Tidewater Inc. F3Q09 (Qtr End 12/31/08) Earnings Call Transcript

Jan.28.09 | About: Tidewater, Inc. (TDW)

Tidewater Inc. (NYSE:TDW)

F3Q09 (Qtr End 12/31/08) Earnings Call

January 28, 2009 11:00 am ET

Executives

Dean Taylor - Chairman, President and CEO

Quinn Fanning - EVP and Chief Financial Officer

Joe Bennett - EVP and Chief Investor Relations Officer

Steve Dick - EVP, Strategic Relationships, Shipyard Operations and Vessels Acquisitions and Dispositions

Jeff Platt - EVP, Day-to-Day Marine Operations

Bruce Lundstrom - EVP, General Counsel and Secretary

Analysts

Jim Crandell - Barclays

Chris Christine - Simmons & Co.

Pierre Conner - Capital One Southcoast

James Barkley - Barclays Capital

Jud Bailey - Jeffries & Company

Dan Boyd - Goldman Sachs

Aaron Gearum - Credit Suisse

Daniel Burke - Johnson Rice

Operator

Good morning. My name is Bobby Joe, and I will be your conference operator today. At this time I would like to welcome everyone to the fiscal 2009 third quarter Earnings Call. (Operator Instructions).

I would now like to turn the call over to Mr. Dean Taylor, Chairman, President and CEO of Tidewater. Sir, you may begin.

Dean Taylor

Thank you, Bobby Joe. Good morning everyone and welcome to Tidewater’s fiscal 2009 third quarter earnings conference call for the period ending 31, December, 2008. I am Dean Taylor, Tidewater’s Chairman, President and CEO, and I will be hosting the call this morning.

With me today are Quinn Fanning, our Executive Vice President and Chief Financial Officer; Joe Bennett, Executive Vice President and Chief Investor Relations Officer; Steve Dick, Executive Vice President, in charge of strategic relationships, shipyard operations, and vessel acquisitions and dispositions; Jeff Platt, Executive Vice President, in charge of day-to-day marine operations; and Bruce Lundstrom, our Executive Vice President, General Counsel and Secretary.

We will follow our traditional format this morning. I will start with some comments about our earnings results released earlier today. I will briefly outline how we are seeing our business unfold in light of the dynamic conditions within the energy and credit markets. I believe it's important for you to have some initial perspective of how Tidewater is approaching this environment, to appropriately asses our recent results and consider our prospects for the future.

Following my initial remarks, I will turn the call over to Quinn for a detailed review of the quarter's results, as well as, the status report on our new build and vessel replacement program. I will then return with a discussion about our markets and how our strategy will deal with them. We will then open the call for your questions.

At this time, I will ask Quinn to read our Safe Harbor Statement and then we can get started.

Quinn Fanning

During today's conference call, Dean, I and other Tidewater management, may make certain comments, which are not statements of historical fact and thus they constitute forward-looking statements. I know that you understand that there are risks, uncertainties and other factors that may cause the company's actual future performance to be materially different from that stated or implied by any comments that we make today during this conference call.

Additional information concerning the factors that could cause actual results to differ materially from those stated or implied by the forward-looking statements maybe found in the risk factor section of Tidewater's Form 10-K.

Dean Taylor

Thanks Quinn. Earlier this morning we reported third quarter earnings of $2.28 per fully diluted share, some $0.62 higher than the year ago quarter and $0.43 higher than the prior September quarter. This quarter’s earnings per share exceeded the latest first call consensus estimate by $0.38.

The quarter was outstanding. It reflected solid operational performance as our overall fleet utilization rate was up slightly from the September quarter, and importantly our operating expense performance including repair and maintenance was below the target we suggested in our last earnings call.

Our total average day rate was higher across the fleet, but the rate of increase in our core international towing supply vessel segment is slowing, as demonstrated by only a $400 a day improvement from the September quarter rate.

In general, we are very pleased with our results and how we are positioned. We are equally pleased that our safety performance continues to be on target, our most important internal goal. During our last earnings conference call in later October, we spent time discussing the turmoil in the credit market, its impact on the global economy and in turn on the energy market.

As most of you know, the freefall of energy and credit markets that commenced in the September quarter continued throughout the December quarter. Clearly, we are looking at a changed economic and energy outlook from almost any viewpoint. In that October call, we also said that we had not yet seen a reversal of the positive trends and activity levels in vessel pricing and our December quarterly results confirm that observation.

However, today, we must acknowledge that we are seeing some of our customers change their attitudes towards spending. As of yet, we have not noted dramatic shifts in behavior by our clients, either in regards to canceling project or in their seeking to buy out or terminate vessel contracts, though there have been instances when we have been asked to review rates on existing contracts.

Clients are certainly taking a harder letter took at the economics of their projects. And services and equipment costs are being critically evaluated in the context of lower commodity prices. The timing of certain customer's future projects is also being affected, and project delays may impact our contract renewal negotiations, when existing contracts come up for renewal.

While many of the recent headlines from operators have disclosed reductions in their CapEx programs in 2009, we should not dismiss some of the more positive long-term news coming from certain of Tidewater's key customers, such at Petrobras and Pemex. In regards to currents contracts, our perspective is that we have stood behind our contractual commitments when spot rates were moving up.

As a result, we hope that our customers will do the same, when things may be moving the other way. In the long-term, however, Tidewater's shareholders will benefit when we align our interest with the interest of our customers and close coordination and alignment with customers is our objective during all market environments, including the present one.

Not to belabor what you have all already heard on other conference calls, with not only the United States, but now Japan and most of the European economies, officially mired in recessions. The critical question for our business becomes, how deep will these recessions be? How long will they last and what will their impact on energy demand be?

Implicit in the questions, is the impact of falling oil and gas consumption, it will [add on] prices in our customers cash flows. You probably already know that, the recent energy industry capital extending surveys for 2009 reflect a substantially altered outlook for global growth and oil use, as compared to last summer reviews.

The oil price volatility we witnessed last year has reduced our client's confidence in projecting their cash flows this year, and that makes many of them conservative in their spending decisions. There is little Tidewater can do to affect their spending decisions. Therefore, we must try to anticipate changes and adjust appropriately.

From Tidewater's perspective however, we believe our global footprint coupled with our financial strength, and our large and capable fleet put us in good stead in this unsettled environment. We are ready and able to assist our client's as they adjust their focus geographically. More importantly, we are capable of withstanding significant market dislocations, should they develop.

Please recall that Tidewater's, senior operational management team has hundreds of years of combined industry experience, including numerous periods of industry downturns. We have been there before. We understand the challenges of managing our business in a contracting market, and we are confident, we can deal with this downturn, too.

With that, let me turn the call over to Quinn, who will discuss the financials and our vessel fleet renewal status. I will then finish up with some brief additional comments. Quinn?

