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GulfMark Is a Gusher


GulfMark Offshore (GMRK), a little-known oil-service outfit, is a gusher on Wall Street. While most energy stocks have slumped, GulfMark stock has spurted--from 23 a share in early October to 41.49 on Apr. 24.

Value investor Scott Black thinks GulfMark is an undervalued oil-patch rarity: It generates solid profits but still sports a price-earnings ratio of just 10.5, based on estimated 2002 earnings of $3.90 a share and 8.2 times 2003 estimated earnings of $5. Most of its larger oil-industry peers have p-e ratios of 18 to 20, and in 2001, GulfMark earned 64 cents a share. Black, president of Delphi Management, which manages $1.6 billion, owns 2% of GulfMark. The company operates 53 vessels, which transport drilling gear and personnel to offshore facilities. It also installs deepwater drilling platforms, operating mainly in the North Sea and in waters off Southeast Asia, West Africa, and Brazil. Tidewater, GulfMark's largest competitor, owns 570 ships.

GulfMark is also undervalued, says Black, based on its assets: He puts its breakup value at 66 a share. GulfMark could well attract a large bidder, says Black. But management, he thinks, may want to wait until its stock goes higher before considering a merger.

Magnus Fyhr of investment firm Jefferies, who rates GulfMark a buy, with a 12-month price target of 57, says increasing deepwater exploration activity, plus rising demand for larger, more advanced vessels, will be the key drivers to GulfMark's continued growth. "It is an attractive play on the growing offshore supply-vessel market," says Fyhr, who doesn't own GulfMark shares. By Gene G. Marcial


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