Tidewater Inc.

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Tidewater Inc.

1440 Canal Street
New Orleans, Louisiana 70112
U.S.A.
(504) 568-1010
Fax: (504) 566-4582

Public Company
Incorporated: 1956 as Tidewater Marine Service, Inc.
Employees: 6,864
Sales: $475.5 million
Stock Exchanges: New York
SICs: 4492 Towing and Tugboat Services; 3563 Air and Gas
Compressors

Tidewater Inc. has grown from one small boat operating in the Gulf of Mexico to a fleet of nearly 500 boats ranging from the waters of the Caspian Sea to the Gulf of Tonkin off the Vietnam coast. With offices located in New Orleans, Louisiana, the company’s marine division runs the world’s largest fleet of vessels serving the international offshore gas and oil industry. In addition to its offshore marine support and transportation services, Tidewater’s compression division ranks as one of the largest suppliers of natural gas and air compression equipment and services for numerous industries in the United States and South America.

Tidewater’s development parallels the discovery of oil in the Gulf of Mexico and the development of the offshore oil industry. The first offshore oilfield in the Gulf of Mexico was found in 1938, a little more than one mile from Cameron Parish, Louisiana. By the mid 1940s, petroleum geologists were estimating that there was between 10 and 12 billion barrels of oil waiting to be recovered in the Gulf. After fixed platforms were built and large-scale drilling operations started in 1946, a new industry developed around what was termed an “oil rig.”

Oil rigs were manned 24 hours a day, with living and eating facilities, a galley, and even recreation areas. Although they seemed self-sufficient, the rigs were entirely dependent on the supply boats that brought food, water, and drilling equipment, and transported crews back and forth from the mainland. The first vessels to serve the oil rigs were old Navy boats and reconfigured shrimp boats. It soon became clear, however, that a special type of boat designed specifically for supplying offshore oil rigs was needed.

Alden J. “Doc” Laborde, a retired Navy officer who was chairman and president of Ocean Drilling and Exploration Company (ODECO), one of the first firms to drill for oil in the Gulf, was convinced that the offshore oil industry needed a specialty supply boat with a revolutionary design. His own design put the boat’s pilot house forward, and the crew’s quarters and wheelhouse forward in the bow. The boat’s deck was entirely flat in order to easily lay various piping and supplies, yet still had a clear afterdeck for any towing that was required. Laborde organized a meeting with nine other men—including his older brother, C.E. Laborde, Jr., a marine operator, an owner of a towing business, an engineer, an accountant, and a few of his closest personal friends—and sought their support in forming a marine supply service for offshore oil rigs. Contributing $10,000 each toward the construction of the first boat, the men incorporated the Tidewater Marine Service Corporation in Louisiana on July 8, 1954.

Tidewater’s first boat, the steel-hulled Ebb Tide, was built and launched in 1955. A request from ODECO to lease the boat resulted in Alden Laborde’s decision to withdraw from involvement in Tidewater to avoid an apparent conflict of interest. Authority for all company decisions was left up to C.E. Laborde, Jr., Ed Kyle, and Don Durant. When the Shell Oil Company heard about the new boat and contacted Tidewater to charter a similar vessel, Laborde, Jr. decided to form a second corporation for the purpose of constructing and operating another supply boat. A third corporation was also formed when Phillips Petroleum wanted to charter a boat. As the demand for its vessels grew, the initial investors in Tidewater began to discuss an expansion program and the possibility of additional financing. Arrangements were made through Rheinholdt & Gardner, an investment firm with close ties to the offshore oil industry, and Whitney National Bank of New Orleans to provide the necessary funding, including loans and an initial public stock offering. On February 7, 1956, a parent organization, Tidewater Marine Service, Inc., was incorporated under the state laws of Delaware.

Throughout its initial period of development, Tidewater’s management was informal. There was no main office, records were kept haphazardly, business commitments were made by any one of the original ten investors without regard to formal contracts or agreements, and the company’s only employee worked out of his own house. Realizing that Tidewater’s rapid expansion necessitated a professional management team, Laborde, Jr. consulted with the other investors and agreed to ask his younger brother, John, to accept the position of president. The younger Laborde, a graduate of Louisiana State Law School who had served as an adjutant on the staff of General Douglas MacArthur during World War II, accepted the offer. Although he knew absolutely nothing about boats, John Laborde was very familiar with the oil industry and its operations in the Gulf of Mexico.

