2024-05-30 15:01:53 ET
Summary
- Demand for OSVs will likely remain robust thanks to healthy oil prices, peaking US shale production, and lower offshore breakeven levels.
- Limited yard capacity, high newbuilding and secondhand prices, as well as aging global fleet will result in high day rates and utilization rates.
- The market is too conservative in anticipating TDW's future growth. We expect TDW to generate $1.85 billion in revenue (13% above consensus) and $1 billion in adjusted EBITDA by 2025.
- Our fair value estimate for TDW ranges from $125 to $163 per share (7-9x EV/EBITDA), implying a 22%-59% upside potential.
- Investment risks include the proliferation of EVs that could curb oil demand and cold-stack vessels that could be re-activated.
Investment Thesis
Demand for OSVs will remain robust as a result of healthy oil prices, peaking US shale production, and lower offshore breakeven levels. On the supply side, limited yard capacity, high newbuilding and secondhand prices, and ageing global fleet will retain day rates and utilization rates high. Lastly, we believe that the market is too conservative in anticipating TDW's future revenue. Our estimated fair value is between $125 and $163 per share (22% to 59% upside potential), assuming a $1 billion adjusted EBITDA by 2025 (61% 2-year CAGR from 2023). Initiate with a BUY rating.
Introduction
Founded in 1956, Tidewater, Inc. ( TDW ) is the leading offshore vessel ("OSV") owner globally with 217 active vessels, including 141 platform supply vessels ("PSV") and 54 anchor handling tug supply vessels ("AHTS"). OSVs are typically used for towing mobile offshore drilling unit ("MODU"), handling rig anchor, supporting offshore exploration & production ("E&P") activities, as well as seismic and survey supports. Customers include national oil companies ("NOCs"), such as Saudi Aramco, and international oil companies ("IOCs")....
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For further details see:
Tidewater: Robust Demand, Supply Constraints, And Conservative Consensus Estimates