Tidewater: Ready To Rise

Biding Its Time
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.

"[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.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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