Offshore market needs to shed equipment, analyst says

Offshore
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what a wonderful business opportunity with so many newer OSVs to shed from the fleet if there was just something one could use them for which might be profitable?

[B]Offshore market needs to shed equipment, analyst says[/B]

By Ken Hocke on February 2, 2017


Almost half of the PSVs in the U.S. Gulf of Mexico are stacked. Ken Hocke photo.

The offshore rig market is expected to begin a slow march forward in early 2018. If oil prices can stabilize between $55 and $65 bbl., oil companies will start to boost exploration and production budgets again.

“This is a challenging market going forward, but at least I see a light at the end of the tunnel,” Richard Sanchez, a marine analyst with IHS Markit, Houston, told attendees at the quarterly meeting of the Offshore Marine Service Association (OMSA) in New Orleans.

In the meantime, the industry has a whole host of problems on its collective plate. Sanchez took his audience through the highlights of his company’s new “IHS Petrodata Global Supply Vessel Forecast” (GSVF). The report shows that the Gulf of Mexico suffered from the biggest downturn in the world over the last two years. The worldwide platform supply vessel market will finally bottom out in 2017, with small movements in demand growth by early 2018, as the oversupply of oil drains out at an excruciatingly slow pace, the report said. Currently, half of the PSV fleet is cold stacked and another 7% is warm stacked. “The oil companies are playing the vessel companies against each other for contracts,” said Sanchez. “Some OSV companies are taking jobs that they know will lose money for them. It’s hard to believe.”

Sanchez said the shallow water market is played out and won’t return. There are only six jackup rigs on contract and one of those isn’t working, he said. “(Jones Act) vessels in the 2,999-dwt range and below have to be taken out,” he said. “There’s not enough tonnage exiting the market to mitigate the oversupply. New vessel construction has far exceeded the number of vessels coming out of the market.” (The Jones Act stipulates that only U.S.-built, -manned, -owned and -operated vessels can operate between U.S. ports.)

The GSVF shows that of the 147 PSVs of 1,999 dwt and below, 18 are working term contracts, 31 are working the spot market and 98 are stacked. In the 2,000-dwt to 2,999-dwt range, 10 are working the term market, nine are working the spot market and 59 are laid up. Even in the 3,000-dwt to 3,999-dwt range the numbers aren’t encouraging. There are a total of 59 such vessels, with 14 working term, 11 in the spot market and 31 cooling their hulls. “The 3,000 class is going to continue losing ground,” said Sanchez.

Over the next year, the face of the industry will go through some changes, said Sanchez. “Your oil patch has changed but your fleet has not,” he said. “I’m expecting a lot of consolidation in the future. The banks don’t want to take fleets away from the vessel owners.”

As for the boats, the big vessels will get the work in deepwater. Even in the down market, of the 94 4,000-dwt and above PSVs in the Gulf, 53 are working term, 22 are in the spot market and only 19 are stacked. Large PSVs are best suited for the recovery, especially in deepwater markets, according to the forecast. “But the price of oil will drive the market,” Sanchez said.

Something else to keep an eye on in the coming months is investors looking to take advantage of owners struggling to survive. “Watch out,” Sanchez warned. “There’s money out there trying to come in and buy cheap and ride the wave up.”

of course there is Alaska but I don’t believe there is any room to adsorb any additional vessels there for fishing or for cargo? Back in the oil but of the 80’s dozens and dozens of ex OSVs came to Seattle to be converted. I was working for Kemp Pacific Fisheries when they bought 3 large anchorboats…RESOLUTE, VOLUNTEER and DEFENDER plus two smaller OSVs.

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Autonomous short sea container drones are the only answer to this problem.

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[QUOTE=c.captain;194887]what a wonderful business opportunity with so many newer OSVs to shed from the fleet if there was just something one could use them for which might be profitable?

of course there is Alaska but I don’t believe there is any room to adsorb any additional vessels there for fishing or for cargo? Back in the oil but of the 80’s dozens and dozens of ex OSVs came to Seattle to be converted. I was working for Kemp Pacific Fisheries when they bought 3 large anchorboats…RESOLUTE, VOLUNTEER and DEFENDER plus two smaller OSVs.[/QUOTE]

Did they keep the Nohab engines?

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What about this proposal??: http://www.superyachtnews.com/fleet/do-you-think-youre-vard-enough

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[QUOTE=ombugge;194894]What about this proposal?[/QUOTE]

perfect…yet another toy for the ultra rich who don’t pay nearly enough taxes to carry all the playtoys too big for the motheryacht to carry

although I do like the idea of conversion of the bigger OSVs to expedition cruise vessels

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Yes or no question here. Do you pay the maximum amount of taxes or do you take all possible deductions?

I like the idea of converting OSVs into yachts or yacht tenders. A lot get turned into “toy haulers”.

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[QUOTE=Bayrunner;194938]Yes or no question here. Do you pay the maximum amount of taxes or do you take all possible deductions? [/QUOTE]

yes I take all the deductions allowed

now yes or no question for you…do you believe in a progressive system of income taxation? (ie. the rich have a higher tax rate on their excess income than a working class person)

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Thanks for answering.

I believe in a flat tax, no deductions. And a national sales tax, that way everyone has the skin in the game whether you are buying a 20oz soda from 7-11 or a Bentley for your daughter named Tiffany (no pun intended) Then the rich are paying more since they are buying more and more expensive stuff at that.

So I guess in a long winded way, no.

I’m solid middle class and I get close to 30% of my income stolen every year. I just got my W-2 so I’m not being facetious.

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[QUOTE=Bayrunner;194942]Thanks for answering.

