Tidewater Inc Q4 FY2021 Earnings Call

Hello, and welcome to the Tidewater Fourth Quarter 2021 Earnings Call and Swire Pacific Offshore acquisition announcement. My name is Alex, and I'll be coordinating the call today.

Thank you, Alex. Good morning, everyone, and welcome to Tidewater's earnings conference call for the 3 months ended December 31, 2021, and also the Swire Pacific Offshore acquisition announcement. I'm joined on the call this morning by our President and CEO, Quintin Kneen; our Chief Financial Officer, Sam Rubio; our General Counsel and Corporate Secretary, Daniel Hudson; 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-Q for additional details on these factors. This document is available on our website at tdw.com or through the SEC at sec.gov. Information presented on this call speaks only as of today, March 9, 2022. 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 measures is included in yesterday's press release. And now with that, I'll turn the call over to Quintin.

Thank you, West. Good morning, everyone, and welcome to the Fourth Quarter 2021 Tidewater Earnings Conference Call. Today’s call will be a bit different as, in addition to updating you on the quarter, we will also discuss the business combination we announced with the earnings release. We have added a slide deck to accompany the press releases to help present the synergy potential of this transaction and provide additional information on the deal. It is linked to the press release and is visible to those listening via webcast. Thank you for accommodating this last-minute conference call and for releasing two press releases early in the morning, but we needed to find a time that wouldn’t conflict with the NYSE or Hong Kong stock exchanges. As you can understand, deals come together when they come together. Also, Sam has been holding the earnings release for over a week, so we decided it was best to share all the information at once. I’m pleased to say that Tidewater has had another solid and active quarter, with several transactions and events since we last spoke. Alongside the strong quarter, we completed the debt refinancing mentioned during the third quarter earnings conference call. We ended the tax benefits preservation plan early, bought out our joint venture partner in Angola, and announced last night that we are entering a definitive agreement to acquire the 51-vessel fleet of Swire Pacific Offshore. Revenue exceeded expectations in the fourth quarter, reaching just over $105 million, which is a 14% increase from the third quarter. While the revenue increase is encouraging, the overall trend is even more significant. Typically, seasonal softness in the North Sea balances out any gains from other regions in the third and fourth quarters. However, this year, the North Sea experienced a slight increase, and the other regions saw considerable growth, leading to the 14% rise. Additionally, quarterly revenue has risen every quarter this year, a strong indicator that activity levels are climbing and are being accepted by our customers as we move past the pandemic-driven downturn and into a growing offshore activity cycle. Historically, the first quarter tends to be the weakest of the calendar year due to weather in the North Sea and some customers chartering based on the calendar year. Gross margin also improved this quarter, rising by 3.2 percentage points to 32.2% before the noncash impairment charge. This pushes the annual gross margin up to 29.1%, just shy of our 30% guidance for the year. Our G&A costs for the year included $2 million related to the transaction we recently announced. You'll recall that G&A had increased last quarter due to higher professional fees. Last quarter, we were somewhat vague as the deal was still in negotiations. However, excluding the deal costs, G&A for the year was $66.6 million, down 10% from $73.4 million in 2020. Our annualized G&A expense for the fourth quarter was $68.4 million. We plan to discuss G&A further in a moment regarding the transaction with Swire Pacific Offshore. Just as a reminder, the combined G&A for Tidewater and GulfMark, at the peak of the last cycle in 2014, was $253 million; and with the merger, it was $143 million. Now, we are at $66.6 million. We are confident in our ability to achieve the anticipated G&A synergies from this deal, and we will provide more details on that later in the call. Free cash flow for the year came in at $52.2 million, with most of it generated in the first half of the year. We maintained positive free cash flow every quarter, which has been one of our key objectives as we navigate a recovering offshore vessel market. The decrease in free cash flow in the second half of the year was due to vessel reactivations. We expect a similar trend in the first half of 2022 since the gross margin from the additional vessel reactivations will not outweigh the reactivation costs until the second half of the year. We believe that all vessels will be either working or sold by the end of 2022, and we are