SEACOR Marine Holdings Inc. (SMHI) FY 2022 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) below presents the Company’s operating results for each of the three years in the period ended December 31, 2022, and its financial condition as of December 31, 2022 and 2021. Certain statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations constitute forward looking statements. See “Forward Looking Statements” included elsewhere in this Annual Report on Form 10-K.

The following MD&A is intended to help the reader understand the results of operations and financial condition of the Company. The MD&A is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and related notes included in Part IV of this Annual Report on Form 10-K and incorporated herein by reference.

Overview

The Company provides global marine and support transportation services to offshore energy facilities worldwide. As of December 31, 2022, the Company operated a diverse fleet of 60 support vessels, of which 58 were owned or leased-in and two were managed on behalf of unaffiliated third parties. The primary users of the Company’s services are major integrated national and international oil companies, independent oil and natural gas exploration and production companies, oil field service and construction companies, as well as offshore wind farm operators and offshore wind farm installation and maintenance companies.

The Company operates and manages a diverse fleet of offshore support vessels that (i) deliver cargo and personnel to offshore installations, including offshore wind farms, (ii) assist offshore operations for production and storage facilities, (iii) provide construction, well work-over, offshore wind farm installation and decommissioning support, (iv) carry and launch equipment used underwater in drilling and well installation, maintenance, inspection and repair and (v) handle anchors and mooring equipment for offshore rigs and platforms. Additionally, the Company’s vessels provide emergency response services and accommodations for technicians and specialists.

Recent Developments

SEACOR Marine Foreign Holdings Credit Facility. On March 2, 2023, the Company and SMFH entered into Amendment No. 7 (“SMFH Amendment No. 7”) to that certain Second Amended and Restated Guaranty, dated as of September 29, 2022, issued by the Company in favor of DNB Bank ASA, New York Branch, as security trustee (the “Second A&R SMFH Credit Facility Guaranty”) in connection with that certain senior secured loan facility with a syndicate of lenders administered by DNB Bank ASA, New York Branch, dated as of September 26, 2018 and as amended from time to time (the “SMFH Credit Facility”). SMFH Amendment No. 7 extends the date through which the Company is required to maintain an interest coverage ratio of 1.50:1.00 (as calculated in accordance with the Second A&R SMFH Credit Facility Guaranty) from December 31, 2022 to June 30, 2023. For the last day of fiscal quarters thereafter, the interest coverage ratio is required to be at least 2.00:1.00.

SEACOR Offshore OSV. On December 22, 2022, SEACOR Offshore OSV LLC (“SEACOR Offshore OSV”), a wholly owned subsidiary of SEACOR Marine, and certain vessel-owning subsidiaries of SEACOR Offshore OSV, entered into Amendment No. 8 (“Amendment No. 8”) to that certain second amended and restated credit facility agreement with DNB Capital LLC and Comerica Bank, as lenders, and administered by DNB Bank ASA, New York Branch, dated as of December 31, 2021 (as amended from time to time, the “SEACOR OSV Credit Facility”), and in connection with which SEACOR Marine previously entered into a Guaranty, dated as of December 31, 2021, in favor of DNB Bank ASA, New York Branch, as security trustee.

Amendment No. 8 provides for, among other things, the division of the loans under the SEACOR OSV Credit Facility into two tranches of debt, Class A Debt (as defined in the SEACOR OSV Credit Facility) deemed loaned under the SEACOR OSV Credit Facility by DNB Capital LLC in an amount of approximately $10.9 million as of the date of the amendment, and Class B Debt (as defined in the SEACOR OSV Credit Facility) deemed loaned under the SEACOR OSV Credit Facility by Comerica Bank in an amount of approximately $5.6 million as of the date of the amendment. In addition, pursuant to Amendment No. 8, (a) the Final Payment Date (as defined in the SEACOR OSV Credit Facility) of the Class A Debt was extended from December 31, 2023 to March 31, 2026, (b) the Margin (as defined in the SEACOR OSV Credit Facility) of the Class A Debt was increased from 4.68% per annum to 4.75% per annum, and (c) the amortization profile of the Credit Facility was amended such that the borrowers thereunder are required to pay $500,000 per quarter up to and including the quarter ending on December 31, 2023 (at which point all amounts outstanding under the Class B Debt shall become due and payable), and $330,450 per quarter thereafter up to and including March 31, 2026. The Class B Debt maintains substantially the same terms and conditions under the SEACOR OSV Credit Facility as it had prior to Amendment No. 8.

