Page 15: of Offshore Engineer Magazine (Jul/Aug 2023)

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MARKETS OFFSHORE SUPPORT VESSELS hile long seen as a derelict industry by inves- The market deterioration from 2015 onwards has led tors, improving market conditions and a num- to historically low orderbook, while long-term layups and ber of corporate activities have recaptured in- scrapping of vessels have combined resulted in a fnite and W vestors’ attention for the OSV space again. shrinking total feet.

Standard Supply, a Standard ETC spin-off, listed on

Most Old Units Not Coming Back

Euronext Growth Oslo in June 2022 as a pure platform supply vessel (PSV) player and has been opportunistically Although reactivations have provided some relief to the active in the S&P market since. tight market, the majority of the cold-stacked units has

Among historical names, DOF ASA underwent bank- been out of the market for close to ten years and/or are ruptcy in November 2022 after long and troubled negotia- more than 20 years old, meaning it is unlikely for those tions with its creditors, and DOF Group was listed in June units to return back to work, in our view.

2023 as the new holding company. The IPO was largely Meanwhile, newbuilds are at the moment capped by oversubscribed and successfully closed after DOF rejected limited fnancing, rising building costs, longer lead time at an offer from Subsea7. yards, and uncertainty over the prevailing fuel technology.

Tidewater further strengthened its position as the OSV The continued uptick in dayrates and replacement costs giant through the acquisition of 50 vessels from Swire Pa- has translated into higher secondhand asset values.

cifc Offshore in March 2022, and more recently with the As an example, the 2012-built 680m2 PSV Standard purchase of 37 large and mid-sized vessels from Solstad Duke was recently sold for USD 11m after being pur-

Offshore. Meanwhile, share performance for several of the chased for USD 7m (including reactivation) a year be- names has been stellar, led by Tidewater – up c. 180% last fore. Looking at larger transactions, Tidewater beneftted 12 months. from the distressed sale of Solstad Offshore PSV feet of

However, many OSV players are still battling with high 37 large-and-mid PSV (10 years avg, age), priced at USD level of indebtedness, legacy of the newbuild order boom 16m per vessel vs our estimated fair value of USD 30m for back in 2014 – when optimism for future increase in de- large and modern tonnage.

mand was pervasive, and fnancing was both available and As the sector keeps heading towards full recovery, we see affordable – just to be followed by the oil price crash and capital discipline to prevail among OSV owners, focusing the consequent downturn. on debt reduction and returning value to shareholders.

The COVID-19 outbreak interrupted the momentum While newbuilds are not on the table today, several play- building in 2019, but the OSV market came back in full ers have commented on being open to the possibility of swing in 2022, supported by increased global E&P spend- ordering new vessels if supported by multi-year term con- ing and revitalized offshore activity. Ship owners have since tracts at dayrates signifcantly higher than current levels.

experienced an overall improvement in earnings, driven by Though, limited yard capacity and fnancial con- an increase in average dayrates and utilization achieved straints will limit newbuild infux in the short term as throughout all vessel segments. we see it. Meanwhile, we expect more corporate activities going forward as owners streamline their feets and focus

Dayrates Reach Peak Levels on core segments.

Dayrates for larger and in high-demand tonnage have In conclusion, the offshore supply vessel industry has now reached previous peak levels, with +20k BHP AHTS traversed a challenging path from a decade-long trough to trading around USD 45k/day, while PSVs with 4,000+ a triumphant resurgence.

dwt are eyeing USD 35k/day globally, with certain regions The frming supply-demand balance has granted vessel closing on USD 40k/day. owners increased bargaining power, resulting in improved

The subsea and offshore construction market is sold out terms and increased proftability.

and projected to reach USD 100k/d in the next years for While global recession risk and rising cost of capital fol- larger tonnage (>400t SWL CON). lowing interest rate hikes from central banks, represent a

As the demand for OSV vessels has been recovering, the near-term macro risk, the underlying fundamentals – fur- supply side of the market has undergone a profound trans- ther helped by the growing offshore wind industry – sup- formation over the past decade. port a long-term-upcycle for vessel owners, in our view.

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