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Operator: Thank you for standing by. At this time, I would like to welcome everyone to the Tidewater Inc’s Q4 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be question-and-answer session. West Gotcher, Vice President of Finance and Investor Relations. You may begin your conference.

West Gotcher: Thank you, Cheryl. Good morning, everyone, and welcome to Tidewater’s Full Year and Q4 2022 Earnings Conference Call. I’m joined on the call this morning by our President and CEO, Quintin Kneen; our Chief Financial Officer, Sam Rubio; and our Vice President of Sales and Marketing, Piers Middleton. During today’s call, we’ll make certain statements that are forward-looking and referring to our plans and expectations. There are risks and uncertainties and other factors that may cause the company’s actual performance to be materially different from that stated or implied by any comment that we make during today’s conference call. Please refer to our most recent Form 10-K for additional details on these factors. These documents are available on our website at cdw.com or through the SEC at sec.gov.

Information presented on this call speaks only as of today, February 28, 2023. Therefore, you’re advised that any time-sensitive information may no longer be accurate at the time of any replay. Also during the call, we’ll present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures can be found on our website at tdw.com and is included in yesterday’s press release. And now with that, I’ll turn the call over to Quintin.

Quintin Kneen: Thank you, Wes. Good morning, everyone, and welcome to the fourth quarter 2022 Tidewater earnings conference call. I’d like to start today’s call by reflecting on the difference that a year can make in our industry and the improvements in our business during the course of 2022. 2022 marked the long awaited inflection point in the offshore vessel market. Our revenue increased nearly 75% compared to 2021, driven by a major acquisition, but also a significant rise in average day rates. Average day rates improved over $2,400 per day for the full year, a pace of improvement we have not seen during the past 20 years, and we expect that 2023 will reflect a full year improvement of over $3,000 per day. On a quarterly basis throughout 2023, we expect average day rates to be increasing quarter-over-quarter, and although it’s too early to comment on the full year day rate increases for 2024.

We see nothing stopping the day rate acceleration. To put this in perspective, historical up-cycle year-over-year day rate improvements were approximately $1,500 per day. Vessel operating margins increased by over 10 percentage points year-over-year. Our adjusted EBITDA nearly quadrupled as compared to 2021. We generated positive net income in the third and fourth quarters of 2022. We closed and integrated a major acquisition over the past year. By all measures, 2022 was a seminal year for Tidewater, and we are very pleased to report on the successes of 2022. I’m going to let Piers and Sam give you more details on the performance of the individual regions. As today, I wanted to spend some time on a handful of non-routine topics. I want to take a moment to explain the process we go through, when we provide forward guidance, which many of you will notice we resumed this quarter.

I want to describe our current capital allocation philosophy, which is going to become an important topic as we continue to generate increasing levels of free cash flow. And then related to capital allocation, a bit more on consolidation in the industry. And then I wanted to finish up with some comments on the Jones Act Warrants and merger acquisition — merger integration. Some of you are new to the Tidewater story. So I wanted to take a moment to discuss an internal process that is critical to how we run our business and how Sam and I have been running companies in this industry over the past 12 to 15 years. We reforecast our business every week. Years ago, we developed a system to capture on a weekly basis changes in day rates expected over the next 12 months, new contracts that have been added changes to forecasted utilization levels, unplanned expenses, general price level increases and literally everything in between.

Every week we review and evaluate these changes to the outlook over the next 12 months. I’ve been told many times that this sounds extreme mostly by people inside the company associated with this activity, but outside the company as well. But for us it’s an important tool to assist us in developing our chartering strategy. Day rates in this industry have historically been quite volatile. And to us that volatility dictates a high sampling frequency. Piers has mentioned on past calls and you will hear it again today, how we are chartering short and our confidence in taking and maintaining this position comes from closely monitoring the movement in day rates around the world. Sam is going to speak to you about some mobilization costs we incurred during the fourth quarter and our confidence in relocating vessels from one region to another is based on the relative day rate development we see in the regions in which we operate.

