different from your offshore -- your vessels that support the oil and gas business?

So different stages of the offshore wind farm field development are taking different vessels. So in the initial phase of the development of an offshore wind farm, it's very similar to what we do in the oil and gas side. They are doing essentially seabed exploration and essentially evaluating the C4 jackets in order to put the wind farm stems on. So as a result, that's identical to what we do on the hydrocarbon side. So the vessels are likewise identical. Once the jackets are there and the firm and the construction begins, those are construction-oriented vessels. We don't have any vessels of that sort. Not too many, in fact, vessels can do that type of work around the world and no Jones Act vessels really can do that work. Once the field is established, then you've got a vessel that's truly called an SOP, which is essentially an accommodation vessel that has the equivalent of walk-to-work capabilities for the wind farm. The vessels that we have today and the combination units that are out there for oil and gas today could do that type of work, but the preference has been to a new build at this point. I sense that the preferences to a new build just because there's so much money available in the optional renewable space, then they can build their own vessels and they can custom build exactly what they want. I think that the economics would say that it's better to retrofit an existing vessel. But for the most part, what we're seeing happen today are new builds on the SOP side. But these vessels that live in the field and take workers to the various wind farm stems on a regular basis are augmented by vessels that transport people out to that vessel, so crude transfer vessels. So you've got the regular hydrocarbon vessels that are doing a lot of the preconstruction work. You've got construction vessels, a variety of sorts that do construction. You've got the SOVs and then you've got the crew transfer vessels. And so the crude transfer vessels and SOVs are definitely in our wheelhouse. I mean the same competencies that it will be demonstrated on the hydrocarbon side or what you can use for those vessels as well, which is just solid ship maintenance, good operational technologies, training mariners, all of that kind of good stuff that any global shipping company has -- is brought to bear in that type of activity as well. Right now, the vessels are different, but not that much different. So my sense is we may see legacy hydrocarbon vessels being used as after modification for SOVs over time, or at least in the beginning stages in certain areas of the world want to see how that plays out.

Got you. So in other words, largely the fleet that you are using for oil and gas is fairly similar to what you would use for the wind?

Today, it is. It's -- we don't have any specialty build vessels for the activity that we're doing in offshore wind today. If we were to try and get more aggressive in the offshore wind today, it would probably take a new vessel. I'm not sure if the economics are there, although we can constantly reevaluate it because we're looking for great ways to get into that industry. And then what we may see happen as the world kind of picks up speed in its development of offshore wind is that people lean on legacy hydrocarbon vessels to do what they can do, which is essentially the same thing that's just not as -- and not as pretty.

Got you. So on that front, are you seeing the same players tendering for the offshore wind projects as you would see them in your oil and gas side?

It's a mix. We definitely see a lot of the same players. But I would say that the majority of players, especially in the North Sea sector, are exclusively one or the other. They're either in the oil and gas space or they're in the renewable space. It's not always the case. But -- and there's some big players that are definitely in both spaces. So -- but no, it's -- and in the U.S., it's still evolving, but definitely seeing legacy oil and gas players in the mix in a big way. And I expect to see the same thing in Southeast Asia.

Right. I want to pick up on your point about the U.S. offshore wind business. It's fairly nascent. I mean it's actually got one of the most promising pipelines in terms of projects, but it's quite -- it's been quite slow to move because I think the view is there's not like a very fully formed supply chain to support the offshore wind market. I don't know if you agree with that. But my question there is how do you take your kind of incumbent position in offshore oil and gas and having Jones Act vessels and knowing all the rules and regulations, how can that turn into an advantage for you?

So I would say that the thing holding offshore wind back right now is really regulation more than it is the supply chain. Certainly, having the right Jones Act vessels is going to be important and on the construction side. But there's a lot of Jones Act vessels out there that can augment the construction process. There's a lot of vessels out there that can do a lot of the in-field work that's going to be required. So I actually see it more as a regulation bottleneck than anything else. And it seems like the new administration is trying to work its way through that. But certainly, what we saw in the earlier phases, Rock Island and others, was it was a lot of local politics as well as a lot of national politics. I think stumbling -- putting stumbling blocks into the development. But it wasn't that much different than what we saw in Northern Europe when it first began 20 years ago. And at that point, it was really more about the economics, like it was overly subsidized and the wind turbines weren't as productive as they are today. So there's a lot of things that we can learn from the European experience and offshore wind. And I think that we will, as we grow into the U.S. -- grow the U.S. offshore wind market. The nice thing about Tidewater is it's got tremendous amount of vessel experience, very familiar with the offshore wind activities. And as a Jones Act player, we can partner with others. We can partner with that expertise that we see in Northern Europe to become a much better combined player here in the U.S. Gulf of Mexico -- I'm sorry, in the U.S. waters. And also, I see some significant opportunities for floating offshore wind, which is a lot more complicated in areas like Taiwan, Japan and Southeast Asia.

Okay. Just to pick up on that point about just U.S. waters. How do you -- I mean there's -- your business is actually quite subject to regulation, and we saw in the beginning with your new presidency, there were orders to restrict certain activities, although we knew that they were temporary. How do you protect your business kind of in various regions against kind of the sudden regulatory changes? Is it very hard to predict? How do you think about the risks in the various regions of certain types of -- Denmark talked about banning exploration and the U.S. went through a temporary ban of issuing drilling permits. Just talk a bit about your risk management and kind of future-proof your business.