Quinn Fanning

Thank you, Dean. Good morning, everyone. First I will call your attention to our earnings press release, which we put out this morning prior to the markets opening. In case you missed it, on January 23rd, Tidewater also announced the declaration of a $0.25 dividend, payable March 13th to holders of record on March 3rd. Finally, before I move on to a financial recap of the December quarter, I can confirm for you that we expect to file our 10-Q through the Edgar filing service sometime around midday today.

Turning to quarterly results as of and for the period ended December 31st, I will provide a brief recap of just completed quarter and of year-to-date results and than offer a few perspectives on what is driving financial results in terms of fleet profile, geography, rates and utilization, cost trends and otherwise. Secondly, I will offer some high-level guidance for our fiscal fourth quarter, which ends on March 31.

Because the operating outlook is particularly fluid at present, and because we have not yet completed our fiscal 2010 budget, we'll not be offering guidance beyond the March quarter today. I will conclude my remarks with an assessment of Tidewater's current financial profile, its capital commitments, available liquidity, and as appropriate, key financial targets.

As Dean noted in his introductory remarks, we reported diluted earnings per common share of $2.28 for the third quarter of fiscal 2009, which ended on December 31, 2008, versus diluted earnings per common share of $1.85 for the previous quarter and diluted earnings per common share of $1.66 for the third fiscal quarter of 2008. That's a quarter-over-quarter increase of 23.2%, and a year-over-year increase of 37.3%.

If one were to normalize diluted earnings per common share for amounts in excess of or below the average quarterly gain on asset sales, the Tidewater has experienced over the last eight quarters of about $4.4 million quarter-over-quarter and year-over-year EPS growth was about 24% and 33% respectively.

For the nine-months ended December 31, 2008, diluted earnings per common share were $5.76 versus $4.76 for the nine-months ended December 31, 2007. That's a year-over-year increase of about 21%. Again normalizing for average gains on vessel dispositions, year-over-year growth in EPS was about 18%.

The quarter we just completed was characterized by continued growth in average day rates for our core group of towing supply and supply vessels, albeit at a rate of increase that was less than what we have enjoyed last few quarters. As of today, we have seen no dramatic reversal or downward reprising of the fleet.

Utilization for the December quarter was also reasonably consistent with the September quarter, and current day rates in utilization statistics are comparable to averages for the December quarter, some up a bit, some down a bit, but again no dramatic shifts one way or another.

Somewhat reiterating points made by Dean, the environment and our outlook has become uncertain as a result of knock-on effects of the pullback in commodity prices in a deteriorating global economy, but the topline is hanging in there to date. We also had a very strong quarter in terms of vessel operating cost in G&A and another good quarter in terms of proceeds from in gains on vessel dispositions.

Finally, I would like to call your attention to the fact that we have again revised our estimate for Tidewater's effective tax rate, and now we are forecasting 17.25% effective tax rate for the year. If you will recall, in the September quarter, we moved that rate from 17% to 18%.

There is really no radical shift in the geographic location of assets or any change in strategy behind the most recent revision, nor, quite frankly, is it an issue of not being able to make up our minds; instead, the change reflects ordinary course equipment movements and refinement of our best estimate as how the fiscal year will play out in terms of effective tax rates for financial reporting purposes.

Relative growth between the U.S. and non-U.S. based fleet, the impact of pretax margins of increases or decreases in day rates, and utilization and tax legislation in the United States or elsewhere, can all have an impact on our tax rate. Inevitably, this will also impact some of our utilities. This is unavoidable, and is also expected.

In terms of fleet profile, Tidewater accepted delivery of three new vessels in the quarter and additional three vessels that have been delivered thus far in January. The recently delivered equipment is pretty comparable to other vessels that we have built since 2000 as part of our fleet renewal program it is also representative of our remaining construction progress.

Specifically, we have recently taken delivery of 230 to 240 foot PSVs with cargo capacity of 2,700 to 3,100 dead weight tons and three anchor handling towing supply vessels varying in size from about 7,000 brake horsepower to 10,000 BHP. Five of these, six vessels were delivered against international contracts with a term of an excess of one year and we believe that sixth vessel has good prospects as well.

Looking at some specifics in terms of financial results; vessel revenues for the December quarter increased to $349 million. This represented a bit over 1% increase relative to 2Q fiscal 2009 and a 12% increase over 3Q fiscal 2008.

Domestic vessel revenues were up about 7% quarter-over-quarter and essentially flat year-over-year. This trend largely reflects the somewhat offsetting effects of reasonable day rate environment in the U.S. Gulf of Mexico, particularly after this false storms and the mobilization of equipment to international markets over the last year.

Domestic deepwater is down one vessel quarter-over-quarter and two vessels year-over-year. Domestic towing supply and supply is also down one vessel quarter-over-quarter and two vessels year-over-year. Overall, the domestic vessel count is down five vessels quarter-over-quarter reflecting three mobilization from the U.S. Gulf of Mexico to international markets and two dispositions.

Deepwater equipment remains at effectively full utilization. For reference, deepwater utilization was 96.7% for the December quarter. At $23,961 a day, average day rates in deepwater were off $1,272 quarter-over-quarter. This primary reflects the mobilization of two high rate vessels out of the Gulf of Mexico late in the September quarter.

Current day rates for the remaining six vessels in the U.S. Gulf of Mexico have six deepwater vessels in the U.S. Gulf of Mexico and recently consistent with the December’s quarters average. Average day rates for the domestic towing supply and supply fleets were up about a $1000 quarter-over-quarter to $13,947 in part related to increased vessel demand and better pricing following hurricane Ike and Gustav.

At 49%, domestic towing supply and supply utilization was essentially flat quarter-over-quarter. Note also that we had 14 stack vessels in the domestic towing supply and supply fleet during the December quarter, which went factored out of the stated utilization figures, would equate to an effective domestic towing supply and supply fleet utilization of approximately 90%.

Year-over-year comparisons remain favorable as well. With deepwater showing better utilization and higher day rates for the December 2008 quarter, than were experienced in the December 2007 quarter. The story is the same in deepwater when comparing the nine-month periods ending December 2008 and December 2007. For towing supply and supply, higher day rates have generally offset the impacts of lower utilization.

To recap, domestic demand for the company's vessels was brisk for most of the December quarter. In part reflecting, a step up in hurricane related work. Demand however, weighing in the final weeks of December, as a result of normal winter slowdowns and the winding down of our offshore repair work.

Current average day rate for the domestic fleet are in the range of 24 to $25,000 a day for deepwater equipment. 13 to $14,000 per day for towing supply and supply vessels and to the mid to high $5,000 range for crew and utility boats. Market tone in the U.S. has certainly shifted and as a result, we have become more cautious. Still, no clear picture of the future has emerged, and we can not yet quantify the likely impact on demand and pricing.

