Seeking Alpha: Tidewater Hoping To Weather The Downturn

If a rising tide is suppose to lift all boats, an uncommonly weak tide carries the risk of leaving some high and dry. That might be a little melodramatic with respect to Tidewater (NYSE:TDW), but I do believe this global leader in marine supply and support vessels for the energy industry is looking at a multiyear period of lean times.

Tidewater has spent a lot of time, energy, and money modernizing its fleet, but utilization rates and dayrates are likely to plunge over the next couple of years as rig counts dive and offshore E&P companies flee the market. While I think Tidewater has the financial wherewithal to make it through to the other side, I'm not as keen on this company as a way to play this trough and the eventual recovery. The shares do seem undervalued on the premise that this is a company that can return to profitability eventually, and companies like this can see earnings rebound sharply from the bottom, but this is most likely a multiyear recovery story.

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Tidewater Hoping To Weather The Downturn

Seeking Alpha: Gulfmark Swamped By Pessimism

Quite a bit has changed for Gulfmark Offshore (NYSE:GLF) in the year since I last wrote about the shares. Not only did the hoped-for increase in drilling activity in the Gulf of Mexico not materialize, but the sharp decline in oil prices has reduced activity across all of Gulfmark's operating regions. Making matters worse, more boats have come into service and operators have accepted big declines in dayrates (particularly in the spot market) to keep their boats working.

There are a lot of ways to frame the damage done to Gulfmark shares. The stock price is down two-thirds from a year ago and the average sell-side price target has fallen by about 70%. Just in the past few months, sell-side analysts have cut their EBTIDA estimates for 2015 and 2016 by as much as 75% in many cases.

With shares trading at less than half their tangible book value, it's tempting to ask whether the Street has gone overboard. Gulfmark does have a modern fleet that can serve major drillers like Chevron (NYSE:CVX) and offshore drilling will eventually recover. The problem is that situations like this can get a lot worse before they get better. Gulfmark may manage to go through the bottom of the cycle without posting negative free cash flow, but it will likely be a close call and it could take a while for dayrates to recover. That said, if you want to play an aggressive contrarian view that pessimism on offshore energy activity has gone too far, this would be a name to consider.

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Gulfmark Swamped By Pessimism

Seeking Alpha: After A Rough Patch, Tidewater Looks A Lot More Interesting

Back in October Tidewater (TDW) was one of the relatively few energy service companies that looked overvalued to me. While I liked the company's strong position in offshore and deepwater supply vessels, I just didn't think that paying such a high multiple was reasonable given risks in the North Sea and Angola, not to mention potential delays in floater and jackup deliveries.

As it turns out, the shares declined more than 20% since that piece, with the stock taking a big hit on disappointing third quarter results. I don't see the results as a sign of any particular operating deficiency, though, and I believe the reset in valuation and expectations makes this a much more interesting name to consider today.

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After A Rough Patch, Tidewater Looks A Lot More Interesting

Seeking Alpha: Is There A Gulf In Gulfmark's Valuation?

Activity in the North Sea and Gulf of Mexico is heating up, and that's a good thing for Gulfmark Offshore (GLF) as it gets about 85% of its revenue from those regions. Gulfmark may not be the biggest fish in the marine vessel sea, but it has a solid position in the high-spec market for vessels in the North Sea and Gulf of Mexico, where utilization and dayrates have been picking up and where expectations call for several years of double-digit growth in rigs.

Gulfmark has outpaced Tidewater (TDW) in the stock market over the last year, but may yet still offer more upside with its newbuild and upgrade programs. I'm giving Gulfmark some premium to its historical multiple, as I believe those newbuilds are going to add value and Southeast Asian operations have bottomed, and doing so suggests double-digit undervaluation for the year to come.

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Is There A Gulf In Gulfmark's Valuation?

Seeking Alpha: Tidewater Already Riding High On Offshore Expectations

Having written about a few energy services companies over the past week or two that appear to be undervalued, it was a little startling to run the numbers on Tidewater (TDW) and find a services company that actually may be overpriced. Tidewater has a lot of positive things going for it, including a recently remodernized fleet, operating exposure to almost every major offshore market, and extensive expected rig deployments in the coming years. Even so, investors have to be prepared to use a higher-than-average multiple (or a higher expected level of EBITDA) to generate a target price that makes these shares look cheap today.

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Tidewater Already Riding High On Offshore Expectations