Right. So it's not just like the drilling regulations that come into play. It's all sorts of regulation. Maritime industry is interesting in the sense that most nations feel an obligation to protect their maritime industry. We have a Jones Act, which is one of the strongest protections and laws around the world from a maritime perspective. But other countries have it as well. And they will change their degree of enforcement in it. They will change the laws in it. So it's not just the drilling activities. It's the maritime industry as a whole. Then we have to -- than we had to in the industry. So you do that a number of different ways. One is you've always got a plan B and C for your vessels. You don't ever want to build a vessel that's so specialized that it only works in one area of the world. Because then you do [ get off ] that very quick, and you run the risk of just getting marginalized one way or the other in that particular geography. So having a global footprint helps make sure that you can float the vessels to where they need to be at any given time. You can float away from trouble to the extent that you have it. You see that in -- throughout the Americas all the time. So -- in the Gulf of Mexico is relatively low and the demand from a demand perspective, you see vessels going through Brazil or Southern Caribbean or Mexico. As it tightens up, you see them come back and kind of play that against each other. There are certain geographies that -- and boat classes that you have to be mindful about. The vessels at work, for example, in the Middle East, those aren't deepwater vessels. Those are relatively rudimentary vessel technologies, and they're great for the Middle East. They're great for the waters around the Equator and other peaceful areas. Mexico as well. But you're not going to take them to the North Sea. So there is some geography limitations that you have to be mindful about. But really you minimize the number of truly dedicated specialty vessels you have. There's always a double-edge sword on specialty vessels. If you get a contract, you can usually hold on to it for a long period of time. But if you lose that contract or at the end of that contract life, it's very difficult to get that vessel reemployed at those same levels of -- profitability levels. So generalize your vessel category and make sure that you've got plan B and C for all of your geographies and all of your boat times and respond quickly. I mean it looks like when the world went to hell during the pandemic, we -- unfortunately, Nigeria was really hard hit. And so we had to relocate those vessels quickly and shut down. So we moved those vessels into the southern part of Western -- West Africa and continue to put those boats back to work in different areas. So you just got to be as flexible as you can. You've got to have a global footprint in order to leverage with what the hotspots are. Like when we talked earlier in the conversation about North Sea being hot and -- but not so much in West Africa. You can move your vessel between those 2 locations to take advantage of them.

Right, right. Well, it sounds like an experienced veteran that knows how to deploy his assets and -- okay. I do have a question e-mailed in, and it's just a very simple one. How is the kind of summer spot market in Northern Europe developing? Is it panning out the way you expected? Or are there some potential like positive surprises popping up?

Well, you never know. No. So as I indicated earlier in the conversation, Norway seems to be doing really well. I'm waiting for a little bit more strength in the U.K. sector of the market. And I want to see. The activity indicators I have for the U.K. sector and the Mediterranean are actually very good. I just don't know if they're going to take hold as early as the summertime. But definitely, activity levels are up. Things are definitely off the bottom. They're not as strong as I had hoped that they would be. But it's always a relative mix. I mean I think Norway -- I wouldn't say Norway is stronger than I expect it to be.

Right. And then one more question from me, kind of what you can see on your competitors' behavior. So when tenders are going out right now, are they all answering to them? Are they getting very aggressive on pricing? Are they giving up any other terms and conditions?

Well, unfortunately, all the terms and conditions were given away back in '15 and '16. So I think ...

It's a good thing it's bottomed.

Yes. Always.

Can't get worse.

Well, that's right. That's the difference. But the terms of conditions aren't that bad. I mean with everything on the margin in the favor of the charter, but not that bad. So I guess what I would say is that in the depths of the downturn, people are afraid to push price because they're always concerned that they won't get the next job or they'll get this job for a week, but then they'll go off higher again. And they will have offended a customer and therefore, lock themselves out in the market for a period of time. And I don't see that today. What I see today and what we've seen really through the last couple of months in the North Sea is that people are willing to push price, which is great because that tells me that even though we're a fragmented owner base, the collective mentality is getting aggressive on price, which is what this industry needs to do. And so I'm actually very encouraged by the competitor dynamics that I've seen in those areas that are tightening up. Now in areas where it's still -- where things aren't as tight, there's still a lot of price-based competition. And -- but the good thing I could say about the competitor dynamics is they were much worse in the depths of the pandemic. I saw people just bring boats to work at cash flow breakeven, which made no sense. Now I'm starting to see them push price aggressively now that the summer work season is upon us in the North Sea. I think we're starting to see a little bit of that also in Brazil. And I expect to see a little bit of that in the Mediterranean as we go through the next 12 months. So I'm generally encouraged by our competitor activity. I think we -- again, I think we're through the worst of the pandemic, and I believe that we're going to see things improving throughout '21 and '22.

All right. Good. Probably a good point to end on a high note then. Do you have any closing comments to make there?

I guess, I'm really excited about the change that is ahead of us in this industry. We've had to do a lot since 2014 to transform Tidewater to be very cost focused and focused on cash flow generation. And now we've kind of gone headstrong into an energy transition, and we're trying to figure out our way through that. So I'm very excited about all the potential things that can go for -- go in our favor here over the next couple of years. And with the recovery of the -- from the pandemic unfolding and offshore wind here in the U.S. unfolding, I'm actually more excited now than I've been in probably 5 years.

Great. Thank you very much for spending this time with me, Quintin. So with that, we'll sign off from here. And good luck.

Thank you very much. Thanks for having me.

Thank you. Bye-bye.