on track to achieve this goal. Of the 51 vessels in the Swire Pacific Offshore fleet, 49 are currently active, and we are committed to ensuring they remain gainfully employed. Vessels in layup cost us $13.7 million in 2021, which accounted for 4 percentage points of gross margin. It's important to note that pandemic-related expenses cost us approximately 5 percentage points, including OpEx and off-hire impacts. I will let Sam provide an update on the new bonds we issued in the fourth quarter and the new revolver shortly, but first, I want to share a few other updates before passing the call to Piers. We terminated the tax benefits preservation plan early in the fourth quarter. You may recall we established this plan just as the pandemic hit to avoid any unnecessary or inadvertent limitations on our substantial tax credits—over $400 million. One of the key factors that could have triggered the IRS limitation on these attributes was the acquisition of GulfMark in the fourth quarter of 2018. The tax limitation determination is a rolling three-year computation, and once the three-year anniversary of that deal passed, the Board decided to terminate the plan. We appreciate that these plans can be viewed as not being shareholder-friendly, which is not our intention. As soon as the risk of triggering the plan was lowered sufficiently, the Board acted to end it. Regarding the proposed transaction with Swire Pacific Offshore, it potentially raises the rolling three-year average, but not to a concerning level. Another transaction we completed early in the first quarter of 2022 is the acquisition of our partner’s 51% interest in Sonatide, our joint venture in Angola, which we purchased for $11.2 million. This acquisition allows us to have full control and operation of our business in Angola and implement the efficiency improvements that we’ve applied to the rest of Tidewater. It also removes the commission we were paying to the joint venture and allows us to consolidate the $10 million in net assets held by that joint venture. This transaction enables us to leverage our position in Angola for growth across West Africa, including the 25 Swire Pacific offshore vessels located there. Additionally, in the fourth quarter, we initiated the previously mentioned at-the-money stock issuance plan. We have not issued any shares under that plan since it was established. We plan to use it to repurchase Jones Act Warrants, which are options given to foreign equity holders who do not meet U.S. citizenship requirements and thus cannot own regular equity shares due to the Jones Act. Our aim with the ATM plan is to create a market for those warrants by issuing new equity shares in exchange for the warrants, with no new net shares intended to be issued. This plan is intended to help us exit the Jones Act Warrants. We have around 1.2 million remaining from the Tidewater and GulfMark restructurings, and we intend to issue 8.1 million in the proposed transaction with Swire Pacific Offshore. If you hold these warrants and want to exit, please reach out to us. We control the issuance and are aware of market conditions, so we aim to avoid negatively impacting the price. We're open to discussions if you’re interested. It’s a win-win situation as it allows us to increase the float without diluting equity holders. Finally, I’d like to provide an overview of the strategic rationale for the proposed transaction involving Swire Pacific Offshore. Piers and Sam will offer more details shortly. As I mentioned, we intend to issue 8.1 million Jones Act Warrants and $42 million in cash for a total purchase price of around $190 million. This acquisition is debt-free. The value per vessel in this transaction is $3.7 million compared to Tidewater’s average per vessel value of $5.4 million. We plan to operate the new vessels under the Tidewater brand. While many investors might not be familiar with Swire Pacific Offshore, it is regarded in the industry as one of the premier operators, known for its impeccable safety record, stellar client reputation, world-class fleet, and top-notch mariners. Tidewater will now possess the industry’s largest fleet of OSVs at 174. I will discuss additional strategic benefits of the deal shortly, but we believe the combination of these fleets presents an excellent opportunity for earnings and free cash flow growth as the offshore vessel market continues to recover. Furthermore, we have identified significant synergies we can realize by integrating their operations with our scalable, shore-based infrastructure. Swire's fleet of 51 OSVs is mainly located in West Africa, Southeast Asia, and the Middle East. The combined fleet of 174 OSVs will now be the largest in the industry. We will have a significant presence in every major market worldwide. We continue to be weighted towards PSVs but expect that the large anchor handlers acquired from Swire will benefit from the anticipated improvement in the drilling market. Another key benefit of this transaction is that not only are we now the