Expecting Continued Low Oil Prices, Argus Maintains Hold Rating On Tidewater

Argus’ David Coleman expects the low oil prices to persist, along with continued weak demand in the offshore drilling market.

Coleman maintains a Hold rating on Tidewater Inc. TDW.

Tough Times Ahead

“We expect further downward pressure on vessel day rates and margins in the near term, as commodity prices are unlikely to rebound to levels that would lead to increased customer capital spending,” the analyst mentioned.

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In addition, Coleman believes the poor timing of the new build cycle has led to the industry having significant supply of vessels seeking work during a time when there is reduced activity.

According to the Argus report, “The company may also face challenges repaying debt scheduled to mature in fiscal 2017, and may lack the resources to purchase additional assets during the current downturn.”

On a more positive note, Coleman pointed out that Tidewater’s fleet was “one of the youngest in the industry and should benefit from relatively high utilization and day rates as older vessels are retired.”