Laborde went to work immediately: he rented office space, hired secretarial and bookkeeping help, sorted out the little documentation there was on the company, and met with the original investors and convinced them it was his responsibility alone to make agreements and arrange contracts for Tidewater. Not long after he started, Laborde was notified by the U.S. Coast Guard that one of Tidewater’s vessels was in violation of marine regulations. The fine amounted to nearly $168,000. Knowing that Tidewater faced bankruptcy if the full amount of the fine were to be paid, Laborde explained the circumstances of the violation, which was due to a lack of knowledge on the part of the crew, and negotiated a settlement of $2,000 with the Coast Guard. This exchange with the Coast Guard led Laborde to educate himself on all aspects of marine laws and regulations so that he could formulate operating procedures for Tidewater.

During its first fiscal year, Tidewater recorded a loss of $10,027. Yet Laborde remained optimistic, largely because of a gross revenue amounting to over $400,000. The company’s fleet expanded to eleven vessels. Near the end of 1957, Tidewater became the first offshore marine transportation business located in the Gulf of Mexico to make a foray into foreign waters. Laborde reached an agreement with a small boat company, Semarca, to transport supplies for an over-water oil and gas firm operating on Lake Maracaibo in Venezuela. By the end of the second fiscal year Laborde’s optimism was rewarded: Tidewater doubled its gross revenues to $851,156, while net earnings jumped to over $97,000.

Tidewater grew rapidly during its first decade of operation. In 1961, just five years after the company’s first boat was launched, Tidewater had already made a major acquisition by purchasing the Offshore Transportation Corporation. By taking over OTC’s fleet, Tidewater increased the number of its revenue-producing vessels to 56. The Venezuelan venture was contributing nearly 40 percent of the company’s total earnings. Individual stockholders in the company had grown from under 50 to over 800. Most importantly, the company reported gross revenues of $4,887,208 for 1961, but net revenues of $584,444, an increase of 59 percent over the previous year.

In 1962, Tidewater suffered a small decrease in revenues from the previous year, but the Venezuelan venture continued to be very profitable and the company expanded its operations to include the coastal waters off California and Trinidad. One year later, Tidewater continued the development of its American West Coast operation by initiating business in Alaska and by locating a base at Santa Barbara, California. In 1964, the company’s fleet of vessels was working regularly in the Red Sea, the Gulf of Suez, the North Sea, Lake Maracaibo in Venezuela, the Gulf of Mexico, off the coastal waters of Trinidad, and along the entire U.S. Pacific coast. Having purchased T. J. Falgout, a Galveston, Texas-based competitor in the Gulf of Mexico, Tidewater’s fleet amounted to 104 vessels. That same year, Tidewater passed one of its most important milestones; it increased profits to over $1,000,000. Gross revenues were reported at $7,625,698, a leap of almost 50 percent over the previous year.

By the end of its first decade, company operations had expanded to the Persian/Arabian Gulf, and plans were being implemented to provide marine services to Nigeria, Iran, Canada, and Australia. More boats were added to the Tidewater fleet, some newly constructed and some purchased used, which brought the total to 180 vessels. And, not surprisingly, revenues and profits continued their upward spiral. In 1966, Tidewater revenues soared to $19,733,881, an increase of 90 percent over the previous year. Profits jumped 30 percent over the previous year, and were now close to $3,000,000.

In order to capitalize on its success, during the following years Tidewater’s strategy was to concentrate on diversifying and expanding its operations. In 1968, Tidewater merged with Twenty Grand Marine Services, Inc., its closest competitor in the Gulf of Mexico. This acquisition brought in Twenty Grand’s tugboats and other vessels, and Tidewater’s fleet increased to a total of 358. Tidewater also purchased Sandair Corporation, a leader in the air and gas compressor market; entering the air and gas compressor business was regarded by Tidewater management as a logical extension of its specialized services for the offshore oil industry. Foreign partnerships were established in the Netherlands and Iran. In 1969, the company acquired Hamer Hammer Service, Inc., a firm that supplied both equipment and personnel for the on-shore and offshore driving of oil well casings, and South Coast Gas Compression Company, Inc., a provider of natural gas compression equipment and services for the offshore oil industry.

