Tidewater: a strong prospect for investment in oil and gas

Tidewater Inc. is a global leader in offshore service vessels providing support services to the offshore energy industry. The company was founded in 1956 and is headquartered in Houston, Texas. Tidewater has a fleet of over 200 vessels that operate in the offshore oil and gas industry across the world, including in the Gulf of Mexico, North Sea, West Africa, and Southeast Asia.

One factor that influences the demand for offshore services is the frequency of maintenance required for offshore rigs. When the demand for oil is lower, oil rigs can be serviced with less frequency. However, when oil demand is higher, rigs need to be frequently serviced so they can operate at maximum efficiency. As a result, Tidewater ships have higher demand when the oil market is higher.

In this article, we will delve into the importance of oil prices on Tidewater's business, the performance of the company over recent years, its financials, and the potential for growth in the future. We will also take a closer look at the offshore industry and the factors that influence demand for Tidewater's services. Ultimately, we will determine whether investing in Tidewater is a good choice for investors looking to capitalize on the potential for growth in the oil and gas industry.

Business Model

Tidewater's business model is centered around providing offshore support services to the oil and gas industry. The company operates a diverse fleet of vessels that includes platform supply vessels, anchor-handling tug supply vessels, and crew boats, among others. These vessels are used to transport personnel, equipment, and supplies to offshore oil and gas platforms.

Tidewater's services are in high demand when the oil and gas industry is thriving, and oil prices are high. As oil rigs need to be frequently serviced to operate at maximum efficiency, Tidewater's vessels play a critical role in ensuring that these platforms are running smoothly. Additionally, the company provides services such as drilling support, seismic support, and construction support to the offshore industry.

Tidewater's customers include major oil and gas companies, drilling contractors, and other offshore service providers. The company has a global presence, with operations in key offshore regions such as the Gulf of Mexico, North Sea, West Africa, and Southeast Asia. By maintaining a diverse fleet of vessels and a global footprint, Tidewater is well-positioned to serve the needs of its customers in different regions and in various market conditions.

To maintain its fleet of vessels, Tidewater has an in-house maintenance and repair program that is supported by a team of experienced technicians and engineers. This program ensures that the vessels are operating efficiently and safely, which is critical to the success of the company's operations.

In terms of revenue generation, Tidewater operates on a time-charter basis, where customers pay a daily rate for the use of its vessels. The company's rates are typically negotiated on a long-term basis, providing a level of stability to its revenue stream.

Overall, Tidewater's business model is centered around providing essential support services to the offshore oil and gas industry. The company's diverse fleet of vessels, global footprint, and in-house maintenance program position it well to serve the needs of its customers in different regions and in various market conditions.

Financial Performance

Tidewater's financial performance has been fluctuating in recent years due to the volatility of the oil market. In 2022, Tidewater reported a net sales turnover of $648 million, which is a significant increase from the previous year's net sales of $371 million. However, the cost of goods sold also increased from $264 million in 2021 to $399 million in 2022, resulting in a gross profit of $248 million, up from $107 million in 2021.

Tidewater's selling, general, and administrative expenses increased slightly from $67 million in 2021 to $84 million in 2022. As a result, the company's operating income before depreciation increased from $40 million in 2021 to $164 million in 2022. However, Tidewater incurred higher depreciation and amortization expenses in 2022, amounting to $119 million compared to $115 million in 2021.

After accounting for depreciation, Tidewater's operating income decreased from a loss of $75 million in 2021 to a profit of $45 million in 2022. However, the company incurred higher interest and related expenses of $17 million in 2022, up from $16 million in 2021.

Tidewater also recorded non-operating income of $13 million in 2022, compared to a loss of $21 million in 2021. However, the company recorded a special items income of $16 million in 2022, compared to a special items income of $13 million in 2021.

After adjusting for special items and extraordinary items, Tidewater's net loss decreased from $129 million in 2021 to $22 million in 2022. This translates to a basic earnings per share of $(0.49) in 2022, compared to $(3.14) in 2021.