Re-Alignment of Capital Structure

At the end of the third quarter and beginning of the fourth quarter of 2022, the Company entered into a series of transactions described in more detail below that resulted in the Company (i) extending $177.4 million that was due in 2023 until 2026, (ii) receiving

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$66.0 million in proceeds from the sale of its interest in certain joint ventures and (iii) deploying $20.0 million of the sale proceeds as a loan to its former joint venture to be repaid by September 2023.

Exchange Transactions. On October 5, 2022, SEACOR Marine and certain funds affiliated with The Carlyle Group Inc. (the “Carlyle Investors”) entered into two agreements pursuant to which SEACOR Marine issued the Carlyle Investors (i) $90.0 million in aggregate principal amount of the Company’s 8.0% / 9.5% Senior PIK Toggle Notes due 2026 (the “Guaranteed Notes”) and (ii) $35.0 million aggregate principal amount of SEACOR Marine’s 4.25% Convertible Senior Notes due 2026 (the “New Convertible Notes”) in exchange for $125.0 million in aggregate principal amount of SEACOR Marine’s convertible senior notes due 2023 (“Old Convertible Notes”), comprising all Old Convertible Notes outstanding (the “Exchange Transactions”). The Exchange Transactions extended the maturity of $125.0 million of SEACOR Marine’s indebtedness by over 2.5 years from December 2023 to July 2026. For additional information and a summary of the terms of the Guaranteed Notes and New Convertible Notes, see “Note 9. Long-Term Debt” in the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Framework Agreement Transactions. On September 29, 2022, SEACOR Marine and certain of its subsidiaries, on the one hand, and Operadora de Transportes Marítimos, S.A. de C.V. (“OTM”), CME Drillship Holdings DAC (“CME Ireland”), and OVH, on the other hand, entered into a Framework Agreement (the “Framework Agreement”). OTM and CME Ireland are affiliates of Proyectos Globales de Energía y Servicios CME, S.A. de C.V. (“CME”). Alfredo Miguel Bejos is the President and Chief Executive Officer of CME and also serves as a member of the board of directors of SEACOR Marine.

Prior to the closing of the Framework Agreement Transactions (defined below), the Company owned 49% of each of MexMar and OVH through SEACOR Marine International LLC, a wholly-owned subsidiary of SEACOR Marine (“SEACOR Marine International”), and the remaining 51% ownership interests were held by OTM. The Company also owned a minority interest in SEACOR Marlin LLC (“SEACOR Marlin LLC”), the owner of the PSV SEACOR Marlin, and the remaining ownership interests of SEACOR Marlin LLC were held by MexMar.

The Framework Agreement provided for, among other things, (i) the sale by SEACOR Marine LLC, a wholly-owned subsidiary of SEACOR Marine (“SMLLC”), of all of the outstanding equity interests of SEACOR Marine International to OTM for a purchase price of $66.0 million in cash paid at closing, (ii) the sale of the AHTS SEACOR Davis to CME Ireland in exchange for the remaining equity interests in SEACOR Marlin LLC, such that SEACOR Marlin LLC became a wholly-owned subsidiary of SEACOR Marine and the sole owner of the PSV SEACOR Marlin, (iii) the transfer of a hybrid battery system from OVH to SEACOR Marine Capital as repayment in full of a certain vessel loan agreement provided by the Company to its former joint venture, and (iv) entry into a bareboat charter agreement between SEACOR Marlin LLC and MexMar with respect to the PSV SEACOR Marlin (collectively, the “Framework Agreement Transactions”).