Turning to our international operations, at $312 million vessel revenues were up about 2.5% quarter-over-quarter, and up about 14% year-over-year. International average vessel count was up one vessel quarter-over-quarter, primarily reflecting the effects of five dispositions, and three new vessel deliveries, and finally, three previously mentioned, mobilizations from the U.S. Gulf of Mexico.

Average day rates in utilization for international deepwater at $26,590 and 85.9% respectively, were essentially flat quarter-over-quarter. Year-over-year utilization is off a couple of points, and day rates are up about 6.5%.

For the core international towing supply and supply fleet, utilization quarter-over-quarter was essentially flat at 76% and the average day rate was up $370 a day to $12,745. That's about a 3% quarter-over-quarter improvement in day rates for this, our largest class of vessels.

Like deepwater, year-over-year utilization for the international towing supply and supply fleet is off a couple of points. International towing supply and supply day rates are up about 22% percent year-over-year. Current average day rates for the international fleet, are plus $27,000 for deepwater vessels, plus or minus $13,000 for towing supply and supply equipment, and plus $5,000 for crew and utility boats.

Separate, and apart from vessel operations for the December quarter, "other marine revenues", which is primarily the outside work done at Quality Shipyard, was $13.2 million. This is up substantially from the September quarter and the December 2007 quarter.

As many of you know, we used completed contract accounting at Quality, so this change primarily reflects the timing of deliveries for third-party work. More important than the revenue, cash margin on other marine revenue was up about $1 million quarter-over-quarter.

Turning to operating costs, where I think we have made some good progress. We reported total vessel operating costs for the quarter of about $161 million, versus vessel operating costs of about $175 million for the June quarter. On a quarter-over-quarter basis, crew costs were down $2.9 million, primarily reflecting the benefit of a strengthening dollar, and the benefit that has on foreign currency denominated expenses.

Fuel, lube oil and supply costs were down $2.3 million, reflecting fewer mobilizations in the December quarter, relative to the December quarter. Also of note, in meriting some comments was the fact that insurance expense was down more than $4 million in the December quarter, as compared to the September quarter. Embedded in this trend are both Tidewater solid safety record in recent quarters, and a lag effect between lower claims and reduction in our estimates of ultimate losses.

Premium costs should ultimately follow this trend as well. The many other factors, impact insurance markets, and ultimately the cost of insurance. In any event, without regard to the timing of the realization of this benefit, our strong safety record performance is a point of positive differentiation for Tidewater, with current and perspective employees and current and perspective customers. This is real source of value for Tidewater shareholders.

Finally, repairs and maintenance expense was down about $3.7 million quarter-over-quarter. This is consistent with the expectation that dry docking costs would come down in the second half of our fiscal year, relative to the first half of the year. We also expect this decline in R&M cost to continue into the March quarter.

Beyond the March quarter, market conditions will have an impact in the number of regulatory dry dockings that we do. However, if demand is there, and shipyard economics makes sense, we would expect an uptick in R&M expense in the June quarter. As I mentioned, we are still working through our fiscal 2010 budget, but our sense today is that we will not return to the high-levels of R&M expense, that were experienced in the first half fiscal 2009.

Returning to the theme of our October call, we also think that we have made progress on better forecasting managing costs. While we expect shipyard costs inflation to abate, if not reverse recent trends, in the current environment leveraging potential purchasing economies and better managing cost will an organizational priority regardless of the macroeconomic environment.

One final item that I would like to highlight in terms of the quarter’s OpEx is that the three vessels that were delivered in the December quarter had approximately $1 million of vessel level operating expenses associated with them.

As we noted in last quarter’s call, new vessels are generally moderate contributors to bottom-line in the first quarter following delivery. I call this to your attention again, because new delivery should have a more significant impact on our financial results as we begin to step-up our new vessel deliveries in coming quarters. For example; in the March quarter, when we expect to take delivery of 11 vessels, OpEx associated with new deliveries is estimated at plus $3 million.

Before I turn to guidance, I will note that our days off higher and the associated loss revenue due to dry docks follow the positive trend of lower earning cost in the quarters as completed.

For the December quarter, aggregate days off hire was a bit less than 2,200 days, which is 150 to 200 fewer days off hire when compared to the first and second quarters totals. We estimate loss revenue due to days off hire for regulatory dry docks and other major repairs for the December quarter of $23 million versus $29 million in lost revenue in the June quarter, and about $25 million in lost revenue in the September quarter.

All in all, it has been a pretty good quarter in terms of OpEx and lost revenue. As with operating costs, we made progress with respect to cash or vessel level operating margins. As compared to the first half of the year, when negative variances in the operating cost line were somewhat offset by positive variances in revenue, largely as a result of positive day rate trends, in the December quarter as I just recapped, a number of things fell into place in terms of cost and as a result to operating margins.

In particular for the third fiscal quarter, we reported a cash operating margin of 53.8% versus 49.1% in the second fiscal quarter and 46.2 % in the first fiscal quarter. On a go-forward basis, we expect operating cost for the fourth quarter in fiscal quarter 2009, that's our March quarter to be at plus or minus a $165 million.

In general terms, this guidance is based on a normalization of insurance and other, if you will same-store operating costs, coupled with an upward trend in operating costs associated with new vessel deliveries. We also expect positive impacts from lowering R&M costs, and the continuation of a positive trend in lost revenue due to dry dockings.

In particular, consistent with our fourth quarter guidance that was provided in October, we expect vessel level cash operating margins for the March quarter to be in the range of 51% to 53%. As I mentioned, at the front-end of my remarks, we are not going to provide guidance beyond the fiscal fourth quarter until we have a better sense of the operating environment.

As I am sure the audience is aware, vessel OpEx excludes G&A, depreciation expense, and gains or losses on sale of assets. As expected, G&A was down in the December quarter relative to September quarter, which included some non-recurring costs.

Results of the December quarter also benefited from a reduction of professional fees, and an FX benefit from non-U.S. G&A. For modeling purposes the recent quarterly run-rate is probably $33 million to $34 million.

At $4.8 million, gains on dispositions was off a bit from the September quarter, but were very consistent with the gains that we have been recognizing in recent quarters. Our dialogue with perspective buyers of equipment remains reasonably active as we have some basis to expect another pretty good quarter in terms of dispositions in the March quarter.

More generally, like new construction and vessel acquisitions the vessel dispositions have been and should continue to be an important element of our fleet renewal program. Turning to the balance sheet, Tidewater continues to maintain a very conservative financial profile both in regards to leverage and liquidity.

