This paper presents a novel technique for obstacle avoidance and target location using autonomous underwater vehicles. The proposed method uses the concept of bidirectional artificial potential fields in order to cooperatively avoid obstacles whilst travelling to a desired location. A fluid-like formation is presented whereby the vehicles are assigned a separation distance, which they adhere to when not in the process of obstacle avoidance. This distance is free of angular constraints, which allows a more flexible formation than traditional approaches. Although cooperative in nature, the proposed strategy allows all the vehicles to be independently guided by the overall potential field. This technique is useful even when other vehicles fail. Both clockwise and anticlockwise fields are simultaneously created around obstacles, and used by the vehicles to ensure cooperative avoidance around the obstacles. The proposed technique could be used for a number of applications such as mapping/exploration/surface inspection to name a few. Simulation results have been conducted for various scenarios and show the method to be effective.