Note Receivable. In connection with the closing of the Framework Agreement Transactions, on September 29, 2022, SEACOR Marine Capital Inc., a wholly-owned subsidiary of SEACOR Marine (“SEACOR Marine Capital”) purchased all of the outstanding loans under the Second Amended and Restated Term Loan Credit Facility Agreement, made as of July 8, 2022, by and among MexMar, as the borrower, DNB Capital LLC and The Governor and Company of the Bank of Ireland, each as lenders, and DNB Bank ASA, New York Branch, as facility agent (as amended from time to time, the “MexMar Original Facility Agreement”) for an aggregate amount of $28.8 million, representing the par value of the loan. The purchase was funded using proceeds received from the Framework Agreement Transactions. On the same date, the MexMar Original Facility Agreement was amended and restated in the Third Amended and Restated Facility Agreement (“MexMar Third A&R Facility Agreement”) pursuant to which, among other things, SEACOR Marine Capital became the lender, MexMar paid down approximately $8.8 million of the loan and agreed to repay the $20.0 million of the loan that remains outstanding by September 30, 2023, through four equal quarterly installments of $5.0 million. As of December 31, 2022, the loan balance due from MexMar was $15.0 million. For additional information and a summary of the terms of the MexMar Third A&R Facility Agreement, see “Note 4. Note Receivable” in the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

SEACOR Marine Foreign Holdings Credit Facility. On September 29, 2022, SEACOR Marine, SMFH, and certain vessel-owning subsidiaries of SEACOR Marine, entered into Amendment No. 5 (“SMFH Amendment No. 5”) to the SMFH Credit Facility, and in connection therewith SEACOR Marine entered into the Second A&R SMFH Credit Facility Guaranty.

SMFH Amendment No. 5 and the Second A&R SMFH Credit Facility Guaranty provided for, among other things, (i) a $5.3 million prepayment of the SMFH Credit Facility thereby reducing the amount outstanding thereunder to approximately $74.7 million, (ii) the establishment of Tranche A and Tranche B loans under the SMFH Credit Facility (each as defined in the SMFH Credit Facility) and (iii) the change in the reference rate for Tranche B from LIBOR to SOFR. Tranche A is comprised of approximately $19.8 million of the principal amount of the loan and will maintain the same Margin (as defined in the SMFH Credit Facility) over LIBOR of 4.75% per annum through December 31, 2022, thereafter reverting to 3.75% per annum and the same maturity date of September 30, 2023. Tranche B is comprised of approximately $54.9 million of the principal amount of the loan, permanently maintains the Margin over SOFR (previously LIBOR) at 4.75% per annum and extends the maturity date from September 30, 2023 to March 31, 2026.

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Trends Affecting the Offshore Marine Business

Oil and Natural Gas Prices

The market for offshore oil and natural gas drilling has historically been cyclical. Demand for offshore support vessels is highly correlated to the price of oil and natural gas as those prices significantly impact the Company’s customers’ exploration and drilling activity levels. Oil and natural gas prices tend to fluctuate based on many factors, including global economic activity, levels of reserves and production activity. Price levels for oil and natural gas have and will continue to influence demand for offshore marine services. In addition to the price of oil and natural gas, the availability of acreage, local tax incentives or disincentives, drilling moratoriums and other regulatory actions, and requirements for maintaining interests in leases affect activity in the offshore oil and natural gas industry. Factors that influence the level of offshore exploration and drilling activities include:

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expectations as to future oil and natural gas commodity prices;

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customer assessments of offshore drilling prospects compared with land-based opportunities, including newer or unconventional opportunities such as shale;

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expectations as to the future demand for oil and natural gas in the context of the transition to non-hydrocarbon based sources of energy;

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customer assessments of cost, geological opportunity and political stability in host countries;

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worldwide demand for oil and natural gas;

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the ability or willingness of OPEC to set and maintain production levels and pricing;

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regional conflicts in oil producing regions;

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the level of oil and natural gas production by non-OPEC countries;

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transitions to and demand for non-hydrocarbon based energy sources;

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the relative exchange rates for the U.S. dollar; and

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various U.S. and international government policies regarding exploration and development of oil and natural gas reserves.