But another benefit of this detailed weekly forecasting process is that over time and through refinement we have developed a relatively high degree of confidence in our ability to forecast the business. The guidance Sam is going to provide you later in the call is based off of these reports. It’s the same reports we provide to our Board. The guidance is neither deliberately conservative nor optimistic, it’s our current candid assessment for the year. We provide calendar year guidance with a range and we tighten up that range as we proceed through the year. We will update you every quarter and we feel confident that the information we are providing is the best possible outlook for our business at the time it’s given. As you reflect on the outlook for 2023, you will quickly conclude that the business is poised to generate a substantial amount of free cash flow over the next several years.

And as mentioned in the press release we are already virtually unlevered. So it’s appropriate to discuss our capital allocation philosophy. It’s also fairly easy to see that the amount of cash that will be generated over the next several years if our outlook is correct is of such a magnitude that value-accretive, mergers, acquisitions, dividends, share repurchases, all will be considered in the ultimate allocation of capital. First and foremost, we will not be putting any new vessels on to water. Our fleet has been reactivated. We have no material reactivation costs remaining. Mergers and acquisitions can be used to increase our overall long-term return on capital. A key attribute we look for in mergers and acquisitions is the ability to increase our span of control over vessels currently on the water provided those vessels maximize the duration of our fleet’s earning potential and/or contribute to the individual profitability of each vessel through economies of scale.

Increasing our span of control over vessels only makes sense when the price per vessel is accretive to our equity holders. I’m not interested in adding vessels to the fleet just to add vessels to the fleet. This company can make a tremendous amount of money with the vessels it already has. It can make disproportionately more money with more vessels, if they are the right vessels purchased at the right price. And when we find consolidating opportunities like that, we certainly pursue them, but they’re the exception. Even as fragmented as our industry is, I do not expect that we could deploy all of the cash we are forecasted to generate over the next several years in such value-accretive acquisitions, which means that in addition, we will return money to shareholders through dividends and share repurchases.

Now with all that said, we also need to ensure we are properly structured from a debt capital perspective. As reflected by our net debt position of $9.6 million, we are underleveraged at this point in the cycle. So we should also use leverage to an appropriate degree to maximize value to our equity holders. Leveraging the business means having even more cash to allocate and we need to move the leverage over time, as the capital markets permit through long duration debt compatible with our industry’s volatility. And last but not least, we have a restriction in our current bond issue with the $175 million issue that matures in November of 2026 that restricts the timing and the amount of cash that we can return to shareholders. This is a restriction that can be dealt with but it’s appropriate to mention.

You will recall that we issued 8.1 million Jones Act Warrants in this Swire Pacific Offshore acquisition. All of those warrants have now been converted into common shares. This was done during the second half of 2022. None of those warrants remain. Because an overwhelming majority of the common shares issued in the two warrant exchange transactions were issued to US citizens, we now have room for foreign owners to hold Tidewater common equity. So if you happen to be holding a relatively small amount of credit or warrants that were issued in 2017, please contact us to convert those into common shares. Remember that those warrants will not receive a cash dividend, when the common shares do. As it relates to consolidation, I think it’s accurate to say that we have been in non-stop due diligence over the past five or so years.

It’s been an enjoyable experience getting such a comprehensive understanding of our competitors around the world. But I just want to caution everyone that in those non-stop due diligent over the past five years or so, we’ve only closed two major deals. We’re disciplined in our acquisition strategy and additional consolidation may or may not happen. As I think about the potential for future consolidation, the one perspective that I would suggest to you that has changed from those first two deals we did is that our willingness to use equity is very low. Due to the outlook for cash generation and the unlevered state of the company, I am more focused on those opportunities for the right vessels at the right price that can be purchased for cash.