I believe in a flat tax, no deductions. And a national sales tax, that way everyone has the skin in the game whether you are buying a 20oz soda from 7-11 or a Bentley for your daughter named Tiffany (no pun intended) Then the rich are paying more since they are buying more and more expensive stuff at that.

So I guess in a long winded way, no.

I’m solid middle class and I get close to 30% of my income stolen every year. I just got my W-2 so I’m not being facetious.[/QUOTE]

Except the poor must spend nearly 100% of their income on their daily needs, while the wealthy may only spend a tiny amount of theirs, including the things they don’t need. So a flat tax is never flat.

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As it is now, the wealthy have bought so many tax loopholes that they pay a smaller percentage of their income than the poor. The wealthy would pay a lot more under a flat tax with few loopholes. Not that I object to a higher tax rate on the top 1 percent.

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USA survived for over 100 years without an income tax. Just saying.

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very true.

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and for that 100 years the Federal government was small with tiny total expenditures which were generally funded with tarriffs collected on imports. Of course we all know you Republicans want to have ZERO social welfare spending but if you want such a small government today then you had better want to have ZERO defense and security spending…are you conservatives down with that? Didn’t think so.

btw, in 1944 the top rate was 94% on income over $200000. Guess how many millionaires left the US in those years? NONE! And corporate taxes on excess profits was 100%. Guess how many corporations picked up and left for Bermuda or Switzerland? NONE! That was once upon a time when the wealthy in the US felt a duty to contribute to the common good and welfare of the Republic. Mighty as well have been from another planet when compared with today. Since the days of Reagan, the wealthy have all believed keeping all their money is a birth right and something they deserve!

Former Treasury Secretary Paul O’Neill was told “deficits don’t matter” when he warned of a looming fiscal crisis.

O’Neill, fired in a shakeup of Bush’s economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from “the corporate crowd,” a key constituency.

O’Neill said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. “You know, Paul, Reagan proved deficits don’t matter,” he said, according to excerpts. Cheney continued: “We won the midterms (congressional elections). This is our due.” A month later, Cheney told the Treasury secretary he was fired.

The vice president’s office had no immediate comment, but John Snow, who replaced O’Neill, insisted that deficits “do matter” to the administration.

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The vice president’s office had no immediate comment, but John Snow, who replaced O’Neill, insisted that deficits “do matter” to the administration.

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I remember sitting through a speech from Robert Reich pissing and moaning about the opposition demanding a balanced budget. It’s all slight of hand from both sides…

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[QUOTE=c.captain;194967]btw, in 1944 the top rate was 94% on income over $200000. Guess how many millionaires left the US in those years? NONE! And corporate taxes on excess profits was 100%. Guess how many corporations picked up and left for Bermuda or Switzerland? NONE! That was once upon a time when the wealthy in the US felt a duty to contribute to the common good and welfare of the Republic. Mighty as well have been from another planet when compared with today. Since the days of Reagan, the wealthy have all believed keeping all their money is a birth right and something they deserve![/QUOTE]
I believe JFK changed the tax rate and eliminated most of the loop holes the rich enjoyed with the 94% rate…It just changed the flow.

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Raising hope for the Oil & Gas Industry in 2017??: http://www.amemaritime.com/news/view,five-reasons-for-global-oil-and-gas-to-be-cheerful-in-2017_45896.htm

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Some appears to have a more optimisic view of the future for offshore drilling: http://splash247.com/borr-drilling-1-35bn-deal-transocean-jackup-fleet/

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Reuter’s news article from today.

New projects, shale boom could trigger oil oversupply by 2018-19: Goldman

New production projects and a fresh shale boom could boost oil output by a million barrels per year and result in an oversupply in the next couple of years, according to Goldman Sachs.

“2017-19 is likely to see the largest increase in mega projects’ production in history, as the record 2011-13 capex commitment yields fruit,” the U.S. investment bank said in a research note on Tuesday.

OPEC’s landmark decision to limit output for the first time in eight years in a bid to arrest the existing supply glut reduced price volatility and increased stability, unintentionally helping the shale producers, the bank said.

“OPEC’s decision in November 2016 to cut production was rational, in our view, and fit into its role of inventory manager of last resort,” Goldman said.

“However, the unintended consequence was to underwrite shale activity through a bullish credit market at a time when delayed delivery of the 2011-13 capex boom could lead to record non-OPEC production growth in 2018.”

The Organization of the Petroleum Exporting Countries (OPEC) agreed to curb its output by about 1.2 million barrels per day (bpd) from Jan. 1 this year. Russia and 10 other non-OPEC producers agreed to jointly cut by an additional 600,000 bpd.

OPEC is likely to weigh the risk of long-term market share loss against the benefit of stability before taking a call on extending production curbs, with the industry expected to bring “onstream a multi-year pipeline of giant developments that tails off only by 2020,” Goldman said.

“U.S. shale oil currently offers large-scale development opportunities with 6-9 months to peak production. In this environment, OPEC’s rational decision is to leverage on its cost leadership to maximize market share, while managing short-term inventory imbalances,” the bank said.

OPEC will have to extend its oil output curbs in order to sustain a recovery in prices, as a revival in crude production outside the group may scupper its efforts to erode an overhang of unused inventory, a Reuters poll of analysts showed last week.

(Reporting by Vijaykumar Vedala in Bengaluru; Editing by Susan Fenton)

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The future in the Offshore market is not in drilling and exploitation, but in decommissioning of obsolete fields:

http://www.osjonline.com/news/view,more-than-300-fields-in-north-sea-will-see-decommissioning-activity-by-2025_50385.htm

This does not apply to the North Sea and it’s strict regulations only, it applies world wide.
Not least the Gom, with more depleted and depleting fields than anywhere else.