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Did Tidewater’s Waiver Extension Revive the Market’s Outlook?

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Did Tidewater’s Waiver Extension Revive the Market’s Outlook? PART 1 OF 3

Tidewater Dodges the Bullet Again, Receives Extension

Tidewater receives an extension

On January 26, Tidewater (TDW) received limited waivers regarding covenants on borrowing from its principal lenders until March 3, 2017. The company was in discussions with lenders and noteholders to obtain relief from certain covenants on its debt. In November 2016, the company received an extension on the debt covenant until January 27, 2017. Read Is Tidewater in Danger of a Default? to learn more.

Tidewater Dodges the Bullet Again, Receives Extension

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Tidewater versus the industry and crude oil prices

Tidewater’s stock price, which was up 6% in the past two months until January 26, rose 3% on January 27 following news of the credit extension. In the past two months, the VanEck Vectors Oil Services ETF (OIH) rose ~12%. OIH is an ETF tracking an index of 25 oilfield equipment and services stocks. The SPDR S&P 500 ETF (SPY) rose ~4% in the past two months. Crude oil prices rose ~17% in the past two months.

What’s the path ahead?

Tidewater provides offshore service vessels to offshore energy producers. It depends on offshore drilling and energy production. The offshore rig count is a leading indicator of Tidewater’s business prospects. After staying persistently weak for the past two years, the offshore rig count started to recover. In the past two months, the US offshore rig count rose 20% until January 27. The increased offshore rig count and drilling activity can improve Tidewater’s debt servicing ability going forward. A higher offshore rig count can also improve the 4Q16 earnings for Tidewater’s peers TechnipFMC (FTI) and Weatherford International (WFT).

Next, we’ll discuss Tidewater’s fiscal 3Q17 earnings estimates.

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