Page 27: of Maritime Reporter Magazine (March 1998)

GULF COAST UPDATE

Catch That Shooting Star by Greg Trauthwein, editorial director

While predictions of the offshore boom's sooner-than-expected demise are still a bit premature, there have been several signs recently that indicate caution and diversification could be the keys to help builders and suppliers weath- er any potential shock.

At best, the market's signals have been mixed. While there is mounting evidence that the contin- uing Asian financial crisis and a warmer-than-normal winter have and will continue to cut oil demand, oil and offshore service companies alike have routinely touted record revenue and earn- ings numbers, and continue to pro- ject strong rig usage rates.

A Numbers Game

In releasing its most recent report, the International Energy

Agency (IEA) did little to instill confidence in a sustained market boom. Essentially, the IEA noted that oil stocks are going up, while supply is not surging as far ahead as planned. Specifically, stocks held in industrialized nations fin- ished the end of last year at the highest level in two decades, bar- ring 1994.

OECD industry stocks during the fourth quarter rose 160,000 bpd to 2,523 million barrels or 112 million barrels more than at end-1996.

IEA also maintained that the world markets will be oversupplied in the near-term, even after the agency cut oil supply forecasts by nearly one-third. IEA's report said non-OPEC supply would probably exceed demand for at least the first half of 1998, putting additional pressure on crude prices, which have already lost about 30 percent since last November. Through all the smoke, world oil demand is still projected to rise 2.3 percent this year to 75.34 million bpd, a slower growth rate than 1997's 2.7 percent.

There's Hope Yet

Despite the doom forecast by falling per barrel prices, offshore service companies have yet to pull the plug on a tremendous run, a boom market which has seen many companies double revenues from the previous year.

A good example is Transocean

Offshore Inc., which reportedly expects to see continued upward pressure on drilling rig rates as a result of increased spending for off- shore oil and gas exploration and production. According to

Transocean officials, rates for the company's 19 semi-submersible rigs and drillships rose 31 percent to an average $106,000/day, and contracts are getting longer, as oil companies seek to secure drilling rigs — rigs which have been noto- riously scarce of late.

Another major player, Friede

Goldman, expanded its horizons and business base with the pur- chase of France Marine S.A., as well as its subsidiaries

Brissonneau & Lotz Marine, BLM

Offshore, BOPP and Kerdranvat, which are designers and manufac- turers of marine and offshore equipment. The acquisition will allow Friede Goldman companies to offer services in all phases of off- shore rig construction — from design and engineering to manu- facturing and equipment sales. "This move carefully positions us for profitable growth in the world- wide offshore oil and gas markets," said J.L. Holloway, chairman and

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March, 1998 25