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Note 4 - Investment in Unconsolidated Affiliates

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

(4)

INVESTMENT IN UNCONSOLIDATED AFFILIATES

We maintained the following balances with our unconsolidated affiliates:

(In Thousands)		December 31,				December 31,
		2021				2020
Due from affiliates:
Angolan joint venture (Sonatide)		$	49,011			$	41,623
Nigerian joint venture (DTDW)			21,123				20,427
			70,134				62,050
Due to affiliates:
Sonatide		$	40,432			$	32,767
DTDW			21,123				20,427
			61,555				53,194
Due from affiliates, net of due to affiliates		$	8,579			$	8,856

Amounts due from Sonatide

Amounts due from Sonatide (Due from affiliate in the consolidated balance sheets) at December 31, 2021 and December 31, 2020 of approximately $49.0 million and $41.6 million, respectively, represent cash received by Sonatide from customers and due to us, amounts due from customers that are expected to be remitted to us through Sonatide and costs incurred by us on behalf of Sonatide. The following table displays the activity in the due from affiliate account related to Sonatide for the periods indicated:

(In Thousands)		Year Ended December 31,
		2021				2020				2019
Due from Sonatide at beginning of year		$	41,623			$	89,246			$	109,176
Revenue earned by the company through Sonatide			41,775				44,254				52,372
Less amounts received from Sonatide			(26,429	)			(36,160	)			(60,486	)
Less amounts used to offset Due to Sonatide obligations (A)			(8,530	)			(11,848	)			(10,551	)
Less impairment of due from affiliate			(400	)			(40,900	)			—
Other			972				(2,969	)			(1,265	)
		$	49,011			$	41,623			$	89,246

(A)

We reduced the respective due from affiliates and due to affiliates balances each period through netting transactions based on agreement with the joint venture.

The obligation to us from Sonatide is denominated in U.S. dollars; however, the underlying third-party customer payments to Sonatide were satisfied, in part, in Angolan kwanzas. In late 2019, we were informed that, as part of a broad privatization program, Sonangol intended to seek to divest itself of its interest in Sonatide. In January 2022, we acquired the 51% interest of Sonatide previously held by our partner, which has resulted in Sonatide becoming a wholly-owned subsidiary. Refer to Note (15) for discussion of the acquisition.

In the second quarter of 2020 Sonatide declared a $35.0 million dividend. On June 22, 2020, Sonangol received $17.8 million and we received $17.2 million. Our share of the dividend is reflected as dividend income from unconsolidated company in the consolidated statement of operations. In addition, as a result of this dividend payment, the cash balances of the joint venture were significantly reduced and we determined that, as a result, a significant portion of our net due from Sonatide balance was compromised.

At December 31, 2021, Sonatide had approximately $10.2 million of cash on hand plus approximately $10.6 million of net trade accounts receivable, providing approximately $20.8 million of current assets to satisfy the net due from Sonatide. Given prior discussions with our partner regarding how the net losses from the devaluation of certain Angolan kwanza denominated accounts should be shared, we continue to evaluate our net due from Sonatide balance for potential impairment based on available liquidity held by Sonatide. During the years ended December 31, 2021 and 2020, we recorded a $0.4 million and $40.9 million affiliate credit loss impairment expense, respectively.

Amounts due to Sonatide

Amounts due to Sonatide (Due to affiliate in the consolidated balance sheets) at December 31, 2021 and 2020 of approximately $40.4 million and $32.8 million, respectively, primarily represents commissions payable and other costs paid by Sonatide on our behalf. The following table displays the activity in the due to affiliate account related to Sonatide for the periods indicated:

(In Thousands)		Year Ended December 31,
		2021				2020				2019
Due to Sonatide at beginning of year		$	32,767			$	31,475			$	29,347
Plus commissions payable to Sonatide			3,832				4,152				4,937
Plus amounts paid by Sonatide on behalf of the company			10,914				9,037				9,654
Less commissions paid to Sonatide			—				—				(5,961	)
Less amounts used to offset Due from Sonatide obligations (A)			(8,530	)			(11,848	)			(10,551	)
Other			1,449				(49	)			4,049
		$	40,432			$	32,767			$	31,475

(A)

We reduced the respective due from affiliates and due to affiliates balances each period through netting transactions based on agreement with the joint venture.

Sonatide Operations

Sonatide’s principal earnings are from the commissions paid by us to the joint venture for our vessels chartered into Angola. In addition, Sonatide owns two vessels that may generate operating income and cash flow.

Company operations in Angola

For the year ended December 31, 2021, our Angolan operation generated vessel revenues of approximately $43.2 million or 11.9% of our consolidated vessel revenues, from an average of approximately 24 company owned vessels that are marketed through Sonatide, 5 of which were stacked on average during the year ended December 31, 2021.

For the year ended December 31, 2020, our Angolan operation generated vessel revenues of approximately $45.3 million or 11.7% of our consolidated vessel revenues, from an average of approximately 23 company owned vessels that are marketed through Sonatide, 6 of which were stacked on average during the year ended December 31, 2020.

For the year ended December 31, 2019, our Angolan operation generated vessel revenues of approximately $52.1 million or 10.9% of our consolidated vessel revenues, from an average of approximately 32 company owned vessels that are marketed through Sonatide, 13 of which were stacked on average during the year ended December 31, 2019.

Amounts due from DTDW

We own 40% of DTDW in Nigeria. Our partner, who owns 60%, is a Nigerian national. DTDW owns one offshore service vessel. We also operate company owned vessels in Nigeria for which the joint venture receives a commission. As of December 31, 2021 and 2020, respectively, we had no company owned vessels operating in Nigeria and the DTDW owned vessel was not employed. At the beginning of 2020 we had expected that we would be operating numerous vessels in Nigeria, but in the second quarter of 2020 the COVID-19 pandemic and resulting oil price reduction (further described in Note 7) caused our primary customer in Nigeria to eliminate all planned operations for 2020. As a result, our cash flow projections indicated that DTDW does not have sufficient funds to meet its obligations to us or its vendors. Therefore, we recorded affiliate credit loss impairment expense for the year ending December 31, 2020 totaling $12.1 million.

As of December 31, 2020, DTDW had long-term debt of $4.7 million which was secured by the vessel owned by DTDW and guarantees from the DTDW partners (in proportion to their ownership interests). We recorded additional impairment expense of $2.0 million which represented our portion of the joint venture debt guarantee during the year ended December 31, 2020. On April 22, 2021, we paid approximately $2.0 million, to settle this debt guarantee and our partner assumed the remaining joint venture debt which represented his portion of the guarantee.