Argus Cuts Tidewater To Hold, Cites Deteriorating Outlook

Argus Research issued a company update on Tidewater Inc. TDW amid weak demand in the offshore drilling market and a decline the company's operating margins. Argus downgraded Tidewater from Buy to Hold and estimates that in Tidewater will lose $0.69 per share in 2016.

The continued decline of oil prices has weighed on Tidewater's business operations. Regarding the weakening offshore segment, Argus wrote, "Offshore development and exploration...has been the most negatively affected by the industry downturn...We expect fundamentals in the offshore vessel support industry to remain weak...as commodity prices are unlikely to rebound to levels that would lead to increased customer spending."

In response to the decline in oil prices, Tidewater has had to both increase layoffs and scale back its vessel newbuild program. However, analysts at Argus see three strengths in Tidewater that may help the company become a strong industry player if and when commodity prices rebound:

• 1. Tidewater's strong balance sheet, which will help the company purchase assets from financially weaker competitors.
• 2. One of the youngest fleets of vessels in the industry, which may allow the company to command higher utilization and day rates than competitors.
• 3. Tidewater is trading at a discount to its peer group of oil field services companies.

Going forward, while Argus sees the company struggling with challenges in the near term, Tidewater looks positioned to capitalize on its strengths if and when commodity prices improve.

Shares of Tidewater closed Monday at $6.54.