largest OSV operator in the sector, but the combined fleet is the youngest among any large fleet in the industry. We believe this combination of size and fleet quality will enable Tidewater to be the OSV operator of choice globally. We advocate for equity-driven relative value transactions, which is precisely what we've done with Swire. On a market value basis, we clearly emerge as the most investable company in the sector. Additionally, due to the nature of the Jones Act Warrant and cash split, we maintain our balance sheet strength, which we see as a prudent approach to running the business while also leaving us room to pursue future growth opportunities. This isn't our first substantial M&A transaction; we recently completed the Tidewater-GulfMark merger and developed strategies to realize synergies from it. We successfully identified and executed our realization strategy and exceeded initial expectations through continuous improvement initiatives and optimizing shore-based infrastructure. It’s crucial to note that this has been a sustained effort, enabling us to achieve 10 consecutive quarters of G&A reductions. I mention this because I believe we have an established plan that we can adapt as we approach the new Swire transaction. Overall, we anticipate $45 million in synergies from combining these two businesses. The elimination of corporate-level expenses and regional shore-based costs, where our operations intersect, will provide a significant portion of these synergies, along with operating expense savings by leveraging existing supplier relationships and operational protocols. If we assess the combined fleet going forward, excluding any vessels sold in 2021 or currently held for sale, the merged company would have generated $86 million in EBITDA in 2021, which includes $45 million in synergies, compared to Tidewater’s standalone EBITDA of $35 million. There’s no doubt that the synergies we expect from this transaction will meaningfully impact earnings, but we’re particularly excited about the additional earnings leverage the Swire acquisition offers. Achieving a utilization rate of 90% for the combined fleet would add approximately $100 million to EBITDA. Additionally, for every $1,500 increase in day rate, all else being equal, EBITDA would rise another $100 million due to our significant operating leverage. To illustrate, if our fleet day rates approach 2014 levels, we could generate nearly $700 million in EBITDA. Turning to regional performance, as shown by Tidewater’s performance in the West Africa region over the past two quarters, this region is recovering from pandemic lows. The Swire Pacific Offshore fleet, along with our complete control of Angola and our extensive infrastructure has demonstrated significant synergies in both administrative and operating costs. The high-quality fleet we acquired positions Tidewater with the largest fleet of active vessels in the region. We believe there has been a flight to quality, evident in the active fleet, which we expect will provide benefits as this market continues to grow in the coming years. Swire Pacific Offshore's existing position in the Middle East will naturally integrate with our current operations in that area as well, benefiting from our large shore-based infrastructure and enhanced operating expense management through economies of scale. Our position in Southeast Asia has been limited to Thailand over the last five years, but Swire has a strong presence there, and our Thailand business will integrate well into their operations. Similar to our combined West Africa fleet, we are witnessing a flight to quality in this region. Given that Swire’s vessels are fully utilized right now, it reflects the quality of their fleet. The combined fleet will be the largest active fleet in Southeast Asia, placing us in an excellent position for growth in the oil and gas market while providing a stronger platform to engage in the emerging offshore wind market in the region. The Swire Pacific Offshore fleet consists of 51 vessels, including one seismic vessel and one in layup, with possibly two additional vessels deemed uneconomic and held for sale. The number of vessels to be sold will be finalized after the transaction, considering our plans to enhance our geographic footprint. However, we have acquired a relatively young fleet with an average age of 10.2 years, compared to our current fleet's average of 11 years. Importantly, the large PSVs and anchor handlers significantly enhance our combined age profile in these classes, offering a more attractive proposition to our customers and extending the earning potential of the fleet. The day rate for the Swire fleet in 2021 was $11,913, which is 15% above our average day rate of $10,335 for the year. We are enthusiastic about the transaction and believe that the fleet quality, earnings potential, and preservation of our balance sheet position us well for pursuing additional strategic opportunities going forward. We expect the transaction to close within 30 to 60 days.