In the present market environment, we believe that this is a real competitive advantage. Total debt was $300 million at December 31 and cash at 12/31 was a bit over $200 million. As a result, net debt was approximately $100 million and net debt to net book capital is less than 5%.

I would like to remind everyone that the only debt we have outstanding is of 2003 private placement with an average cost of 4.35% and average remaining term of about four years. Debt to trailing EBITDA at 12/31 was about 0.6 times.

We continue to maintain a $300 million revolving credit facility, the entire amount of which was available at 12/31 for future financing needs. Based on our cash position and unused revolver capacity, total available liquidity was about $500 million at December 31, 2008.

To reiterate, this liquidity, which we expect to be supplemented with substantial operating cash flow, is our backlog of new construction, which as of December 31 was spread across 56 vessels with an average aggregate cost of about $1.1 billion. $419 million of this has been funded as of 12/31. Remaining payments on committing construction are about $696 million as of 12/31, of which $134 million is expected to be made during the remainder of fiscal 2009.

$273 million is expected to be made in fiscal 2010 and the balance would be made in fiscal 2011 and beyond. Over the balance of fiscal 2009, as I previously noted, we expect to take delivery of 11 vessels including five anchor handlers, four PSVs, and two crew boats.

To summarize about where we stand with the fleet renewal program; since 2000, 203 new vessels have been added to the fleet or based on current construction contracts, will be added to the fleet. Total capital costs for this program is about $2.9 billion. Over the same period of time, Tidewater has sold or scrapped in excess of 400 vessels.

Today, in excess of 60% of our cash operating margins come from the new fleet. In addition, we believe that over the next couple of years, a combination of deliveries of vessels, currently under-construction, and normal course dispositions, will result in the average fleet age trending down from the current 19 to 20 years to plus or minus 15 years.

Significant strategic activity and our additional new built commitments, both of which are subject to the availability of financing, would likely accelerate this trend. Material change in our pace of dispositions could accelerate or decelerate this trend.

Turning finally to our buyback program; over the last couple of years, Tidewater has returned about $600 million to shareholders through dividends and share repurchases. Our current $200 million share buyback program remains in place, so the program was inactive in the December quarter. We continue to believe that Tidewater is a very attractive investment at recent stock prices.

However, we are taking a reasonably cautious approach with our buyback program, until we have better clarity on the operating environment and available financing. That said, we continue to evaluate a wide range of other options, including additional new builds, one off vessel in fleet acquisitions, and selective corporate opportunities. Capital repatriation strategies will continue to be evaluated against these opportunities.

I will close by repeating our view that Tidewater's strong financial profile and substantial available liquidity are important competitive advantage in this current environment. With that, I will turn it back to, Dean Taylor.

Dean Taylor

Thanks, Quinn. As Quinn has detailed, we had a strong quarter. And while we would like to bask in that performance for a while, we know analysts and shareholders are more interested in what we are going to do in the future, specially in light of the rapidly changing energy and credit markets, than what we did in the past. To answer that question we need to anticipate how our clients will react in this challenging environment.

So far, the most public view we have comes from the oil company capital spending surveys, but we are not sure how accurate they are, since many of our clients are still preparing their budgets or are operating with only short-term budgets subject to revision, depending upon future commodity price changes. Rapidly deteriorating global economic activity in recent weeks will probably make our clients even more hesitant about spending, in the near-term.

Most of our work is done on term contracts of varying durations. We do not expect a significant falloff in work immediately. However, it is possible that future contracts will be delayed and renewals maybe postponed down the road. That means we have greater confidence in our near-term performance, than in our long-term visibility.

I would points out nevertheless, that we are more oily than gassy, international than domestic, our footprint is wider than all of our competition, and large IOCs and NOCs represent the better part of our customer base. As a result, though times may become challenging, we feel we are in the best position to take advantage of the opportunities afforded by those challenges.

Investors are asking whether this industry downturn will be more like that of '97 to '99, associated with the Asian currency crisis, or 1980 to 1982, caused by global efforts to break an accelerating inflationary [spotter]. We do not know. This recession as you all know has one critically different condition from those earlier recessions, which is a global credit crisis.

We were surprised by the speed in which this economic downturn developed, but that was probably due to the credit market problems. We're not necessarily surprised at how fast some of our clients are reacting to the changed energy market outlook, with substantial spending cuts, and corporate restructuring actions. As we sit here today, we doubt anyone has a clear vision of what 2009 will hold.

One observation, we can make is that the international offshore market traditionally has exhibited less volatility, in response to fluctuating commodity prices in the market of North America. We believe that it will remain so in 2009, probably benefiting Tidewater, which currently has approximately 91% of its active fleet operating outside of the U.S. waters.

What does Tidewater do in this environment? In fact, we have been readying ourselves for this time. We have kept our balance sheets strong, with the currents net debt to invested capital ratio of 4%. Our cash flow remains strong, although it probably will not be as strong in fiscal 2010, as we earlier would have thought.

We remain confident that even in most weak industry spending scenarios, Tidewater should continue to generate positive cash flow. That belief gives us confidence that we will be able to utilize this challenging environment to build a bigger and stronger company. In the near-term, we will remain vigilant.

We're well along in the fleet renewal program, as Quinn outlined and will continue that effort with an eye towards finding even better deals than we have done in recent times. We continue to scrutinize the market for attractive acquisitions. As we have stated often before, they must bring us the right assets, at the right price, and at the right time.

We will manage our expenses and we will try to take advantage of whatever operating cost savings, a weakening economy may offer, as well as, take advantage of complimenting what is already a world-class employee base, with individuals who maybe losing their employment in other companies, in parts of the service sector.

We will continue to work closely with our clients to help satisfy their vessel requirements around the world. At the same time, we remain committed to generating an attractive return for our shareholders. Our recently increased dividend is a key opponent of that return, especially in the current period when equity prices remain under pressure.

For a period of time dividends were out of favor, we did not fully subscribe to that idea then, as we felt that a reasonable dividend is part of an investors expected return, it maybe the dividends would be more important in investor's future expectations. We're not believers in the idea that the oil and gas industry has begun a long-term decline.

We know the world consumes a lot of oil and gas everyday and we know that the challenge of finding and producing those hydrocarbons is not becoming any easier. In fact in a low oil and gas price environment, this challenge becomes that much greater.

The world's offshore basins remain one of least explored regions and continue to reveal significant new oil and gas fields, such as those recently discovered offshore Brazil and Israel. To find and develop these fields, our clients will need more new vessels, with greater carrying capacities and work capabilities. We are committed to meeting their requirements, and should be able to continue to grow our fleet of new vessels, in order to do so.

We believe that eventually our customer's requirements for our services will grow in the future, despite the current interruption of the industry's growth. It is that future demand, we believe that holds a very positive long-term outlook for our sector in general, and for Tidewater in particular.

