This doesn’t sound like a good plan.
Sure sounds like a desperate move to me. Though with WTI dropping like it has, the GOM may be dead for a couple more years thanks to the Cheeto demanding lower prices on oil. So it may be a wise move to work their way out of the gulf any way they can.
to me it sounds like the Bubba Slug is conceding that he’ll never be another Mister Gary and he slinking away as a failure who went bankrupt and had to give most of his empire away to his lenders.
Not all merger proposals in the Offshore industry goes on to actual deals:
Depending on how many vessels Harvey Gulf has layed up, any means to get some of them up and running again is in the best interests of the company. Even if that includes reflagged a number of them.
I don’t see this as necessarily a bad move. HOS and ECO have reflagged vessels for Mexico and Brazil and if they think there is long term work anyone should be willing to think about reflagging. Trinidad has a good bit of work taking place with several of the big players already operating there. I was told by a supplier that ECO is trying to open a storage warehouse for their supplies b/c getting anything over there (Trinidad) is very difficult. The plan would have them sending supply vessels on runs to and from the US on somewhat of a regular basis.
Why do they need to re-flag, unless the shelf state requires it to be able to work there??
If it hasn’t changed lately, a US flag OSV working foreign is only required to have US Master, all the rest of the officers and crew can be foreign.
Or are there other rules, or any “hidden costs” to be considered?
Brazil and/or Mexico will charter vessels that are Mexican flagged before they will charter another flag state vessel. This was the main reason HOS reflagged in those markets and I assume the same reason Harvey is looking to follow suit.
Harvey has a BUNCH of stuff still stacked in Gulfport, and those are the boats they are reflagging to send over there.
All the big players ECO, HOS, Candies, Seacor, etc do it all the time. For Harvey to expand it has to eventually happen. What better time to do it then now when activity in Mexico and Trinidad is on the rise and you have vessels literally rusting away that are qualified to do the work?
of course the flip side of this is that the value of these vessels goes down because to come back to US flag, they lose their coastwise trade endorsements which then means all the extra money spent to build them originally in the US is lost forever (until Congress allows them back in to the GoM with special legislation)
It doesn’t matter what it cost to build the vessels. It’s a sunk cost. Plus, the debt has been discharged in bankruptcy. Harvey owns them outright.
If the vessels stay in layup for a few more years waiting for work to pick up in the US market, by that time they will be “shop worn” , obsolete and in need of updating. Even then, they will be old. By the time the US market recovers, the oil companies will want dual fuel / electric hybrid DP 5 vessels with X bows.
If reflagging gets them working now, that’s a no brainer. Furthermore, there is some future benefit to permanently removing them from the overcrowded US market.
That is the one if the reason why they reflag the vessels. Another main reason is when they reflag then to the country they will be working, they no longer have to have US crew onboard. While I was at ECO, that was a big thing they started doing when things went south to save a few bucks.