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Non-Tech : Hvide Marine HMAR - High Growth, Undervalued -- Ignore unavailable to you. Want to Upgrade?

To: Robert T. Quasius who wrote (115)	1/6/1998 3:53:00 PM
From: Grommit	Read Replies (3) \| Respond to of 547

Shareholder Letter. (I received my letter direclty from the company by request, while others will probably have to be processed by/through your stockbrokerage firm, and will be delayed. I ran it through my scanner for you.) ..................................... HVIDE MARINE INCORPORATED J. Erik Hvide December 22, 1997 TO OUR SHAREHOLDERS: We have all observed the recent decline in our share price in the last few weeks, along with the prices of other oil service stocks, and wondered about its causes. After 18 months of almost uninterrupted upward momentum, it is disconcerting to see such price erosion when, in fact, all of the fundamentals driving our industry are as strong as ever. Many of the oil service stocks are off 25-35% since the sector peaked on November 5, and investors are beginning to ask if we've touched bottom yet. I am not in the business of forecasting price movements, but I do know a thing or two about an industry which provides more than 80% of the Company's annual EBITDA. When we went public in August 1996, average day rates for our Gulf of Mexico supply boats stood at $5,683. Today those rates exceed $8,400. The supply/demand equation has not changed. Workboats remain in very tight supply. and newbuildings are targeted toward the fast-growing deepwater segment of the market. A similar situation prevails in the market for offshore drilling rigs, where there is virtually 100% utilization and, given the record-setting pace of recent lease sales, there is every reason for optimism about the future. It is important to understand that the energy industry has changed fundamentally since the last boom period, which ended abruptly in the early 1980s. There followed 15 years of underinvestment and attrition in energy-related infrastructure, which produced a shortage of every kind of oilfield equipment and personnel. Throughout 1997, demand for oilfield services has outstripped the supply, and the same appears to be true for 1998 as well. Technology has also played a substantial role, meaning that the level of exploration and development activity is no longer dependent on $20 oil or $2.00 gas. At the same time, worldwide energy demand continues to grow at a healthy 2-2 1/2% annually, and we continue to deplete reserves faster than we replace them. As we took ahead to 1998, we remain confident that the combined forces of El Nino, the "Asian flu," higher OPEC production ceilings, uncertainty in Iraq and elsewhere, and weekly rumors about this or that energy company cutting back on E & P spending will be dispelled by the continued strength of the market for oilfield equipment and supplies, both domestically and internationally. Shakeouts such as we have experienced in the last several weeks can be therapeutic in stripping away so-called "momentum" players and leaving behind long-term investors. In the meantime, we have decided to postpone our recently announced public equity offering until our share price recovers to more appropriate levels. It is also worth noting that completion of any of our announced deals does not require a new share offering at this time. We thank you for your staying power and look forward to a long and lasting relationship. sincerely /s/ J. Erik Hvide