Offshore oil and natural gas market conditions are highly volatile. Prices deteriorated beginning in the second half of 2014 and continued to deteriorate when oil prices hit a thirteen-year low of less than $27 per barrel (on the New York Mercantile Exchange) in February 2016. Oil prices experienced unprecedented volatility during 2020 due to the COVID-19 pandemic and the related effects on the global economy, with the price per barrel going negative for a short period of time. Oil prices have steadily increased since the lows hit at the beginning of the COVID-19 pandemic and hit a multi-year high of $122 per barrel at points during 2022 primarily as a result of the conflict between Russia and Ukraine as well as the related economic sanctions and economic uncertainty but have recently decreased to the $80 per barrel range.

While the Company has experienced difficult market conditions over the past few years due to low and volatile oil and natural gas prices and the focus of oil and natural gas producing companies on cost and capital spending budget reductions, the increases since the lows experienced during the COVID-19 pandemic in oil and natural gas prices has led to an increase in utilization, day rates and customer inquiries about potential new charters.

Vessel Supply Dynamics and Other Industry Drivers

Low oil prices and the subsequent decline in offshore exploration have forced many operators in the industry to restructure or liquidate assets. The Company continues to closely monitor the delivery of newly built offshore support vessels to the industry-wide fleet, which in the recent past contributed to an oversaturated market, thereby further lowering the demand for the Company’s existing offshore support vessel fleet. A combination of (i) low customer exploration and drilling activity levels, and (ii) excess supply of offshore support vessels whether from laid up fleets or newly built vessels could, in isolation or together, have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and growth prospects.

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Certain macro drivers somewhat independent of oil and natural gas prices may support the Company’s business, including: (i) underspending by oil and natural gas producers during the recent industry downturn leading to pent up demand for maintenance and growth capital expenditures; (ii) improved extraction technologies; and (iii) the need for offshore wind farms support as the industry grows. While the Company expects that alternative forms of energy will continue to grow and add to the world’s energy mix, especially as governments, supranational groups and various other parties focus on climate change causes and concerns, the Company believes that for the foreseeable future demand for gasoline and oil will be sustained, as will demand for electricity from natural gas. Some alternative forms of energy such as offshore wind farms support some of the Company’s businesses and the Company expects such support to increase as development of renewable energy expands.

The Company adheres to a strategy of cold-stacking vessels (removing from active service) during periods of weak utilization in order to reduce the daily running costs of operating the fleet, primarily personnel, repairs and maintenance costs, as well as to defer some drydocking costs into future periods. The Company considers various factors in determining which vessels to cold-stack, including upcoming dates for regulatory vessel inspections and related docking requirements. The Company may maintain class certification on certain cold-stacked vessels, thereby incurring some drydocking costs while cold-stacked. Cold-stacked vessels are returned to active service when market conditions improve, or management anticipates improvement, typically leading to increased costs for drydocking, personnel, repair and maintenance in the periods immediately preceding the vessels’ return to active service. Depending on market conditions, vessels with similar characteristics and capabilities may be rotated between active service and cold-stack. On an ongoing basis, the Company reviews its cold-stacked vessels to determine if any should be designated as retired and removed from service based on the vessel’s physical condition, the expected costs to reactivate and restore class certification, if any, and its viability to operate within current and projected market conditions. As of December 31, 2022, three of the Company’s 58 owned and leased-in vessels were cold-stacked worldwide.