Again, those deals are the exception and not the rule. I’m also pleased to relay that the most recent acquisition of Swire Pacific Offshore was fully brought into the Tidewater infrastructure on January 1. Integrations are always tough. We had over 50 separate projects running throughout the eight-month integration period to effect this integration. It was a Herculean effort by a very talented group of people and I’m happy to relate to the newly integrated business went through the first monthly close process without a hitch. We are on track with the realization of our synergies. And as you may recall from the GulfMark integration, this is when we begin to accelerate the realization of synergies because we’ve reduced the redundant systems and certain processes are eliminated.

We anticipate that full realization of the synergies will occur by the end of the third quarter. Free cash flow for the quarter was $53.3 million, compared to free cash flow of $22.2 million in the third quarter, representing a $31.1 million improvement sequentially. I’m quite pleased with the free cash flow generation in the quarter and the sequential improvement realized. The sequential improvement is principally a function of our efforts to reverse the working capital investment incurred during the first three quarters of 2022. Further the absolute level of free cash flow generation is indicative of the inherent operating leverage of this business. We have now reached a point where our total fleet operating costs have leveled off and we are in a position to generate meaningful incremental free cash flow as utilization and day rates increase.

We do expect to continue to make proportional investments in working capital as the business continues to grow and we will continue to manage working capital slightly as we do any other capital expenditure. We originally anticipated by the end of 2022 that we would have sold or reactivated all of our remaining stacked in assets held for sale. We didn’t get — quite get all of them dealt with. As of now, we have a total of eight vessels remaining. We are in various stages of negotiating the sale of four of the remaining eight vessels and are working to resolve the remaining four over the first half of 2023. And with that, let me turn the call over to Piers, for an overview of the global markets and the company’s performance within.

Piers Middleton: Thank you, Quintin, and good morning, everyone. Before I talk about the market and some of Quintin’s comments about Tidewater’s performance into a wider global context, I wanted to mention that we’ll be releasing our third sustainability report at the end of the week and just to reiterate that at our core ESG is something that has always been and always will be in an extremely important part of Tidewater’s DNA. And it’s great that with our latest sustainability report, we continue to showcase to our stakeholders historical as well as our future commitment to ESG. Please look out for the report when it is released. Before Sam goes through our numbers in greater detail, I wanted to talk through some of the themes we saw develop and crystallize in 2022 and what Tidewater achieved during the year and what we see happening as we go through 2023 and beyond during this up cycle period.

The big theme in 2022 was the market’s realization that there was and is limited OSV supply to meet the increase of demand. Total OSV supply, according to Clarksons Research, was down 4% since 2016 peak in 2022 and with little scope for any additional underlying growth in 2023 or 2024. Due to both the limited order book and remaining suboptimal stack fleet, we don’t expect to see any future growth in OSV supply for some time. On the demand side, sentiment continued to strengthen throughout 2022 with overall global demand for OSVs increasing 8% during 2022 with offshore brokers projecting a further 10% demand increase in 2023. On the OSV side in 2022, we continue to see the increase in demand and shortness in supply impact rates positively throughout the year.

With Clarksons Research reporting new global one-year time charter rates for the largest PSVs at circa $24,501 per day levels compared to $15,131 per day in 2021 and one year time charter rates for large AHTSs averaging $33,456 per day compared to $23,427 per day in 2021. All positive indicators, with the market as a whole, is being disciplined and continued to push rates during 2022. During 2022, one of our key talents was to stay disciplined when bidding for new world with the focus being to push day rates by keeping to a shorter-term chartering strategy to allow us to roll our vessels as quickly as possible onto new contracts on to higher rates. The team has remained very disciplined and has been very successful at pushing our composite fleet rate from $10,583 per day in Q4 2021 to $13,554 per day in Q4 2022, an increase of more than 28% across the whole fleet from our smallest crew boats to our largest vessels and almost double what we have seen achieved in previous up cycles.

