SMHI - Tidewater: A Potential Compounder Within A Fragmented And Overlooked Industry
2024-02-20 07:39:54 ET
Summary
- Tidewater is in a unique position to capture the up-cycle of the offshore oil services market, driven by low net leverage, large fleet size, and a greatly improved cost structure.
- The company is pursuing strategic acquisitions of levered operators at prices below current newbuilds, which will ultimately give it scale in a highly fragmented industry.
- Rising newbuild costs and shipyard constraints are paving the way for limited new supply at a time when offshore drilling demand is increasing after a decade of underinvestment.
Editor's note: Seeking Alpha is proud to welcome Anthony Stella as a new contributor. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to SA Premium. Click here to find out more »
My Background
I am relatively new to the investing realm and graduated from Rutgers University in 2020 with a degree in Finance and IT. It was during my Junior year of college that I realized investing was my passion or, in other words, when I became conscious of the fact that I was reading Seeking Alpha articles and annual reports rather than going to class. Since then, I have gradually oriented my approach to finding businesses that are fundamentally undervalued, trying my best to see the world through the eyes of the proverbial "value investor." This focus fortunately caused me to stumble upon the commodities space back in 2019. More recently, I sought to explore other opportunities within the energy sector that may thrive even in the face of a wide array of geopolitical outcomes, an environment of higher interest rates, and sticky inflation. This turned my attention to looking for large structural deficits that wouldn't be easy to fix and hunt for the most likely beneficiaries.
With the aid of others' research and my own personal efforts, I have identified several traits of Tidewater's business that makes it stand out as a strong long-term investment. My purpose of this article is to share some of the factors that I consider to be most material to evaluating Tidewater's present and future situation. In that regard, I want to help guide your thought process rather than try to convince you of any particular side of the story, although I believe it to be a compelling one.