Certain Components of Revenues and Expenses

The Company operates its fleet in four principal geographic regions: the U.S., primarily in the Gulf of Mexico; Africa and Europe; the Middle East and Asia; and Latin America, primarily in Mexico and Guyana. The Company’s vessels are highly mobile and regularly and routinely move between countries within a geographic region. In addition, the Company’s vessels are redeployed among geographic regions, subject to flag restrictions, as changes in market conditions dictate. The number and type of vessels operated, their rates per day worked and their utilization levels are the key determinants of the Company’s operating results and cash flows. Unless a vessel is cold-stacked, there is little reduction in daily running costs for the vessels and, consequently, operating margins are most sensitive to changes in rates per day worked and utilization. The Company manages its fleet utilizing a global network of shore side support, administrative and finance personnel.

Time charter statistics are the key performance indicators for the Company’s time charter revenues. The rate per day worked is the ratio of total time charter revenues to the aggregate number of days worked. Utilization is the ratio of aggregate number of days worked to total available days for all vessels available for time charter. Unless vessels have been retired and removed from service, available days represents the total calendar days for which vessels available for time charter were owned or leased-in by the Company, whether marketed, under repair, cold-stacked or otherwise out-of-service.

Operating Revenues. The Company generates revenues by providing services to customers primarily pursuant to two different types of contractual arrangements: time charters and bareboat charters. Under a time charter, the Company provides a vessel to a customer and is responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, the Company provides a vessel to a customer and the customer assumes responsibility for all operating expenses and all risks of operation. Vessel charters may range from several days to several years.

Direct Operating Expenses. The aggregate cost of operating the Company’s fleet depends primarily on the size and asset mix of the fleet. The Company’s direct operating costs and expenses, other than leased-in equipment expense, are grouped into the following categories:

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personnel (primarily wages, benefits, payroll taxes, savings plans and travel for marine personnel);

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repairs and maintenance (primarily routine repairs and maintenance and main engine overhauls that are performed in accordance with planned maintenance programs);

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drydocking (primarily the cost of regulatory drydockings performed in accordance with applicable regulations);

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insurance and loss reserves (primarily the cost of Hull and Machinery and Protection and Indemnity insurance premiums and loss deductibles);

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fuel, lubes and supplies; and

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other (communication costs, expenses incurred in mobilizing vessels between geographic regions, third party ship management fees, freight expenses, customs and importation duties and other).

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The Company expenses drydocking, engine overhaul and vessel mobilization costs as incurred. If a disproportionate number of drydockings, overhauls or mobilizations are undertaken in a particular fiscal year or quarter, operating expenses may vary significantly when compared with the prior year or prior quarter.

Direct Vessel Profit. Direct vessel profit (defined as operating revenues less operating expenses excluding leased-in equipment, “DVP”) is the Company’s measure of segment profitability. DVP is a critical financial measure used by the Company to analyze and compare the operating performance of its regions, without regard to financing decisions (depreciation and interest expense for owned vessels vs. lease expense for leased-in vessels).

Leased-in Equipment. In addition to the Company’s owned fleet, it operates leased-in vessels from lessors under bareboat charter arrangements that currently expire in 2023, 2024 and 2027. Certain of these vessels were previously owned and subject of sale and leaseback transactions with their lessors.

Impairments. As a result of the difficult conditions experienced in the offshore oil and natural gas markets beginning in the second half of 2014 and the corresponding reductions in utilization and rates per day worked of its fleet, the Company identified indicators of impairment and has over the past few years recognized impairment charges primarily associated with its AHTS fleet, its liftboat fleet, certain specialty vessels and vessels removed from service. When reviewing its fleet for impairment, the Company groups vessels with similar operating and marketing characteristics, including cold-stacked vessels expected to return to active service, into vessel classes. All other vessels, including vessels retired and removed from service, are evaluated for impairment on a vessel by vessel basis.

