Is Tidewater a Good Bet?

Solid fundamentals, a modernized and large fleet, and rising deepwater activity makes the company a solid long-term bet

Jun 26, 2014 at 9:24AM

Investment in companies associated with offshore drilling seems like a promising idea as a result of the growing focus on offshore drilling activities. This thought earlier led me to look into ERA helicopters. Another service provider that stands to gain immensely from the deepwater story is Tidewater (NYSE:TDW), a provider of offshore service vessels. 

Good tidings
There seems to be good news all around. Check this:

  • Last October Brazil auctioned off its deepwater oil field, Libra, to a consortium including Petrobras, Total, Shell, CNOOC, and CNPC. Putting things in context, Libra's estimated recoverable oil stands at 8 billion-12 billion barrels  – it's significant.
  • Closer to home, Mexico finally opened up its deepwater oil fields to private energy producers. According to The Financialist, "Proven reserves stand at around 10.3 billion barrels of oil and 17.3 trillion cubic feet of natural gas, but the most optimistic estimates of offshore reserves are double that." The math is simple and runs into billions of dollars.
  • The offshore drilling market is expected to grow to $121.1 billion in 2018 from $73.1 billion in 2013. 

The largest benefactors of this massive spending are oil services companies including transporters, drilliers, technology providers, etc. But there are hundreds of them out there, so why Tidewater?

It's prepared for the high tide...
Fact 1: Tidewater's active vessel fleet stood at 294 on March 31, including 11 owned through joint ventures. The average age of 245 newer vessels built since 2000 was 6.9 years, and 38 active, older vessels averaged 28.8 years.

Fact 2: As part of its expansion program since 2000, Tidewater has invested approximately $4.4 billion in 271 vessels (92 are deepwater platform supply vessels or deepwater anchor handling towing supply). There are another 30 vessels under construction for a total cost of approximately $833 million.  

Fact 3: Tidewater has the 'largest number of new offshore support vessels (PSVs and AHTS vessels only ), among its competitors in the industry.

These facts have a lot of important implications for Tidewater. Firstly, a new, modern and more capable fleet translates into higher revenue and earnings potential.

Also, the timing seems perfect with the markets turning around. Offshore Supply Vessel to Rig ratio is expected to fall below 3.9 by 2014 from 4.1  in 2012. This implies that lesser number of vessels will be available per rig, effectively tilting the balance in favor of vessel owners.

And finally, most of the demand growth is in the ultra-deepwater drilling space, where the company has the largest fleet among competitors Gulfmark Offshore (NYSE:GLF), Seacor Holdings (NYSE:CKH), and Hornbeck Offshore (NYSE:HOS).

Gulfmark has 71 PSVs and AHTS but has no exposure to West African and Chinese markets where Tidewater is strong. Seacor has the second largest fleet after Tidewater and offshore marine services contributed 45% to its revenue in 2013. Hornbeck is more of a Gulf of Mexico play although it has exposure to other international markets.

In for the long haul
According to Barclays, "Global E&P spending is poised to reach a new record of $723 billion in 2014, up 6.1% from $682bn in 2013." In fiscal 2014, Tidewater's revenue increased by 15% year over year, reflecting the rising demand. The company is slightly levered with a total debt/equity ratio of 56.4 but maintains high liquidity with a quick ratio of 2.04. It has about $660 million of available liquidity to fund its operations as well as capital expenditures. Also, while you wait for the tide to turn completely, there is a dividend yield of 1.8% and the newly authorized $200 million repurchase program to benefit from. Surely, it's a good bet.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven’t heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America’s greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, “The IRS Is Daring You to Make This Investment Now!,” and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Saurav Chakraborty has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information