Bobby Joe, we are now ready for questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Jim Crandell of Barclays.

Dean Taylor

Hi, Jim.

Jim Crandell - Barclays

Hello, Dean. Dean, my first question is if you could perhaps give some color on the acquisition market. Are there a significant number of vessels now nearing completion where owners are maybe even getting desperate?

Dean Taylor

I do not know about the desperate part, but Steve handles that everyday. If you do not mind Jim, I will ask Steve to respond.

Steve Dick

Jim, there is a little more activity than there has been. However, not a great deal at the moment. There was one this morning where there was a cancellation by one of our competitors of a vessel in Norway. I have not seen that much of it in, in vessels that are coming into the market. They are trickling into the market, and we are being offered them. However, the prices are attractive right now.

Jim Crandell - Barclays

How much would you say that pricing have come down from the peak Steve, overall for new vessels?

Steve Dick

At least 10%, but they were pretty high. They were really high and some are now even 15% off what they were just two months ago.

Jim Crandell - Barclays

I mean do you expect a lot better opportunities here to buy vessels than that?

Steve Dick

I think there will be. I think this will be Jim.

Dean Taylor

I do, Jim.

Jim Crandell - Barclays

How, Dean or Steve has the number of vessels on order changed over the past few months from the sort of 700 plus we have been looking at for a while now.

Dean Taylor

Nominally it is in the 690s now Jim. However, the ones that are questionable would be the ones that have deliveries in 2011, 2012 where the keels have yet to be laid. And so, it would depend upon how long this downturn, this lengths and breath of this downtown as to whether those keels are laid and whether those ships are in fact built.

It is hard to say I serve on a board where it was estimated by that group that 25% of all ships under order worldwide will not be built. I do not think that number specifically applies to the offshore fleet, but to the worldwide fleet and vessels, bunkers, tankers, container ships, etcetera.

I am going to guess, and this is just a right guess, but I am going to guess 10% to 15% of the offshore vessels will not be built, ones that are nominally in the order queue.

Jim Crandell - Barclays

Okay. Looking forward, Dean, we still have probably close to a 1000 older boats out there. Is it too optimistic to think that accelerated retirements of older vessels and continued growth and demand for high-end vessels because of the deepwater rigs coming on, offset any softness in the overall market?

Dean Taylor

The old boats will eventually be shoved out it is a question of when and at what price levels. I think they will not be shoved out though Jim, until we see, I mean the key question is not so much the boats but the rigs. And I think the [Canary] in the coal mine is jack-up fleet.

So as the new jack-ups are delivered and looking at whether the old jack-ups come out of the market or not, whether they are stacked, I think will probably give you a pretty good indication of what’s going to happen, so to the mid-water and the shallow water, both fleets.

That is still a work in progress, as you know. And I think we have got our share of the more traditional vessels in the worldwide fleet. To the extent that a lot of the older jack-ups do not work, we will lose some work with our mature fleet. On the other hand, we have got some pretty decent contract coverage.

And as I said earlier in my remarks, we have got the best worldwide footprint. We view this as a really great time of opportunity, and how it is all going to play out is anybody's guess. However, I can tell you that we are ready for it.

Jim Crandell - Barclays

If one is looking for $40 to $50 per barrel crude over the next 12 to 18 months, Dean, is it certainly possible to see a scenario where your older boats could weaken in price, but due to the number of new rigs coming on that the high-end of the market could hold up well?

Dean Taylor

Again, it depends on how many rigs we are working. What happened back in the '80s? You are not old enough to remember what happened in the '80s.

Jim Crandell - Barclays

Right.

Dean Taylor

However, what happened in the ‘80s, the new boats ended up working at old boat rates. Now, that will be more difficult this time, I think, because the investments are significantly greater. I mean, that is the worse case scenario where you have new boats working at old boat rates.

I will tell you one thing we have seen is been kind of interesting, we have seen some people that were sort of re-energizing their fleets, some customers were reenergizing their fleets with newer equipment, and have slowed that process down. They prefer to keep the older equipment at the expense of renting the newer equipment at higher rate.

It is interesting phenomenon and everything will depend upon how soft the market gets. If the market gets really soft, then you'll see people come in with new boats saying, well I will work for that old boat's rate. If the market is only mildly soft, I think we will see probably a scenario, where there will be a distinct bifurcation of the market, where the new boats will work at higher rates, the older boats will be shoved out, and they will be working at lower rates.

What percentages of each and how soon that may occur, it is awfully hard to say, Jim. I would like to play like I knew the answer, but I am not going to try.

Jim Crandell - Barclays

Okay. That is it for me, Dean. Great job on the cost side in the quarter.

Dean Taylor

Thank you. Best wishes to you.

Jim Crandell – Barclays

Operator

Your next question comes from the line of Chris Christine of Simmons & Co.

Dean Taylor

Hi, Chris.

Chris Christine - Simmons & Co.

Yeah. Thanks, good morning. Quick question regarding looking at contract coverage versus spot for the next 12 months, what percentage of your fleet is covered for that timeframe?

Dean Taylor

Chris, Jeff Platt who runs our day-to-day operations. He will respond to that.

Jeff Platt

Chris, the contract that we are looking out for the next year, we are about 50% of the total fleet working.

Chris Christine - Simmons & Co.

Okay.

Jeff Platt

(inaudible)

Chris Christine - Simmons & Co.

In terms of the new builds. I think as of the last call you were at 52% including the boats that have been recently delivered year-to-date. Is there any update to that number as well?

Jeff Platt

On the contract cover, it is higher than the average for the entire fleet. It is about 67% looking forward on the contract cover for the new vessels.

Chris Christine - Simmons & Co.

Okay. Now, looking kind of geographically, if you were to say, what do you think will be the most well behaved markets? And what are the two most vulnerable markets that you are in, excluding the North Sea?

Dean Taylor

We are not in the North Sea, so.

Chris Christine - Simmons & Co.

Right, right, that is.

Dean Taylor

What typically tends to happen is Gulf of Mexico reacts first, because it is more of a spot market than a term market. And if you look internationally typically, it is Middle East, and then probably Southeast Asia, and then South America and West Africa in turn. South America tends to have longer contracts, because of the heavily waiting of Brazil.

Actually, I think that activity in Mexico will probably increase and Brazilian activity is a giant question mark, with pronouncements going back and forth by the week. I think that longer term, I think Brazil is still going to be a very good market.

Chris Christine - Simmons & Co.

Have you heard anything in the last couple of months in terms of increment color regarding Brazilian and where they will be in the near future, near to intermediate future?

Dean Taylor

Remember, Petrobras is ultimately a government company.

Chris Christine - Simmons & Co.

Right.

