DNB Markets has launched coverage of three offshore supply vessel companies, with analyst Aleksander Erstad recommending buying the shares of Sea1 Offshore, Solstad Offshore and Tidewater.
Tidewater, is the world’s largest OSV company, with a fleet of 213 vessels.
Erstad sees the New York-listed company benefiting from scale.
“Fleet acquisitions, a recovering offshore support vessel market and a strong contracting strategy have helped Tidewater take Ebitda from $35m in 2021 to [an estimated] $564m in 2024,” Erstad said in a note.
But the growth is set to slow in 2025.
“Maintaining the same pace of earnings growth in 2025 looks unlikely. Offshore E&P spending is currently muted, and the risk of idle time for offshore drilling rigs could have a knock-on effect on OSV demand,” Erstad added.
“Overall, we expect slower but still-positive Ebitda growth in 2025 due to below-market contracts gradually repricing to current market rates and a slight uptick in utilisation due to 2025 being less maintenance-intensive than 2024,” he said.
Erstad said it is an “attractive valuation” and has a target price of $70.
Sea1 Offshore offers “industry-leading dividends”.
“A refinancing was completed earlier this year, removing dividend restrictions.
“Solid contract economics and high cash conversion enable strong [free cash flow] generation, and the 18% annual run-rate dividend yield is among the sector’s highest,” Erstad said.
DNB initiates coverage with a buy and NOK 42 ($3.80) share target price.
“Around one-third of our 2025-2026 Ebitda is covered by two well-intervention vessels contracted to at least 2030.
“The remainder is levered to Sea1 Offshore’s AHTS fleet, where visibility is more limited, but the company has shown an ability to find longer-term work outside the volatile North Sea market,” Erstad added.
Solstad Offshore has “attractive assets at a discount”.
After refinancing this year, Solstad Offshore is structured as a holding company with direct control of eight vessels, and the remaining fleet is held through a 27% shareholding in unlisted Solstad Maritime.
“The valuation of Solstad Offshore is highly sensitive to the valuation of its holding in Solstad Maritime, as it accounts for about 70% of the current share price,” Erstad said.
According to Erstad, the implied value of Solstad Maritime (through AMSC) is below peers, although a discount on the minority stake is warranted.
A separate listing for Solstad Maritime is planned for the second quarter of 2025.
A revaluation of Solstad Offshore’s assets and the holding in Solstad Maritime gives upside potential.
Erstad set the target price at NOK 60 compared with the current share price of NOK 40.5.