It is worth noting that Tidewater's financial performance is heavily dependent on the demand for oil and gas exploration and production services. When oil demand is higher, Tidewater's ships have higher demand, resulting in higher revenue. However, when demand for oil is lower, Tidewater's revenue and profits tend to decline. Overall, Tidewater's financial performance is likely to remain volatile due to the unpredictable nature of the oil market.

Future Prospects

The oil and gas industry has been under scrutiny in recent years due to its impact on the environment and the movement towards clean energy. As the world transitions towards renewable energy sources, it is expected that demand for oil will decrease over time. This shift towards clean energy has led to many analysts predicting the end of the oil and gas industry.

However, it is important to note that this transition will not happen overnight, and until it does, companies like Tidewater will continue to operate and generate cash flow. As mentioned earlier, Tidewater has been able to maintain profitability even during periods of low demand for oil due to its cost-cutting measures and efficient operations. Furthermore, Tidewater has diversified its operations by offering services in offshore wind energy, which could be a promising growth opportunity as the world moves towards renewable energy.

While it is true that the oil and gas industry is facing headwinds due to the shift towards clean energy, it is important to remember that this transition will not happen overnight. As such, Tidewater still has a significant runway for growth and profitability. Additionally, as companies within the industry face increased scrutiny from investors and the public over their environmental impact, Tidewater's focus on efficiency and sustainability could provide a competitive advantage in the future.

Oil Prices and Tidewater's Business

Tidewater is a company that provides offshore marine support and transportation services to the global energy industry. The company's business is closely tied to the price of oil, as the demand for its services is largely dependent on the level of exploration and production activity in the oil and gas industry. In this section, we will discuss the relationship between oil prices and Tidewater's business, and explore how fluctuations in oil prices can impact the company's financial performance.

When oil prices are high, exploration and production activity typically increases as companies look to capitalize on the higher prices. This increased activity can result in greater demand for Tidewater's services, as more offshore rigs are put into operation and require transportation and support services. Conversely, when oil prices are low, exploration and production activity tends to slow down, which can lead to a decrease in demand for Tidewater's services.

However, it is worth noting that the relationship between oil prices and Tidewater's business is not always straightforward. For example, while low oil prices can lead to a decrease in demand for the company's services, it can also result in cost-saving measures by exploration and production companies, which can translate into higher demand for Tidewater's services in the form of longer-term contracts. Additionally, high oil prices can also lead to increased competition as more companies enter the market, which can result in lower demand for Tidewater's services.

Looking ahead, the oil and gas industry is facing increased pressure from global efforts to transition towards cleaner forms of energy. While this movement may ultimately result in a decrease in demand for Tidewater's services, the shift towards clean energy is expected to occur gradually over time, allowing the company to continue generating significant cash flows in the short to medium term. Furthermore, Tidewater has already taken steps to diversify its business beyond the oil and gas industry, with a focus on other offshore industries such as renewable energy, which could provide additional opportunities for growth in the future.

Overall, the relationship between oil prices and Tidewater's business is complex, and the company's financial performance is influenced by a range of factors beyond just the level of oil prices. While the shift towards clean energy may ultimately lead to a decrease in demand for the company's services, Tidewater is well-positioned to weather these changes and continue generating strong cash flows in the near term.

Conclusion

In conclusion, Tidewater is a company that has experienced a tumultuous few years but is now showing signs of recovery. Its strong position in the oil and gas industry, as well as its focus on efficiency and cost-cutting, bodes well for the company's future prospects. Tidewater's ability to service oil rigs with higher frequency during times of high demand for oil gives it a competitive advantage and positions it for growth when the market recovers.

However, the shift towards clean energy means that companies like Tidewater will eventually need to adapt and pivot their business models. It is important to keep an eye on how Tidewater will respond to this shift in the industry and whether it will be able to successfully diversify its services to stay relevant. Nonetheless, until that happens, Tidewater is likely to remain a cash-flush company that will continue to generate profits for investors.

Overall, Tidewater represents an interesting investment opportunity for those looking to gain exposure to the oil and gas industry. As with any investment, there are risks involved, but Tidewater's solid financials, strategic focus, and unique position in the market make it a company worth considering for those willing to take on some risk.