Dean Taylor

They've got to follow the dictates of their government. At the same time, very professional company full of really qualified people, with lots of experience in the industry. They understand without investments, they can't continue to do what they need to do, and that is provide the energy needs of that country, which is really a country trying to move from the second world to the first.

And so they know that they've got to continue to invest. There's going to be some tension between Petrobras and their own government and their own owners, in terms of how much they'll be able to invest. And I think that tension is playing itself out.

How it will play out finally, is probably going to be, my guess is better than most people think, in terms of industry activity. They are a government company there, and, ultimately, the government will decide. However, I think that Petrobras will probably be more active than most people think.

Chris Christine - Simmons & Co.

Okay. Thank you very much.

Dean Taylor

Okay, Chris. Thank you.

Operator

And your next question comes from the line of Pierre Conner of Capital One Southcoast.

Dean Taylor

Hello, Pierre.

Pierre Conner - Capital One Southcoast

Hey. Dean, going back to some of the international regions in the potential weakness issues, if you would expand little bit on that age old question of North Sea, where we could see weakness from the oil price and that spread. Do you see that it is first impact in West Africa? What kind of protection do you have in terms of contract cover in West Africa or vessel types, what is your thought on that spreading?

Dean Taylor

Typically they go from the North Sea to Brazil and Africa afterwards. If there's pressure, it may be in Brazil, but operating in Brazil is not nearly as easy as most people think. Lots of challenges in operating in Brazil, as there are in operating in West Africa. I think, and I am just guessing, that there's some of our competition obviously listening in on this call.

My guess is that the North Sea operators would prefer to operate in the North Sea as long as it makes economic sense for them to do so, they will operate in the North Sea. And if things get really soft they will start looking elsewhere and they will migrate probably first to Brazil and second to West Africa.

Pierre Conner - Capital One Southcoast

Okay. Dean, you mentioned PEMEX as a potential growth area, and we continue to see them tender for jack-ups and there's word that they may be requesting additional here in the first quarter. What type of vessel would be towing supply and supply to quote older vessels for PEMEX demand?

Dean Taylor

We do not have any old vessels Pierre. We have traditional vessels.

Pierre Conner - Capital One Southcoast

Traditional, thank you.

Dean Taylor

However, it depends. When the market is in PEMEX's favor, they put very strict guidelines on their tender documents. We have seen them with guidelines as nothing older than 5 years, and we have seen some nothing older than 10 years, some nothing older than 15 years.

as the market shifts in their favor, they become more exigent in their vessel requirements. And they become less exigent as the market shifts out of their favor. It will depend, but my guess is they will probably be looking for newer vessels rather than traditional vessels, if they feel like the market will support it.

Pierre Conner - Capital One Southcoast

Okay, helpful. Two more quick ones. First, in the Gulf of Mexico, recent impact benefit from storm repair, but then going into the typical winter slowdown, expectation, we have come to a conclusion on any of that repair or if there's any left that, because of commodities, it will be deferred anyway? Are we done with the repair work in the Gulf?

Dean Taylor

I do not think so.

Pierre Conner - Capital One Southcoast

No.

Dean Taylor

It is a question mark, Pierre I mean. Clearly, there are some operators that have to evaluate in the present price environment, whether it makes sense to go back and rework platforms and installations that at present economics do not work for them.

And so what I imagine they are doing just like what we do, except in a different spot of the sector. they try to evaluate whether it makes sense to go in and put money into an older asset and whether they will get those kind of return that meets their target hurdles, out of that existing assets.

The present price environment makes that more challenging for them. I think it depends upon their needs for cash, depends upon their view of future pricing, as to whether they will make those investments or not.

Pierre Conner - Capital One Southcoast

Okay. And my last question for Quinn, you didn't mention foreign currency exchange impacts on the revenue line. Is it meaningful on your international vessels and if you done the math on the kind of average rate impact that it had?

Quinn Fanning

We have some currency splits in our contracts, but the vast majority of revenues are dollar denominated.

Pierre Conner - Capital One Southcoast

Okay. There will be no material impacts?

Quinn Fanning

I wouldn't think so.

Pierre Conner - Capital One Southcoast

Okay, that is fine. All right. Thanks, gentlemen.

Dean Taylor

Thanks, Pierre. Take care.

Quinn Fanning

The other thing I say to Pierre real quickly, as we try to the best of our ability match the local currency denominated revenues with our local currency denominated costs. We try, to the best of our ability, and maintain a natural hedge, and really what we are speaking to in terms of Op cost benefits is effectively what is not naturally hedged.

Pierre Conner - Capital One Southcoast

Right, and obviously the margin protection was there because of that. Again, that was topline impact and/or any potential. I know you were commenting effectively did well on the cost side. But, was there any benefit due to CapEx exchange on the cost side also, and I think your answer is no, not real.

Quinn Fanning

Not that jumps out at us.

Pierre Conner - Capital One Southcoast

Got it. All right. Thanks, gentlemen.

Dean Taylor

Thanks, Pierre.

Operator

Your next question comes from the line of James Barkley of Barclays Capital.

Dean Taylor

Hi, James.

James Barkley - Barclays Capital

Morning, again. How are you? Just one on the capital expenditures, I see it is just a high figure, and I trust it is part of the fleet renewal. I was just wondering if you could confirm that. And perhaps maybe just a rough breakdown on, and what percent of the figure is on fleet renewal and what makes up the rest of it?

Quinn Fanning

Our CapEx is high 90s percent as associated with new construction. We do have some capitalized expenses when we invest in some of the older boats or that results in life extension or performance improvement. the vast majority and the 100% of the numbers that I was referring to relates to the fleet renewal program.

And that is not significantly different than it has been over the last couple of quarters. We have had in the high 50s in terms of vessels on a construction for a while, and something over a $1 billion and total capital cost associated with that program for a while as well.

As I mentioned, about $420 million of that $1.1 billion by reference has already been spent, and still less than $700 million that remains to be spent on the fleet renewal program assuming we make no additional commitments.

James Barkley - Barclays Capital

That is perfect.

Quinn Fanning

Does that answer to your question?

James Barkley - Barclays Capital

Yeah, exactly, just wanted to confirm. That is great.

Dean Taylor

Thank you, James.

James Barkley - Barclays Capital Dean Taylor

Operator

And your next question comes from the line of Jud Bailey of Jeffries & Company.

Dean Taylor

Hi, Jud.

Jud Bailey - Jeffries & Company

Hi. Good morning, Dean. In your prepared comments, you mentioned that some of your customers may delay some of their projects which could delay or impact some of your term contract renewals down the road. If that does in fact happen, some of these market do not have a real viable spot market, do you look to move those vessels to another market nearby or do they go idle? Could you talk about that a little bit?