Working through our various regions and starting with Europe. This region had a very strong year overall with significant day rate increases across all vessel classes with average day rates jumping from a composite fleet rate of $11,917 per day in Q4 2021 to $15,364 per day in Q4 2022. During the year as mentioned on previous calls, we saw record high spot rates of £173,750 per day for large anchor handlers in the North Sea market which in turn drove our own anchor handlers day rates during 2022. And as we look out to 2023 and beyond, the traditional lower season periods of Q4 and Q1, we again expect to see strong demand in this region for larger AHTSs and PSVs longer term with forward rates continuing to improve throughout 2023 for all vessel classes driven in part in Norway where we saw $27.2 billion of offshore oil and gas project CapEx being approved in 2022 for new projects and work out beyond 2025.

Moving in to Africa where we have our largest fleet we saw a significant increase in activity across all the countries that we operate in during the course of 2022, which in turn led to an increase in our composite fleet rate of $9,052 per day in Q4 2021 jumping to $12,272 per day in Q4 2022, which is a 35% increase. During Q4 2022, we saw leading edge day rates for our medium class PSV in excess of $27,000 per day and our largest AHTS winning work on rates in excess of $32,000 per day. As we look forward through 2023, we see no let up in activity in the region driven both by an expected increase in floater demand through 2024, but also by a number of announcements for large subsea construction projects in the region out beyond 2025 all of which will require additional OSV supply in the region and bodes well for sustained upcycle in the offshore and OSV space.

In the Middle East, the market continues to tighten. But as we’ve mentioned on prior calls this is a very large and competitive market with over 500 active vessels in the region, but which still continue to see strong levels of tendering from the NOCs during 2022 that enabled us to drive our composite fleet rate for the region from $8,217 per day in Q4 2021 to $9,498 per day in Q4 2022. Leading-edge day rates for our smallest vessel class of AHTS in the region were in excess of $7,000 per day. Again, looking out to the rest of the year, we’re still seeing significant tendering activity for more rigs and boats from the NSCs as well as significant demand from the construction companies to support new projects in the region that would last out beyond 2025.

Similar to other areas of the world, we are seeing no signs of any slowdown in the region. In the Americas we again saw a significant improvement throughout 2022 with the fleet composite data rate jumping from $14,603 per day in Q4 2021 to $18,271 per day in Q4 2022. Outside of the Jones Act, we saw dayrates for our largest PSV class in excess of $35,000 per day during Q4 2022 and rates in excess of $35,000 per day for our largest class of AHTS during the same quarter. During 2022 we saw rates for large PSVs in excess of $40,000 per day in the Gulf of Mexico. And in Brazil we saw a steady influx of foreign flagged tonnage being allowed to work in the country due to a lack of available Brazilian flagged tonnage, support projects in the country.

A very positive indicator of how delicate the supply-demand balances, not just in Brazil but also globally. Demand in the region is expected to stay strong in 2023 and beyond with further exploration slated in all countries in which we currently operate in the region and supply being further exacerbated by several significant construction projects in the region primarily led by Brazil. Lastly, in Asia Pacific, 2022 started off a little slower than some of our other regions, but during the second half of the year we start to see a pickup in demand which we really expect to see blossom during 2023. But we were still able to push composite fleet rates from $10,683 per day in Q4 2021 to $17,868 per day in Q4 2022, a 67% increase, most of which is due to the acquisition of the spot fleet earlier in the year.

In Q4, we achieved leading edge day rates in excess of $40,000 per day for our medium-sized anchor handling class in Australia and rates in excess of $30,000 per day for our largest class of PSV in Asia. In 2023, we’re seeing a strong up-tick in demand in Taiwan to support windfarm projects for which we are well placed with our presence in the country which we acquired through the Swire transaction. And in the second half of the year, we are already starting to see a much higher level of tendering activity throughout the whole region to support projects in Australia, Malaysia and Indonesia. Again, as with all the other regions in which we operate some very positive signs of demand for the longer term. For 2023 and beyond, we will of course remain focused and disciplined on continuing to push rates, but we will also be aiming to improve the contract terms that we enter into with our customers to make them more equitable for both parties and more in line with the realities of the marketplace we are in today.