During 2022, the Company recorded impairment charges of $1.6 million for one FSV that was sold during the year and one leased-in AHTS. During 2021, the Company recorded no impairment charges associated with its fleet. During 2020, the Company recorded impairment charges of $13.5 million associated with its liftboat fleet (five owned and two leased-in vessels), and one specialty vessel and recognized net losses of $5.3 million as a result of asset disposals ($4.8 million loss due to the disposal of one vessel under construction, and $0.5 million loss due to the redelivery of one leased-in AHTS and one leased-in liftboat). Estimated fair values for the Company’s owned vessels were established by independent appraisers and other market data such as recent sales of similar vessels. For information regarding the Company’s vessel fair value measurement determinations, see “Note 12. Fair Value Measurements” in the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. If market conditions continue to decline from the presently depressed utilization and rates per day worked experienced over the last three years, fair values based on future appraisals could decline significantly.

The Company’s other vessel classes and other individual vessels in active service and cold-stacked status, for which no impairment was deemed necessary, have generally experienced a less severe decline in utilization and rates per day worked based on specific market factors. The market factors include vessels with more general utility to a broader range of customers (e.g., FSVs), vessels required for customers to meet regulatory mandates and operating under multiple year contracts or vessels that service customers outside of the offshore oil and natural gas market.

For vessel classes and individual vessels with indicators of impairment, but which were not impaired as of December 31, 2022, the Company has estimated that their future undiscounted cash flows exceed their current carrying values by more than 40%. The Company’s estimates of future undiscounted cash flows are highly subjective as utilization and rates per day worked are uncertain, including the timing of an estimated market recovery in the offshore oil and natural gas markets and the timing and cost of reactivating cold-stacked vessels. If market conditions decline further, or remain stagnant at current levels, changes in the Company’s expectations on future cash flows may result in recognizing additional impairment charges related to its long-lived assets in future periods.

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Consolidated Results of Operations

For the years ended December 31, the Company’s consolidated results of operations were as follows (in thousands, except statistics):

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The following tables summarize the operating results and property and equipment for the Company’s reportable segments for the periods indicated (in thousands, except statistics):

(1)
Total assets exclude $64.0 million of corporate assets.

(2)
In 2022, the Company removed from service one specialty vessel in this region. Regional statistics reflect the removed from service status of this vessel.

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(1)
Total assets exclude $89.4 million of corporate assets.

(2)
In 2021, the Company removed from service four liftboats in this region. Regional statistics reflect the removed from service status of these vessels.

(3)
In prior periods, Africa and Europe were reported as separate segments. Due to the sale of Windcat Workboats, the Company’s European operations are no longer analyzed by the chief operating decision maker on a standalone basis but rather are analyzed as part of the Africa and Europe segment. As a result, for purposes of segment reporting, European operations are now analyzed with Africa and reported as a consolidated segment and prior period information has been conformed to the new consolidated reporting segment.

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(1)
Total assets exclude $105.6 million of corporate assets, and $50.2 million of assets of discontinued operations.

(2)
In prior periods, Africa and Europe were reported as separate segments. Due to the sale of Windcat Workboats, the Company’s European operations are no longer analyzed by the chief operating decision maker on a standalone basis but rather are analyzed as part of the Africa and Europe segment. As a result, for purposes of segment reporting, European operations are now analyzed with Africa and reported as a consolidated segment and prior period information has been conformed to the new consolidated reporting segment.

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The following tables summarize the world-wide operating results and property and equipment for each of the Company’s vessel classes for the periods indicated (in thousands, except statistics):

(1)
In 2022, the Company removed from service one specialty vessel in this class. Other activity statistics reflect the removed from service status of this vessel.

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(1)
In 2021, the Company removed from service four liftboats in this class. Liftboats statistics reflect the removed from service status of these vessels.

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Operating Income (Loss)

United States, primarily Gulf of Mexico. For the years ended December 31, the Company’s direct vessel profit (loss) in the U.S. was as follows (in thousands, except statistics):

(1)
In 2021, the Company removed from service four liftboats in this region. Regional statistics reflect the removed from service status of these vessels.