Dean Taylor

Sure, I will be glad to. Typically, we will move a vessel if we have a job that justifies the cost of the move and gives us a return on our investment, otherwise we stack the vessel. It would just depend on what opportunities present themselves to us, what we see as market conditions developing in the particular area where a vessel may become idle.

Our first response is to stack the vessel, limit the cost, start looking for work elsewhere and, then, if we get work elsewhere, determine whether the cost of the move justifies the investment.

Jud Bailey - Jeffries & Company

Okay. If you look at various markets, there are several Jones Act vessels that have left the gulf for term contracts. Your fleet as well as several in the industry, as those roll off, do we have a risk that some of those vessels mobilize back into the gulf and make the market a little bit softer than we would have anticipated?

Dean Taylor

Sure, there's always a risk, but I think the likelihood that it is our vessels moving back into the gulf making it softer is low. Some of the other vessels, it depends on the term of the job to which they went. typically, unless the gulf market strengthens, I wouldn't expect many vessels to be moving back into the gulf.

Jud Bailey - Jeffries & Company

Okay, great. Andy, my last question; maybe a question for Steve. Nine months ago, one of the big strengths in new building was getting engines and gears and shafts and so forth. Are you seeing prices on those components come down in the market loosening up a bit or is it staying kind of the same from pricing perspective?

Steve Dick

We have not seen very much on pricing but availability is certainly a lot better than it was nine months ago. Even today some of the shipyards, if you are getting quotes from them, they are quoting deliveries that are somewhat shorter than they would have been if you order the ship a year or so. However, there is equipment that is coming on the market now.

Jud Bailey - Jeffries & Company

And what about the quotes for new builds overall from yard, to those overall costs coming down for new builds?

Steve Dick

They are coming down somewhat, but not as much as I think they need to come down and will come down, and I think they are waiting to see what happens with the market. However, they’ve got so much equipment to deliver now that they are still quoting some deliveries fairly far off.

Jud Bailey - Jeffries & Company

Okay, all right. Thank you and congratulations on the good quarter.

Dean Taylor

Thank you very much.

Operator

Your next question comes from the line of Dan Boyd of Goldman Sachs.

Dan Boyd - Goldman Sachs

Hi, Dan.

Jud Bailey - Jeffries & Company

You mentioned on the answer to an earlier question that the asking price for some of the new builds have come down 10% to 15%. How does that compare to the cost of the new builds that you order this summer?

Dean Taylor

Still higher.

Dan Boyd - Goldman Sachs

Okay. Therefore, it is still cheaper to build than buy, which is why you will not expect M&A to happen?

Dean Taylor

not in every case. We were criticized that we went very slow in what we were doing, but we were meticulous and judicious in what we bought, so that we didn't pay the exorbitant prices as some of the other companies paid for equivalent equipment. Steve did a wonderful job of scouring sort of the world shipyards and making deals with yards before they became popular, such that we were sort of first in line at particular yards with new classes of vessels.

We got terrific pricing. When I make that comparison, that prices are not down to the pricing that Steve got, when he made orders it is because he was disciplined in what he did initially. I would say the pricing may not be down to what some other people paid while prices were on their way up.

I expect that prices will be coming down pretty smartly, pretty quickly. And I think that some of the shipyards, particularly as cancellations take effect, some of the shipyards are going to become a little bit more desperate than what we have seen to-date. Just to guess, how soon that will happen, and how it is all going to play out is still unclear, but that is my guess.

Dan Boyd - Goldman Sachs

Yeah. And then just to clarify, it sounds like you have not seen any softness in spot market rates in the international fleet. Is that correct?

Jeff Platt

This is Jeff Platt. Overall the spot market internationally is a lot less. I mean our vessels working international are in term and this is even with the shorter term out to Southeast Asia. Again, we are not seeing the rate of increase on the day rates, but really we do not have much that is on, what you would call a spot working international.

Dan Boyd - Goldman Sachs

Okay. Then it is more about rate roller, how that impacts it. You also mentioned in your prepared comments that some customers are coming and asking to review rates. However, you have not seen anything material yet.

Can you just give us some more color on those conversations? What types of customers? What types of projects are they related to in terms of shallow water, deepwater, regions, and also the length of the contracts that they are discussing?

Dean Taylor

Since a lot of those conversations are still in process, I just assume to offer that if I could.

Dan Boyd - Goldman Sachs

Okay. Fair enough.

Dean Taylor

And going back to the last question, let me just point out. At the end of the quarter our worldwide rates across our fleet for every class of vessel, our average rate was $12427. Right now, as we speak, our average rate across the fleet 411 vessels roughly is $12564. Rates have actually gone up from the end of December to now. Now how long that holds up is unclear.

I would point out that and it does speak to what Jeff said about sort of the term nature of the international market, since most of our vessels are term and most are international, rates at the spot market has not risen in any measurable fashion.

Yes, now we are not in markets where there is a strongest spot market. We are not in the North Sea, which is almost wholly a spot market, where of 10% so to speak of our fleet in the Gulf of Mexico which is mostly a spot market. Everywhere else it’s mostly a term market.

Dan Boyd - Goldman Sachs

Does that also give us some insight into how the contracts are tiered in that? You are actually rolling to some higher price contracts that were signed maybe a year ago or earlier in that cycle and because of that nature you are likely to see some day rate increases even once the market starts to weaken a little bit unless you start to renegotiate contracts?

Dean Taylor

Not necessarily, because it wouldn't change quarter-to-quarter based on something that you've got a few quarters out. If it changes quarter-to-quarter, mostly is the result of the stuff that is come up in the quarter that you are renewing. I think that is right Joe. Any thoughts Jeff?

Jeff Platt

The other thing we are seeing of course is, as contracts are coming up for renewal, the operators are delaying the decisions for big scoring and are very much of the up market in any limited capacity or vessels that are very tight, they would try to lock it up in a much longer timeframe for their projects. Of course, they are trying to delay the project and push that out.

Even if their knowledge of when they will absolutely start the drilling program, that is getting a lot cloudier. we are seeing projects or contracts come up for the renewal and the operator waiting until the end till they absolutely make a commitment on the equipment to roll.

Joe Bennett

And this is Joe. I would just add that I think what you've said is accurate in any normal period of change, whether it is a growing market or descending market. Our average day rates that are quoted and because of our contract coverage tends to move slowly, and on the way up, people kind of question why aren't your day rates moving quicker?

We hear leading edge day rates are really moving quickly. And it is well, you have to let the contracts roll over before you have a chance at increasing and the same thing, when day rates are being reduced. It would not be unusual to have what I would call a lag. If we start seeing those day rates go down that you wouldn't see it in the quoted numbers for a little period of time.

Dan Boyd - Goldman Sachs

Okay. That is all very helpful. I really appreciate the insight.

Dean Taylor

Thanks and best wishes to you.