Overall, as mentioned by Quintin, we are very pleased with how the market continued to move in the right direction during 2022 and are very positive about, how the market would develop during 2023 and into a sustained period of growth for the OSV space into the foreseeable front. And with that, I’ll hand it over to Sam. Thank you.

Sam Rubio: Thank you, Piers and good morning everyone. At this time, I would like to take you through our financial results and discuss some key points that make up these results. I will begin by highlighting the full year activity and turn to the quarterly results. For the year, we generated revenue of $647.7 million compared to $371 million in 2021, an increase of 75%. The increase in day rates and the addition of the Swire fleet were the main drivers to the revenue increase. Vessel operating margin for the year was $244.1 million, compared to $99.8 million in 2021. We generated net income in the third and fourth quarter of 2022 and for the year, we reported a net loss of $21.7 million compared to a net loss of $129 million in 2021.

Operationally average day rates improved almost $2,400 per day for the full year and vessel operating margins increased by 10.5 percentage points, year-over-year. Adjusted EBITDA was $166.7 million for 2022, compared to $34.7 million in 2021, an increase of approximately 30%.2022 was quite a year and we are pleased to report the success we achieved. As noted on our earnings release, we have once again begun to report forward guidance. So as we look to 2023, based on our most recent forecast, we are estimating revenues to be in the range of $890 million to $910 million, and our vessel operating margins to be between 49% and 51%. I would now like to turn our attention to the quarter. And as in the past my discussion will focus primarily on sequential quarterly results, comparing the fourth quarter of 2022 through the third quarter of 2022.

For the fourth quarter, we reported net income of $10.6 million or $0.20 per diluted share compared to net income of $5.4 million or $0.10 per diluted share for the third quarter. We have now reported consecutive net income for the first time, since our emergence from bankruptcy in 2017. Our revenue for the fourth quarter was $186.7 million, down $5.1 million from the third quarter revenue of $191.8 million. The decrease resulted primarily from the seasonal decline in our North Sea operations in the Europe and Mediterranean region, which normally occurs in Q4 and Q1 of each year. And in our Asia Pacific region, we saw vessels come off contracts and vessels transiting out of the area or vessels mobilizing to perform their dry docks that impacted our overall results.

Active utilization decreased marginally to 82.5% compared to 83.7% in Q3. Average day rates were essentially flat at $13,554 per day in the fourth quarter compared to $13,606 per day in the third quarter. Gross margin percentage for Q4 decreased to 37.8%, down from 40.7% in Q3. Vessel operating costs for the quarter were $115.5 million, an increase of $2.5 million from Q3 principally driven by higher repair costs and higher fuel costs, as we continue to mobilize vessels in and out of new contracts to achieve higher vessel margins. In the quarter, we relocated six vessels to different areas which added almost $700,000 of fuel costs to our operating expense. The result of the additional costs increased our vessel operating cost per marketed day to approximately $6,936 per day in the quarter.

We continue to realize identify operating synergies associated with the SPO acquisition. Our original target was $25 million and to date we realized approximately $10 million. We anticipate the remaining synergies to be realized by Q3 of 2023. In the quarter, we sold four vessels, two from assets held for sale, during the fourth quarter for the net proceeds of $5 million and recorded a net gain of $1.1 million on the sale of these vessels. We generated operating income of $13.1 million for the quarter compared to $19.1 million in Q3. The decrease is due primarily to a decrease in revenue, coupled with the increase in operating expense. G&A costs for the quarter was $28.6 million $1.4 million higher than Q3. G&A for the fourth quarter included, $5.2 million of transaction costs associated with the SPO acquisition, compared to $4.3 million in Q3.

