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Tidewater Looks Cheap At Current Levels, But The Stock Will Need Some Oil Price Upside

Mar. 05, 2020 7:15 AM ETTidewater Inc. (TDW) Stock12 Comments
Vladimir Zernov profile picture
Vladimir Zernov


  • Tidewater reports fourth-quarter results, showing positive operating cash flow.
  • The company plans more lower-spec vessel sales to boost its cash position and high-grade its fleet.
  • Tidewater looks cheap at current levels, but shorter-term stock price dynamics depend on OPEC and the coronavirus.

Tidewater (NYSE:TDW) has recently reported its fourth-quarter results, which are especially interesting to see amidst the current oil price crisis and the corresponding downside moves in many offshore names. The company reported revenues of $119 million and a net loss of $60 million. The main driver for the loss was an impairment of $32.5 million due to the decision to dispose of 46 lower-spec vessels in 2020. As per Tidewater’s annual report, it disposed of 38 vessels in 2018 and 40 vessels in 2019. The latest “wave” of vessel sales was booked as “assets held for sale” on the balance sheet and totals $39.2 million.

In the fourth quarter, the company has been able to achieve positive operating cash flow of $5.3 million. For the year, it reported negative operating cash flow of -$31.4 million. Utilization of active vessels increased to 81.4% in the fourth quarter from 80.4% in the third quarter, helping the company turn to positive cash flow.

Back in November 2019, Tidewater held a cash tender offer for its debt. As a result, its long-term debt position decreased from $419.9 million at the end of the third quarter to $279 million at the end of the fourth quarter. Not surprisingly, the company’s cash position also decreased from $359.3 million in the third quarter to $218.3 million in the fourth quarter.

Source: Tidewater annual report

In my opinion, Tidewater’s debt situation is not concerning. While the earnings numbers look bleak (a loss of -$142 million for the full year 2019, a slight improvement from a loss of -$172 million for the full year 2018), the cash flow situation is normal. Thanks to asset sales, Tidewater was able to offset capex in 2019 and even mitigate the negative operating cash flow. Now that the operating cash flow is heading in the right direction (and keeping in mind that $39.2 million of

This article was written by

Vladimir Zernov profile picture
I'm a trader who trades both short-term and long-term. I started my career as a day-trader for a trading firm, but then turned to longer time frames and went on my own to manage my portfolio. I use technical analysis as well as fundamental analysis in my research.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in TDW over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (12)

bazooooka profile picture
twas worth the wait?
11 Mar. 2020
Look for the "strongest" players to restart discussions around possible tie-ups. Tidewater-Bourbon seems to make the most sense, not sure why Bourbon's creditors didn't go for this proposal upon initial approach a couple months back.

From a Jones Act compliance standpoint, Tidewater-Hornbeck may make sense, once Hornbeck emerges from Chapter 11 (in or out of court), but I continue to view this as a less likely marriage.
Vladimir Zernov profile picture
Agree, TDW - Bourbon makes good sense.
12 Mar. 2020
As reflected in the current downward movement of the stock and 8.0% Senior Secured Notes recently trading below par, Tidewater needs to find a way to address the interest coverage ratio on the Notes which could become a problem as early as 2Q 2020. With the prospect of material cash burn, holders of the Notes may decide to pull the rug.

Based on disclosures and recent conference call, it sounds like the early termination remedies on most of the existing $440mm of 2020 backlog are nothing to brag home about. Investors and or bull traders can take some solace that reportedly 60-70% of Tidewater's current business activity is made up of basic production activity which provides some downsize protection but these jobs likely generate considerably less operating margin. All in all, expect Tidewater to explore various options beyond the obvious which will be an attempt to renegotiate this covenant.
It looks like their cash buffer should do fine given much of their revenue comes from ongoing servicing of existing rigs. My guess is they only have to make it another 6 months as they will be golden after that. Oil isn't staying below 40-50 beyond this fall IMO. Global decline rates are huge and CAPEX is going to plummet to levels as a percent of production the world has never seen. US onshore shale production depletion rates are incredibly high. There will be bankruptcies and CAPEX budgets that are axed to near zero even by the stronger companies. Wait until summer when virus dies down and demand at these prices begins to increase briskly while supply plummets. There will be lots of oil in storage but I can see a 8-10 mbpd supply drop over the coming 9 months...just throwing a wild guess out there but that figure wouldn't surprise me.
tidalrider099 profile picture
agree, I was in EGO and made a nice return, now heavy in MU, AMD, FCX and XOM, by the way, been following you for awhile and find you spot on, thanks
tidalrider099 profile picture
yea definitely obvious Vlad, still sitting on stocks and
Vladimir Zernov profile picture
During such market downside, the place to hide is gold stocks that will likely rise more when other fall, but even they experienced a major sell-off recently which I attribute to selling aimed at raising cash levels in preparation for further downside - in order to have some dry powder just in case.
tidalrider099 profile picture
Don't see it til oil sustains above $60. a barrel and maybe not even then.
Vladimir Zernov profile picture
Obviously, the stock needs at least stable oil to have any chance to raise its head above the water.
Not discounting sonatide receivable, net cash on balance is is almost $9 per share. If they can continue to be free cash flow positive, say $50mm a year, I would value at about $18 a share.
Charlie's Munger profile picture
so is it 5% cheap?
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