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What Are Tidewater’s Growth Drivers?

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Jan. 19 2017, Published 11:25 a.m. ET

Tidewater’s fundamentals

From April 1 to September 30 of fiscal 2017, Tidewater’s (TDW) revenues fell 46% compared to the same period in fiscal 2016. From fiscal 2015 to fiscal 2016, Tidewater’s revenues fell 35%.

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Tidewater’s revenues fell

The main reason why Tidewater’s revenues fell was a significant decline in the fleet utilization rate. In fiscal 2Q17, the largest fall in Tidewater’s fleet utilization was in its Asia-Pacific fleet compared to a year ago (68% versus 28%). Tidewater’s Middle East fleet was the most resilient (73% versus 64%) during the same period. During fiscal 2Q17, Tidewater’s average active vessel count fell by 17 compared to fiscal 1Q17.

In fiscal 2Q17, Tidewater’s revenue share from the Middle East and North Africa increased, while its revenue share from Sub-Saharan Africa and Europe fell compared to fiscal 1Q17.

Growth drivers

A weaker offshore energy market, following the crude oil price crash since mid-2014, prompted lower utilization and falling income for the offshore vessel industry. Day-based utilization rates measure the percentage of existing ships used in day-to-day operations. Utilization depends on the growth in the number of working deepwater rigs.

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Net income

Tidewater’s net loss also fell to $267.5 million in the first six months of fiscal 2017 compared to an ~$59 million net loss in the first six months of fiscal 2016. The net income deteriorated primarily as a result of $129.6 million in asset impairment charges in fiscal 2Q17. Tidewater accounts for 0.03% of the iShares Micro-Cap ETF (IWC).

Net income for Tidewater’s peers

In 3Q16, Oceaneering International’s (OII) net loss was ~$12 million, while Oil States International’s (OIS) net loss was ~$11 million. Schlumberger (SLB), the largest oilfield equipment and services company by market capitalization, recorded $190 million in net income in 3Q16.

Next, we’ll discuss how Tidewater’s operating margin was impacted by upstream companies’ capex.

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