G&A cost in the fourth quarter was also burdened by about $5.8 million associated with the legacy SPO cost, which continues to be well below our initial expectation of about $8.8 million for the quarter. On an annual basis, this replaces approximately $12 million, which is approaching our $20 million synergy target. We anticipate achieving that target by the end of Q1 2023 as a significant part of our synergies will materialize now that we have completed the SAP implementation. For the year our total G&A cost was $101.9 million. We do expect to incur additional transaction costs in Q1 of 2023. Excluding these costs our G&A costs for 2023 is estimated to be $85 million. In the quarter, we incurred $12.1 million of deferred drydock costs compared to $12.8 million in Q3.

In the quarter, we incurred 539 dry dock days which affected utilization by 3%. For the full year, we incurred $56 million in drydock costs. Drydock cost for 2023 is expected to be about $77 million. In Q4, we also incurred about $4.9 million in capital expenditures related to vessel modifications including battery installations and IT upgrades including fuel monitoring systems. For the full year, we incurred $16.6 million in capital expenditures and we expect to incur approximately $14 million in 2023. We generated $53.3 million of free cash flow this quarter, which more than doubled the Q3 amount, driven by strong cash from operating activities including increased accounts receivable collections as we began to monetize working capital resulting from prior quarter revenue increases.

We do expect to invest in working capital as revenue continues to grow; however, we have to continue to manage this as tightly as possible. In Q4 of 2019, we began reclassifying vessels on our balance sheet from property and equipment to assets held for sale. We have since run 88 vessels through this program. At the end of Q4 2022, we had eight vessels remaining in assets held for sale at a value of $4.2 million. During the fourth quarter, we sold two vessels from assets held for sale for proceeds of $3.3 million. November, our redemption of the SPO warrants — we completed our invention of the SPO warrants with a public common stock offering for approximately 4 million shares to redeem the equal number of warrants remaining. In total, for 2022, we have redeemed all 8.1 million warrants that were issued to Swire as part of the acquisition.

I would now like to focus on the performance of the regions. Our Americas region reported operating income of $3.2 million for the quarter compared to operating income of $3 million in Q3 of 2022. The region reported revenue of $41.8 million in Q4 compared to $39.1 million in Q3. The region operated 31 average vessels in the quarter, which was unchanged from Q3. Active utilization for the quarter was 80%, also the same as prior quarter. Additionally, day rates increased 8.1% to $18,271 from $16,901 per day in Q3. The improvement in operating income was due primarily to the increase in revenue. For the fourth quarter, the Asia-Pacific region reported an operating loss of $800,000 compared to an operating profit of $3.3 million in Q3. The region reported revenue of $19.1 million for the fourth quarter compared to $23.9 million in the prior quarter.

The region operated at 14 average vessels, which was down one vessel on average compared to Q3. Revenue decreases were principally influenced by the expiration of contracts, the movement of one vessel out of the region, and dry docks incurred in the quarter. Active utilization decreased to 79.5% in the quarter compared to 91.4% in Q3. Day rates declined slightly to $17,868 per day in Q4 compared to $18,530 per day in Q3. The lower revenues were partially offset by decreases in operating costs, as we operated one less vessel in the quarter. For the fourth quarter, the Middle East region reported an operating profit of $492,000 compared to an operating profit of $605,000 in Q3. The region remained steady quarter-over-quarter and reported revenue of $30.6 million in the fourth quarter compared to $31.2 million in the prior quarter.

The region operated 43 vessels, which was one vessel higher than Q3. Active utilization remained the same at 83% in the quarter. Day rates declined slightly to $9,498 per day in Q4 compared to $9,781 per day in Q3. The decrease in operating income was due primarily to the decrease in revenue. Our Europe and Mediterranean region reported operating income of $3.9 million in Q4, compared to operating income of $13.1 million in Q3. Typical seasonality occurred in Q4, as we saw revenue decrease to $33.5 million compared to $39.7 million in Q3. The region operated 27 vessels in the quarter, which was an increase of one vessel from Q3. Active utilization decreased to 87.8% compared to 95.2% in Q3. The decrease in utilization was due to the seasonality, as there is less activity in the winter months.

