With oil prices surging, investors are seeking vessels that the rising tide might lift. To some pros, Tidewater (TDW ), operator of the world's largest fleet of offshore oil-service ships, is attractive at 27.24 -- down from 35 in early March. That drop was due to a slowdown in Gulf of Mexico drilling. But Roderick McKenzie of investment firm Sterne, Agee & Leach sees a pickup in the gulf and says that international operations will give Tidewater's earnings their strongest push. Advertisement
"[Drilling] has picked up in Southeast Asia and West Africa -- and the Middle East outlook is good, as the majors start new projects," he says. Top prices spur a boost in exploration, he notes, which expands Tidewater's business. He recently upgraded his rating to a buy, figuring Tidewater is worth 35, based on 19 times his 2005 earnings forecast of $1.35 a share, and 13 times his 2006 estimate of $1.95. In 2004, McKenzie expects $1.04, reflecting the Gulf problem, vs. 2003's $1.57. Scott Kuensell of Brandywine Asset Management, which owns shares, says Tidewater, with its 570 vessels, is positioned to profit from a surge in activity anywhere in the world. Although the Gulf of Mexico has been a challenge, he, too, expects drilling there to revive soon. And with the stock trading below its net asset value of $28 a share, Tidewater is cheap, figures Kuensell.