Offshore services giant Tidewater Inc. (NYSE: TDW) reports "unexpected developments" in its negotiations with Angolan national oil company Sonangol on Sonatide, the joint venture with Sonangol in which Tidewater has a 49 percent stake and through which it markets its services to energy companies for operation offshore Angola.
More Tidewater vessels are deployed in Angola and more revenue is derived from its operations in Angola than in or from any of Tidewater’s other countries of operation. For the three month period ended December 31, 2011, Tidewater’s Angolan operations generated approximately 23 percent of its consolidated vessel revenue. Now, it seems, that could change.
Tidewater's current Sonatide joint venture agreement with Sonangol expires on March 31, 2012.
Tidewater has been in continuing negotiations with Sonangol to put the joint venture on a more permanent footing after a number of temporary extensions of the original agreement. In February 2012, members of Tidewater’s senior management group met in Angola with their counterparts from Sonangol. In the course of negotiations, Sonangol introduced additional or modified contract expectations. Tidewater responded to these expectations by presenting a revised proposal that is under consideration by Sonangol.
"Recently, however," says Tidewater, "Sonangol advised that it may not be in a position to provide its response to Tidewater’s revised proposal until late March. At the same time, Sonangol advised Tidewater that it would not consider further vessel contracting activity by Sonatide until the joint venture negotiations have been resolved to the parties’ mutual satisfaction. The effect of this development is that, at least for the time being, Sonatide will not be able to pursue new charters or charter extensions with customers in the Angolan market."
Tidewater says it has "no information as to whether Sonangol will provide a response that will allow for the continuation of fruitful negotiations between the parties."
"Given these unexpected developments," says Tidewater, it has "begun the process of evaluating the potential movement of its vessels currently dedicated to work in Angola to other markets, where there is strong demand for Tidewater’s vessels and services. While there would be costs associated with any such redeployment, Tidewater believes that such a course is preferable to entering into a new joint venture agreement that would contain terms that would not be in the best interests of Tidewater and its stockholders."
Tidewater expects that, if necessary, its vessels operating in Angola could be transitioned to other markets over some reasonable period, particularly given that a number of Sonatide's charterparty agreements with customers extend beyond March 31, 2012.
In the meantime, Tidewater says that it "will continue to await further word from Sonangol in the hopes that it can still reach a mutually advantageous joint venture agreement that will continue the historical commercial relationship that has served Tidewater, Sonangol, and numerous other energy companies that operate offshore Angola extremely well for years."
March 12, 2012
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