In addition, we had a couple of dry docks in the process that affected overall utilization. We also saw a 12% decline in day rates to $15,364 per day compared to $17,436 per day in Q3. You may recall that day rates in Q3 increased significantly due to the leading-edge day rates achieved by our Anchor handler in the North Sea. The decline in operating income for the quarter was mainly driven by the decrease in revenue, coupled with higher operating costs, as we transferred and operated one extra vessel in the region. Our West Africa region reported operating income of $18.3 million in Q4, compared to operating income of $12.3 million in Q3. The market in this area has continued to improve, as we have seen revenues increase steadily for eight straight quarters.

Revenue for Q4 was $60.2 million compared to $56.3 million in Q3. The region operated two less vessels on average in Q4. Active utilization increased to 81.7% in Q4 from 79.4% in Q3. Day rates continue to increase as we saw a 7% increase to $12,272 per day in Q4 from $11,467 per day in Q3. The increase in operating income from Q3 resulted from higher revenue coupled with lower operating costs, as two less vessels operated in the region. In summary, we are pleased with our Q4 results. Q4 results will typically be below Q3, which is expected, as seasonality occurs in the North Sea. In the quarter, we also relocated vessels to areas and had a high number of dry dock days that affected overall results. We are encouraged to see revenue increase throughout the year, driven by the increase in day rates and the newly acquired SPO vessels in the second half of the year.

We also reactivated many of our previously stacked underutilized legacy Tidewater vessels, which will now put us in a strong position to take advantage of the upturn in the industry, as we remain encouraged by the leading indicators we see for 2023 and beyond. Finally, I do want to thank our teams for a successful implementation from the legacy SPO Oracle ERP system SAP. This was a lot of hard work, but we have a very talented group of individuals that made this possible in eight short months. The SAP go-live was January 1, 2023 and we have since had our first month end close which we accomplished in 4.5 days without a problem. With that, I’ll turn it back over to Quintin.

Quintin Kneen: Thank you, Sam. Commercial momentum continues as our customers plan for what by all accounts appears to be another leg up in offshore activity in 2023 and into 2024. We continue to be committed to our commercial chartering strategy of staying short to take advantage of rising day rates in all regions in all vessel classes. We continue to view this as the best strategy to drive earnings and free cash flow generation over the coming quarters. And with that Cheryl, we will open it up for questions.

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Operator: Thank you. Your first question is from Hans Lund of Clarksons. Please go ahead. Your line is open.

Hans Lund: Yeah. Thank you. Can you perhaps provide some color on how much of the fleet in terms of percentage is committed on contracts in 2023 and 2024?

Quintin Kneen: Yeah, Hans hold on one second we’ll give you an idea of what that is. Sam is looking up some of the numbers right here to give you a better number. However, I will tell you that because we’re going short our intention is to minimize that number until we get to a more comfortable thing in locking up longer term.

Hans Lund: Maybe perhaps if you’re able to — I mean you gave some guidance on 2023, but if you look to 2024, do you have the backlog number there for next year?

Sam Rubio: Yeah. So Hans, in percentage-wise we have 70% of 2023 contracted and 2024 it’d be 45%.

Hans Lund: Okay. Perfect. And then in terms of the backlog value of those 45% in 2024, do you have that number or…

Sam Rubio: Yes, so 2023 is $586 million and 2024 is $385 million.

Hans Lund: Perfect. And then in terms of I guess staying on 2024, if you compare 2024 to 2023, do you think revenue and EBITDA could increase as such on an annual basis as you expect revenue and EBITDA to increase in 2023 versus 2022? I guess, what I’m asking is?