Thank you, Quintin, and good morning, everyone. Before Sam goes through our numbers in greater detail, I wanted to talk through some of the things we set out to do in 2021 and then we start to see bear fruits in Q4 and what we see happening as we go into 2022 and a little on how we see the Swire-Tidewater combination being able to take advantage of the improving market we are currently in. 2021 was a year of transition for both us and the industry as we came out of a very tough 2020. And so throughout 2021, we talked about discipline as a key commercial tenet for our teams around the world. Discipline on rates, discipline on reactivations, discipline on utilization, and discipline on contract term. We felt that as a market leader in the industry, we had and have a responsibility to lead the market in all four of these areas and set out our story clearly to take advantage of what we see as an improving market in 2022 and beyond. On day rates, as Quintin mentioned, we saw incremental improvement quarter-over-quarter, culminating in a strong revenue bump in Q4. Every region contributed, but where we have really been able to start pushing rates is with our global approach to our large deck PSV fleet. We anticipated increased global demand for Q4 and into 2022, and we're able to be disciplined about reactivating the majority of our remaining large PSVs to meet that demand at the right time, which has meant that we've been able to bring more vessels back into the fleet in Q4 but still increase active utilization by 1% compared to Q3 in 2021. One of the important milestones for Q4 was to get certain customers to start paying full mobilization and demobilization again for our vessels, whereas in recent years, we've had to compete against less disciplined and desperate competitors who are willing to buy work in order to survive. It would now appear that for the right, best-in-class tonnage that Tidewater provides, customers are prepared to pay to mobilize our ships to where their projects are. This isn't across the board yet, but we do expect this trend to continue into 2022 for the larger deck PSVs and higher volatile AHTSs, which as long as we remain disciplined, will translate into higher day rates and increased utilization throughout 2022. By being disciplined and focusing on our flight to quality philosophy, it allowed us to plan our reactivation with suppliers and shipyards in 2021 to be able to meet demand at the right time as the market improves and with a more focused, more modern, and more high-graded fleet, we have not had to take some of the loss-making, long-term contracts our competitors have but instead are able to concentrate on shorter-term contracts with first-class customers, leaving us with optionality to drive the rates up in 2022 and 2023. With the Swire announcement, we're acquiring a company with a similar disciplined and best-in-class philosophy as we have created at Tidewater. They have brilliant people and a brilliant fleet of modern vessels. And as Quintin mentioned, with the combination of our two fleets, we will create the largest OSV operator in the world today, but it is the combination of the types of vessels that is so important, and that will allow us to drive revenue growth in 2022. After the close, we will have over 80 large PSVs and 11 200-tonne-plus AHTSs in the fleet. And yes, the combination will enhance our competitive position greatly in both West Africa and Asia Pac. But in a market where customers are starting to pay full mobilizations to get the right vessels in the right locations for their projects, we believe we'll be in the enviable position of having not just the largest OSV fleet and the truly global footprint, but most importantly, the right types of vessels to leverage OSV rates globally. This won't happen overnight, although with $100 oil, it might move a bit quicker than anyone thought. But this combined fleet is not only best-in-class for the market, but the combination of two marquee OSV operators also creates a clear, first choice supplier for our customers around the world.