The decade of the 1970s was just as successful for Tidewater as the company’s early years. In 1970, Tidewater reported revenues of over $50 million, and over $5 million in profits. In May of the same year, Tidewater joined the select list of 1,300 companies listed on the New York Stock Exchange. In 1971, Tidewater acquired interests in offshore oil production in Indonesia, Java, and Sumatra. At the same time, the company created Pental Insurance Company, Ltd., a Bermuda-based firm insuring all of Tidewater’s vessels. The company was soon providing services in the Adriatic Sea, and its large supply and towing-supply vessels were commanding higher and higher rates wherever they operated. Hillard Oil and Gas Company, Inc., an American oil and gas exploration firm, was purchased in 1977, the same year the board of director’s decided to change the name of the Tidewater Marine Services to Tidewater, Inc. Tidewater, Inc., reorganized to function as a parent organization for its many subsidiaries, formed six divisions, including: Marine Services, Compression Services, Oil & Gas, Insurance, Real Estate, and Contractor Services. By 1979, total revenues shot past the $200 million mark, and profits exceeded $30 million.

Revenues and profits continued their meteoric rise during the early 1980s. However, when the oil and gas industry was sent into an historic decline by plummeting oil prices, Tidewater’s fortunes went spinning downward. The company’s position was exacerbated by an inundated supply boat market, and a sudden decrease in day rates for its vessels. The most significant threat to Tidewater, however, came from hostile takeover attempts. In 1984, Irwin L. Jacobs, a corporate raider, purchased enough Tidewater stock to attempt to take control of the company. When Jacobs’s first offer was rejected by Tidewater’s board of directors, he engaged in a complicated series of corporate and legal maneuverings over the next five years to wrest control of the company from the directors. Frustrated by his inability to acquire Tidewater by legal means, in 1989 Jacobs made another offer to purchase Tidewater at $11 per share. With John Laborde still providing sound leadership, Tidewater’s board of directors sidestepped Jacobs by agreeing to facilitate the sale of Jacobs’s stock and arranging a registered secondary stock offering. As a result, Jacobs withdrew his offer to acquire Tidewater and disposed of his shares with a handsome profit.

The takeover attempts and the continuing slump in the oil and gas industry had deleterious effects on Tidewater. In 1985, the company reported it first loss since 1957, and by 1987 losses amounted to a record $56 million. With losses continuing to mount, John Laborde proved his leadership with a calm, confident demeanor and astute decision-making skills. Although Tidewater was losing money, Laborde’s earlier decision to enter the natural gas compression business seemed prescient. During the worst years of the oil and gas industry recession, Tidewater’s compression business provided a steady flow of revenue that kept the company afloat. Laborde also decided to sell all of the company’s Indonesian oil interests. In 1987, Laborde restructured debt payments with Tidewater’s primary lenders, and by 1990 had pared downed over $60 million of the company’s senior debt. During the same year, Laborde convinced Tidewater’s board of director’s to make a public offering of over five million shares of common stock. With revenues starting to increase, Laborde thought it best to continue expanding Tidewater’s international operations by placing 41 pieces of towing equipment in and around West Africa.

Perhaps the most important of Laborde’s decisions involved the acquisition of Zapata Gulf Marine Corporation in 1992. Tidewater’s biggest rival, Zapata was an amalgamation of the company’s four most important competitors. By consolidating Zapata’s vessels with its own, Tidewater doubled its marine fleet. For Laborde, the timing of this acquisition could not have been better; after one of the worst freezes of the century in the Gulf of Mexico, a spring thaw led to a doubling of day rates for workboats. With the largest fleet in the Gulf, Tidewater took advantage of this opportunity to put all of its newly acquired vessels from Zapata into service.

By the end of fiscal year 1994, Tidewater had completely recovered from the recession of the offshore oil industry, increased its fleet to 594 vessels, and expanded its overseas ventures. Over 70 percent of Tidewater’s fleet operated in foreign waters. With nearly 85 percent of its revenues from marine operations and the remainder from compression operations, Tidewater reported total revenues amounting to $522 million. A good cash-flow and increasing offshore marine contracts from around the world enabled the company to eliminate its entire debt. In light of the revitalization of the company, John Laborde decided to retire in October of 1994 after serving 38 years as president of Tidewater. His replacement, William C. O’Malley, the former chief executive officer of Sonat Offshore Drilling Inc., can only hope to match Laborde’s legacy of astute management and financial success.