Quintin Kneen: So, yeah, I do. And in fact I think profitability will increase even disproportionately. So as we were talking about earlier in the call, the year-over-year increases in day rates that we’re seeing for 2023 are approximately $3,000 maybe just a little over $3,000. That’s implicit in the guidance and as it relates to you. And I see day rates accelerating and we still have some boats that are on charter at a lower rate that we’re done in like 2019, 2020 and 2021 that are going to be rolling off. So my anticipation is that in 2024, we’ll see even more than a $3,000 rate increase year-over-year, which means that essentially the percentage increase would be just as much or higher.

Hans Lund: Okay, perfect. And then just lastly I think Sam touched upon it. But just in terms of SG&A for 2023, did you say that you expect SG&A to come in at about $85 million?

Sam Rubio: That’s correct. Yes.

Hans Lund: And then dry docks expected to be 77.

Sam Rubio: Drydocks at 77. That’s correct.

Hans Lund: Perfect. All right. Thank you. That’s it for me. I’ll just jump back in queue.

Operator: Your next question is from Ina Golikja of Fearnley Securities. Please go ahead. Your line is open.

Ina Golikja: Hello, everyone. Thanks for taking my question. I was thinking a little bit you just mentioned the G&A, but what about the overall cost. What’s the average level you see, let’s say the end of 2023? Because we have heard like also from owners here in Norway they were talking like markets getting tighter but also the cost and inflation pressure just starting to bite. So I just wanted to — if you could give a bit more color on what is — how much cost you think will increase in 2023 and 2024? Thank you.

Sam Rubio: So Ina, we mentioned in the range of 49% to 51% as a margin for 2023.

Quintin Kneen: Yeah. I think implicit in that is there’s a couple of things happening. There certainly are general price level increases that we’re experiencing as everybody else is for labor and other things. And that’s in that 5% to 8% range. But we also have synergies rolling through on the Swire Pacific transaction that are going to bring that down. So, if you’re looking at the overall dollar magnitude on a per vessel basis is in that 2% to 3% range.

Ina Golikja: For ’23 or ’23-’24.

Quintin Kneen: So ’24 is just too early to jump. I don’t if — the nice thing about the fact that supply is constrained is that, it actually doesn’t put more pressure on our supply channel, so on laborers and others. So once all the boats are working essentially, there’s no pressure to lift rates commensurate with the increases in day rates. So, my hope is that, we’ll see that stabilize in ’24, but we’ll give you better guidance as we get closer to that.

Ina Golikja: Okay. Thanks. Just like to mention a little bit utilization, average utilization you see for the next two years.

Quintin Kneen: Well, I definitely see it increasing, but let me break it down to you on where I see the limitations, right? So, in utilization, you have to think about it over a reasonable time period. So, if you give me a month, I could give you 100% utilization. But if you talk about a year, there’s always going to be 3% to 3.5% that go for dry box. So that’s going to be — that’s going to cap you out. There’s always going to be about 3% and 3.5% down for repairs, right? So, your theoretical maximum is in that 93% range, right? Now, there’s also going to be some frictional unemployment and things like that, so my belief is that, as we see the cycle continuing to strengthen, we’re going to move out of the high 80s and into the low 90s. But do I think it will ever go over 93% for a year, I certainly hope so. But I don’t anticipate that to be the case.

Ina Golikja: Okay. Thank you. And I — if I heard it correctly, you mentioned that you have mobilized one of the vessels to the Mediterranean, do you see like as we are heading into the strong summer season at least here in the North Sea, do you see more vessels moving towards this region?

Piers Middleton: I think, we’ll obviously see where the market goes. I mean, the market is very strong in certain areas. So we’ll move vessels accordingly, as long as we’re getting paid off mobilization fees — mobilization fees. We’ll be going to work, where our vessels are required, where we can push the highest rates. So yes, we’re open to going anywhere, as long as we’re paid properly.

Ina Golikja: Okay. Thank you.

Operator: There are no further questions at this time. I will now turn the call over to Quintin Kneen for closing remarks.

Quintin Kneen: Thank you, Cheryl. Thank you, everyone, and we look forward to updating you again in May. Goodbye.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.