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. My discussion will focus primarily on the quarter-to-quarter results of the fourth quarter of 2021 compared to the third quarter of 2021. As previously mentioned by Quintin, we recently announced the entering into a definitive agreement to acquire Swire Pacific Offshore fleet, so I will also provide a bit more detail about the acquisition later on the call. As noted in our press release filed this morning, we reported a net loss for the quarter of $37.9 million or $0.92 per share. From an operational perspective, we once again showed steady signs of improvement quarter-over-quarter. Our revenue for the fourth quarter of 2021 was $105.2 million, this was $12.8 million or approximately 14% increase from the third quarter of 2021. The increase was driven mainly by capacity increase as we added 6 vessels for our active vessel count in the quarter. In addition, we did see an increase in active utilization of 82.4% compared to 81.6% in the previous quarter. We also saw our average day rate increase 3% to $10,583 per day in the fourth quarter from $10,288 per day in the third quarter. Overall, gross margin for the quarter increased nicely to 32%, up from 29% in Q3. Vessel operating costs for the quarter was $71.2 million, an increase of $5.8 million from Q3. The increase in overall cost is mainly due to operating 6 more vessels and the continued reactivation costs associated with these vessels. Reactivation costs for the quarter was approximately $1.3 million. In the fourth quarter of 2021, we recorded a $13.5 million impairment charge as we moved 5 vessels into our asset held for sale category. We also incurred an affiliate credit loss impairment of $1.4 million related to our Angola JV. We did not sell a vessel in the quarter. For the year, we have sold 19 vessels and other assets for net proceeds of $34 million and recorded a net loss of $2.9 million on the sale of these assets. Our operating loss of $27 million for the quarter increased by $5.4 million from Q3, due mainly to the increase in the impairment expense and higher operating costs, offset somewhat by the increase in revenue. G&A costs for the quarter was $17.6 million, a decrease of $400,000 from Q3, due mainly to lower professional fees. Our annualized G&A expense for the third quarter was $71 million. However, certain charges for the quarter are considered one-time charges. In Q4, we incurred $500,000 in professional fees related to the Swire Pacific Offshore combination. For the year of 2021, we incurred approximately $2 million in professional fees related to the combination. Taking these charges into effect, our G&A costs for 2021 was $66.6 million against the target set at the beginning of the year of $68 million. At this time, I would like to provide some information as it relates to the Swire Pacific Offshore combination and what the expectations are now that we have signed a definitive agreement. We expect the closing to occur in the second quarter of 2022. We have already done a lot of work through the diligence process to understand the structure of the company, but we will immediately begin to fine-tune our initial results. Achieving the $45 million of synergies, principally the G&A synergies of $20 million noted on the investor presentation will be important. So these next few weeks will be a crucial time as we prepare to begin the integration once the acquisition is complete. I see this process mirroring the same process we went through in the GulfMark and Tidewater merger. You may recall that the combined G&A run rate for both companies was $143 million at the closing of that transaction. And after the first year, the cost was below $100 million. Our current goal is to achieve $20 million in G&A synergies which would be significant, considering we anticipate the combined G&A run rate will be slightly over $100 million at closing. I do see us adding G&A costs in Southeast Asia as we currently have no infrastructure to support this area. The areas where there is overlap, like in the Middle East and Africa is where the opportunity will be to maximize synergies. We are confident that we will achieve similar results as in our previous combination. Also, as is the case in all combinations, there is a cost associated with them. Through December 31, 2021, as mentioned previously, we have spent $2 million in professional fees. I see another $4 million in cost to complete the transaction. In addition, we could spend another $8 million to $10 million to achieve noted synergies. This will include items such as severance costs, lease termination costs, state bonuses, and integration performance bonuses. In the third quarter, we incurred $9.9 million in deferred drydock costs compared to $10.6 million in Q3. Q4 was a heavy drydock quarter with 244 drydock days. As some of the drydocks we had scheduled in the first half of the year are now materializing and