Operator

And your question comes from the line of Eric Webner of George Rice Associates.

Unidentified Analyst

Hi. Just another question on contracts. What is the average length of a contract?

Dean Taylor

It used to be 12 to 15 months internationally, probably now 15 to 18 months.

Unidentified Analyst

And is there any way to give us a sense of what percentage of your contract come up quarter by quarter?

Dean Taylor

if you some of the smart guys with numbers can do the math. It seems to me, I remember Keith used to comment about 20% came up every quarter. And but somebody tells me otherwise, that is my answer.

Jeff Platt

That sounds, Bob right. We usually quote about 15% to 20%, there is no standard amount that rolls over each and every quarter, but I would say on average, about 15 or so percent of the fleet rolls over each quarter.

Quinn Fanning

Maybe slightly different cutout that Jeff had earlier mentioned what percentage job are available hours were contracted for over the next year, and if you look at it on a 6-month basis versus 12-months basis, the available hours are contracted 63% or thereabouts on a 6-month basis and as Jeff mentioned, that moves to 50% on a 12-month basis.

Jeff Platt

The entire fleet is actually 66% on 6-month?

Quinn Fanning

I am sorry, 66% moving down to 50%. That gives you some sense as to how the contract burn works.

Unidentified Analyst

Great, so the contracts that are coming up this quarter were negotiated 15, 18 months ago?

Jeff Platt

On average, the fact is, you could have a 3 year roll over, and you could have a 6 month roll over. You have to talk in averages, when you start talking about contracts rolling over.

Quinn Fanning

Some of our new deliveries are against multiyear contracts.

Unidentified Analyst

Okay, great. Thank you.

Dean Taylor

Thank you.

Operator

And your next question comes from the line of James Mooney of Nikkei Capital.

Dean Taylor

Hi, James.

Unidentified Analyst

Hello, great quarter guys. Two quick questions on the cost front. The $4 million reduction insurance was on accrual catch-up or is that $4 million going forward that we should take out of the cost line?

Quinn Fanning

No. I was trying to give some color on this on my comments, which is we have been seeing an improvement loss costs if you will over a period of time. Our own actuary estimates and reviews that are done by outsiders usually creates a lag dynamic, such that on a quarter by quarter basis we will review the total accruals in on a historically semiannual basis, we will look to outside actuaries to support our analysis.

What you saw this quarter is essentially a consensus between Tidewater and our outside advisors that lost costs had come down substantially that we could essentially reverse the accrual that we were doing. Therefore, you wouldn't want to take the $4 million out of, $4 million or $5 million out of the numbers on a permanent basis.

I also think it would be unfair to say that it was “one-time item” if you were to look at the $5 million over a four quarter basis, an average, the benefit over that period of time. That would have been a fair characterization of our loss costs or ultimately our insurance costs.

Unidentified Analyst

Okay, got you. Thank you.

Quinn Fanning

It is neither one-time not a permanent step-down in operating costs.

Unidentified Analyst

On your crude costs, can you tell us what percentage is denominated in foreign currencies?

Quinn Fanning

I wouldn't have that at the tips of my fingers. The $3 million benefit that I indicated in terms of the quarter-over-quarter change in crude costs, was largely as a result of foreign exchange benefit because our employee count and number of hours worked was reasonably consistent on a quarter-over-quarter basis.

Unidentified Analyst

Some of the currencies moved more than 20%, so what I am trying to figure out, there's a lag. Like if the currency stayed flat, next quarter from the average this quarter, would we see anymore benefit from currencies or have we seen, have we captured off on the crude cost side?

Dean Taylor

Let me help you from a numbers viewpoint, a personnel newspapers viewpoint. Typically, the officers, two to three of the four officers are paid in dollars. Then everyone else is paid in local currency.

Unidentified Analyst

Okay.

Dean Taylor

Typically, we have not broken this down this far. But, typically, the officer cost is roughly equivalent to what the rest of the crew costs.

Unidentified Analyst

Okay.

Dean Taylor

I hope this helps.

Unidentified Analyst

That is very helpful.

Dean Taylor

How the currencies translation will play out, that is probably as good as we can do at least on this call.

Unidentified Analyst

Okay. Thank you very much.

Dean Taylor

You are welcome.

Operator

Your next question comes from the line of Aaron Gearum of Credit Suisse.

Dean Taylor

Hello, Aaron. How are you?

Aaron Gearum - Credit Suisse

Good, doing well, Dean, real quick one. I wanted to get a little bit of perhaps a split in West Africa historically been a pretty important market for you, what's your split is deepwater versus shallow water as you may have noted a couple, jack-up utilization in West Africa, eased a little bit and a couple of rigs actually moved down the market. Just to get a sense of your split in West Africa.

Dean Taylor

It is mostly shallow water. And to a lesser extent, deepwater, but the deepwater component is growing more than the shallow water components growing. In terms of a split, this is seat-of-pants guess, but I am going to say 85-15, something like that.

Aaron Gearum - Credit Suisse

Okay. Can you give us a sense of how big of a market West Africa is relative to international? And what you are seeing in terms of the boat utilization and pricing in West Africa?

Dean Taylor

The utilization is good, pricing is pretty good. What it is going to follow will be the jack-up pricing. When you start to see a lot of equipment become – one of the jack-ups become idle in West Africa, if that occurs, then I think we will start to see some softening in the what we would call the traditional filling supply, supply vessel rates.

Now in out international fleet of 363 vessels, 225 of them are towing supply or supply vessels. And I do not want to break down for competitive reasons, how many are exactly in West Africa as oppose to everywhere else. However, the better part of our fleet in West Africa is not deepwater.

Aaron Gearum - Credit Suisse

All right. Thanks a lot.

Dean Taylor

Thank you.

Operator

Your next question comes from the line of Daniel Burke of Johnson Rice.

Dean Taylor

Hey, Daniel.

Daniel Burke - Johnson Rice

Hey, guys. I will ask one quick one and take the rest of them offline. Just curious, if you could comment, it looks like you got about 15 vessels delivering between now and middle of the calendar year. How many of those are spoken for, or do you have slots for all of them? What I was surprised to hear was that it seems like one of the six is still looking around for prospects?

Steve Dick

I do not know if I can give you six months worth of data from the tips of my fingers. It is the 11 that I mentioned that will be delivered in the coming quarter, we looked at that morning. And I think 8 of those are against contract, so 3 are still being marketed.

Daniel Burke - Johnson Rice

Okay, great. I will take the rest offline. Appreciate it.

Dean Taylor

Thank you.

Operator

And at this time there are no further questions.

Dean Taylor

Thanks, everyone for your participation in our call. Thanks for your interest in our company, and god bless you all. Thanks a lot.

Operator

This does conclude today's conference call. You may now disconnect.

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