2022 compared with 2021

Operating Revenues. Charter revenues were $34.2 million higher in 2022 compared with 2021. Charter revenues were $19.8 million higher due to the repositioning of vessels between geographic regions, $10.5 million higher due to the acquisition of an additional three PSVs in this region as a result of the OSV Partners Merger (as defined below in “Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax”) and $3.9 million higher due to improved utilization of the vessels included in the results of this region in both comparative periods (as applicable to each region, the “Regional Core Fleet”). Other marine services were $5.9 million higher primarily due to business interruption insurance revenue and higher management fees and liftboat catering revenues. As of December 31, 2022, the Company had three of 14 owned and leased-in vessels (one AHTS, one FSV, and one liftboat) cold-stacked in this region compared with four of 14 vessels as of December 31, 2021.

Direct Operating Expenses. Direct operating expenses were $31.8 million higher in 2022 compared with 2021. Direct operating expenses were $16.7 million higher due to the repositioning of vessels between geographic regions, $8.4 million higher due to net fleet additions and $6.7 million higher for the Regional Core Fleet as a result of timing of drydocking and vessels changing from bareboat to time charter status. In addition, drydocking and repair expenditures included $0.6 million of costs pending adjustment of insurance claims in 2022.

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2021 compared with 2020

Operating Revenues. Charter revenues were $4.3 million higher in 2021 compared with 2020. Charter revenues were $7.9 million higher due to improved utilization of the Regional Core Fleet. Charter revenues were $3.1 million lower due to the repositioning of vessels between geographic regions and $0.5 million lower due to net fleet dispositions. Other marine services were $1.2 million higher primarily due to higher management fees and liftboat catering revenues. As of December 31, 2021, the Company had four of 14 owned and leased-in vessels (one AHTS, one FSV, and two liftboats) cold-stacked in this region compared with 15 of 20 vessels as of December 31, 2020. In addition, the Company had four liftboats removed from service in this region as of December 31, 2021.

Direct Operating Expenses. Direct operating expenses were $2.6 million higher in 2021 compared with 2020. Direct operating expenses were $4.6 million higher for the Regional Core Fleet primarily due to the reactivation of vessels that were previously cold-stacked. Direct operating expenses were $1.6 million lower due to net fleet dispositions, and $0.4 million lower due to the repositioning of vessels between geographic regions.

Africa and Europe, continuing operations. For the years ended December 31, the Company’s direct vessel profit in Africa and Europe was as follows (in thousands, except statistics):

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2022 compared with 2021

Operating Revenues. Charter revenues were $15.8 million higher in 2022 compared with 2021. Charter revenues were $7.7 million higher due to the reactivation of vessels that were previously cold-stacked, $5.6 million higher due to the repositioning of vessels between geographic regions and $3.6 million higher for the Regional Core Fleet as a result of increased day rates and utilization. Charter revenues were $1.1 million lower due to net asset dispositions. Other marine services were $1.2 million higher primarily due to the receipt of cash from the settlement of a mediation in our favor. As of December 31, 2022, the Company had no owned and leased-in vessels cold-stacked in this region.

Direct Operating Expenses. Direct operating expenses were $11.3 million higher in 2022 compared with 2021. Direct operating expenses were $10.2 million higher due to the repositioning of vessels between geographic regions, $1.4 million higher due to the reactivation of vessels that were previously cold-stacked and $0.6 million for the Regional Core Fleet. Direct operating expenses were $0.9 million lower due to net assets dispositions.

2021 compared with 2020

Operating Revenues. Charter revenues were $3.4 million lower in 2021 compared with 2020. Charter revenues were $5.4 million lower due to the repositioning of vessels between geographic regions and $2.0 million higher due to net fleet additions. Other marine services were $1.2 million lower primarily due to commission charges. As of December 31, 2021, the Company had no owned and leased-in vessels cold stacked in this region, compared with four of 16 vessels as of December 31, 2020.

Direct Operating Expenses. Direct operating expenses were $5.6 million higher in 2021 compared with 2020, primarily due to higher operating costs in West Africa and the reactivation of vessels that were previously cold-stacked.

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Middle East and Asia. For the years ended December 31, the Company’s direct vessel profit (loss) in the Middle East and Asia was as follows (in thousands, except statistics):