as we continue to reactivate vessels, we see 2022 to be another heavy year. We incurred $27.3 million in drydock costs for the full year 2021. We anticipate full year 2022 drydock costs to be approximately $51 million. In the quarter, we also incurred about $6.4 million in capital expenditures related to the purchase of the battery pack from one of our vessels and a down payment of two tugboats being built for our Angola operation. The full year spend for 2021 was $9 million. Free cash flow was positive once again this quarter as we achieved $2.9 million of free cash flow, continuing a positive trend of achievement. The free cash flow, even though positive, was lower than prior quarters due primarily to the high drydock activity. And in the quarter, there were no proceeds from asset sales. Free cash flow for the last 12 months was $52 million, which is a remarkable achievement considering the challenges that were faced throughout the year. We expect to continue to generate positive free cash flow in the future. However, reactivation and drydock costs will impact it over the upcoming next two quarters. On previous calls, we talked a lot about collection challenges related to Pemex. I'm pleased to say that their AR balance decreased from $16 million at the beginning of the quarter to $8 million at December 31. This is the lowest balance we've seen in quite some time. Our dialogue with them will continue to remain open to ensure the balance can be kept at these levels going forward. In Q4 2019, we began reclassifying vessels on our balance sheet from property and equipment to assets held for sale. At that time, we reclassified 46 vessels. In 2020, we added another 30 vessels, and we sold 53, leaving the balance of 23 at the end of 2020. During the first three quarters of 2021, we sold 9 vessels, added 2 vessels to the category, and reactivated 2 vessels and transferred them back to the active fleet. In Q4, we added 5 vessels to the category and reactivated and transferred 1 vessel back to the vessel fleet, leaving us with 18 vessels held for sale. The book value for these vessels was $14.4 million at December 31, 2021. On November 16, 2021, we completed an offering of $175 million aggregate principal amount of the 2026 notes. The bonds were privately placed at an issue price of 98.5%. We used the net proceeds from the offering to redeem the 8% senior notes due in 2022, to discharge our Troms offshore debt and for general corporate purposes, including fees and expenses related to the foregoing actions and recognized an $11.1 million loss on debt extinguishment resulting from costs and expenses incurred in connection with this transaction. On November 16, 2021, we entered into a super senior revolving credit facility agreement with DNB Bank. The credit facility agreement takes precedence over all other debt, if and when drawn. The credit facility agreement matures on November 16, 2026, and provides $25 million for general working capital purposes. All amounts owed under the credit facility agreement are secured by the same collateral that secures the 2026 notes, and such collateral is to be shared in accordance with the priorities established in the intercreditor agreement. No amounts have been drawn on this credit facility. Also, on November 16, 2021, we also entered into an at-the-market sales agreement, pursuant to which we may offer and sell shares from time to time of our common stock, par value of $0.001 per share, having an aggregate offering price of up to $30 million. We set up these financing transactions to be capital neutral, and at December 31, 2021, we had $154.3 million of cash on hand, including $4 million of long-term restricted cash and total liquidity of $179.3 million. You may recall that in the third quarter, we did reclassify on our balance sheet our senior secured notes from non-current to current as the notes matured in August 2022. This was a temporary accounting reclass since the funding of our new senior notes did not occur prior to us filing the third quarter Form 10-Q. Since the offering was completed in November, the reclass has been reversed, reflecting the senior note balance back in long-term debt. I would now like to focus on the performance of the regions. Our Americas region reported an operating loss of $2.9 million for the quarter compared to an operating loss of $1.8 million in Q3 2021. The area reported revenue of $27.9 million in Q4 compared to $24.6 million in Q3. The area operated 26 vessels in the quarter, which was an increase of 1 from Q3. Active utilization for the quarter was 80%, which was unchanged from the prior quarter. Day rates also increased to $14,603 from $13,740 per day in Q3. The increase in operating loss was due primarily to the increase in operating costs related to higher crew costs and operating supplies as vessels were reactivated in the period, and vessels did not begin their contracts until early 2022. Our Middle East, Asia Pacific area reported operating income of $1.1 million compared to operating income of $713,000 in Q3. The area reported revenue of $26.9 million in the current quarter, which was an increase of $1.2 million quarter-over-quarter. The area operated 37 vessels, which was also the same as Q3. Active utilization did increase by approximately 5 percentage points to 92% in the quarter compared to 87.3% in Q3. However, day rates remained constant at $8,580 per day in Q4 compared to $8,623 per day in Q3. The increase in operating income is due to higher revenue, coupled with lower operating costs due to lower operating supplies and freight costs. Our Europe and Mediterranean region reported an operating loss of $4 million in Q4 compared to an operating loss of $2.9 million in Q3. We saw revenue increase by 6% to $22.5 million compared to $21.2 million in Q3. The area operated 23 vessels in the quarter, which was an increase of 2 vessels from Q3, and active utilization did decrease a bit to 88.5% compared to 91% in Q3. We did see a slight uptick in day rates to $11,917 per day compared to $11,890 per day in Q3. The increase in operating loss for the quarter was mainly driven by the increase in operating costs due mainly to the reactivation and operation of 2 additional vessels in the quarter. Our West Africa region reported an operating loss of $1.1 million in Q4 compared to an operating loss of $3.7 million in Q3. The market in the area has improved throughout the year, as we've seen revenue increase steadily every quarter this year. Revenue for Q4 was $23.2 million compared to $20.2 million in Q3. The area operated 3 more vessels in Q4, and active utilization remained flat at 71.4% in Q4 compared to 71.3% in Q3. Day rates increased 6% to $9,052 per day in Q4 from $8,562 per day in Q3. The decrease in operating loss from Q3 resulted mainly from the increase in revenue, offset somewhat by the increase in operating costs due to the reactivation and operation of 3 additional vessels in the quarter. We're glad to see quarter-over-quarter improvement in results for the region. Also subsequent to year-end, we purchased our partner's 51% interest in Sonatide, our joint venture in Angola. The purchase was for $11.2 million, which will allow us full control of the business operations in that area. In summary, we're encouraged to see the increase in revenue, day rates, and utilization, and we are encouraged to see the continued positive signs in market activity. We reactivated 20 vessels in 2021, which did have an impact on our operational results. Soon, we will begin to see the full benefit of those reactivations as revenue will continue to grow and operating costs stabilize to a normal level. Reactivations will continue in 2022, so we will continue to see some additional costs run through the P&L, but this is positive as these reactivations are being done on vessels where contracts have been secured. We remain very encouraged with all the positive signs and look forward to this continuing in 2022 and beyond. The Swire Pacific Offshore acquisition will prove to be an important factor in growing the value of the company. Swire brings a great team, a high-quality fleet, and a strong commercial position in key markets. We are very excited and eager to work together and create an exciting and world-leading OSV company. Shortly, you will see a Form 8-K filed for the signed share purchase agreement. On the date of completion of the acquisition, we will file a Form 8-K, including general information related to the close. We then have 75 days to file a Form 8-K/A that will include historical target financial statements and pro forma financial information. Our intent is to file a registration statement for the issued warrants as soon as practical after the acquisition so this information will be included in that filing.

Thank you, Sam. Our objective is to generate continuously increasing free cash flow by positioning our vessels geographically to obtain the highest possible day rates, operate them at the most optimal operating cost per vessel, and to do this at the lowest G&A cost per vessel. We're doing this while carefully minding the capital expenditure and working capital investments. These objectives are simply stated, but achieving them requires innovative technology, agile change management, and strong financial discipline. The company is free cash flow positive, and our objectives and compensation plans are all geared to increasing free cash flow. And with that, Alex, we will open it up for questions.

We currently have no questions, so I will pass it back to Quintin for any closing remarks.

Wonderful. Thank you, Alex. Everyone, thank you for the impromptu conference call. We appreciate you listening in. If you have any questions, please reach out to myself, Sam, or West with any. Take care. See you in May. Goodbye.

Thank you all for joining. You may now disconnect.