Have offshore operators thrown in the towel?

what I want to know is why has nobody gone belly up yet?

Have offshore operators thrown in the towel?

By G. Allen Brooks on February 28, 2017


Stacked PSVs in Louisiana, August 2016. Ken Hocke photo.

Hornbeck Offshore CEO Todd Hornbeck recently described his company’s weak quarterly earnings as a reflection of the poor state of the offshore vessel market.

“We are caught in a situation with a massively oversupplied market of OSVs for current market conditions based on the continuing decline in deepwater drilling activities,” Hornbeck said in a Feb. 16 earnings call. “At present, we see no signs that these conditions will change any time soon.”

The statement was no surprise, as the offshore drilling market has been one of the most distressed sectors of the oilfield service industry due to its high operating costs and poor demand in a climate of low oil prices.

The question for offshore service companies and offshore drilling operators is simple: What will it take for the outlook to change?

Hornbeck’s answer to that question seems to depend on how you define change.

“Earlier in this cycle, the industry mantra was ‘lower for longer,’” Hornbeck said. “The message we have recently been hearing from our customers, almost uniformly, is that they now see oil prices as ‘lower forever.’ They no longer view this as a U-shape recovery, but an L-shaped recovery, or so we’re told.”

If offshore operators truly believe they will not experience higher oil prices in the future, then taking steps to reduce operating and capital costs is the only path to higher levels of activity down the road. Attacking high costs offshore requires a number of adjustments by both operators and service companies.

So far, service companies have borne the brunt of the cost reductions required as a result of oil prices falling from $100 a barrel. To achieve cost reductions, drilling contractors and service companies laid off employees, idled equipment, cut salaries and slashed prices. The net result has left the contracting and service industry deeply in debt and nearly bankrupt.

While the service business can operate for a brief period in such a perilous state, doing so for any duration means the destruction of the supply chain for the offshore business. Producers will need to make more substantial cuts on their side of the operating cost equation. At the same time, contractors and service companies need to reassess the make-up of their industry. Recapitalizations of service companies — eliminating debt in favor of nearly 100% equity financing — will be necessary. Another step will be consolidations that enable surviving companies to control more assets with less overhead.

Todd Hornbeck made his pitch during the call: “Smart acquisitions can achieve those objectives in the OSV space, given the high operating risk and capital-intensive nature of this business. And for this industry, such acquisitions are necessary.”

Will there be follow through? If so, the structure of the offshore drilling and service industry will look very different in a few years.

A: Cheap loans via low interest rates. It doesn’t cost too much to sustain a zombie corporation. Best thing would be for a few companies to die off so what little work there still is can go to the survivors. This would allow the survivors to break out of the rut and maybe even flourish.

The same holds for the container ship glut. More shippers need to follow Hanjin in not just bankruptcy but liquidation.

Alas, that’s still a long ways off.

Gulfmark and Harvey are two on the edge of existence. Hornbeck, ECO and Seacor are the strongest out there. TDW has most of their old crap overseas.

[QUOTE=John Galt;195696]Gulfmark and Harvey are two on the edge of existence. Hornbeck, ECO and Seacor are the strongest out there. TDW has most of their old crap overseas.[/QUOTE]

TDW have some modern vessels in their fleet outside GoM. They FINALLY learnt not to cut cost by reducing the equipment specs when building vessels to high specs design to try to compete on the international market. (Large PSVs and AHTS in the >15.000 Bhp class)

They also have a subsidiary in Norway operating a modern fleet under NOR and IOM flag: http://www.tromsoffshore.no/

They built a number of smaller AHTS (<6.000 Bhp)in China in late 2000s/early 2010s. These were intended to replace the old GoM boats that they originally took overseas and the second hand foreign built vessel they had purchased over the years. These were not a success as they were under spec relative to market requirement(new vessel w/1970s technology and DPS 0 class)They have been offered for sale for a long time now.

Here is a few of the vessels belonging/have belonged to TDW: http://www.shipsandoil.com/shipinformation/0Ship%20Info%20North%20America/Tidewater/Tidewater.htm
I don’t know how many are still in the fleet, where they are or anything else about their present status.

PS> Most of the “old crap” from the GoM have been idle for a long time, or been scrapped. I don’t know if they still have some operating in the GoM though??

[QUOTE=DeckApe;195664]A: Cheap loans via low interest rates. It doesn’t cost too much to sustain a zombie corporation. Best thing would be for a few companies to die off so what little work there still is can go to the survivors. This would allow the survivors to break out of the rut and maybe even flourish.

The same holds for the container ship glut. More shippers need to follow Hanjin in not just bankruptcy but liquidation.

Alas, that’s still a long ways off.[/QUOTE]

On the other side of the pond there are frantic activities to salvage as much as possible of the Maritime Cluster around Aalesund. Havila appears to have succeeded in their restructuring: http://splash247.com/havila-concludes-restructuring/
But 8 of their vessels are looking for buyers as they are not seen as core assets for when the market turns.

Island Offshore is going it alone and is getting some of their laidup vessels back to work: http://www.smp.no/nyheter/2017/03/01/Island-Offshore-tek-inn-att-300-sjøfolk-14347454.ece?cx_front_click=baseline_test&cx_front_click_place=6&cx_front_click_articles=3
300 of their laid-off seamen are going back to work in the nearest month.

The merger of Farstad, Rem and Deepsea Supply into Solstad to form the largest Offshore Vessel operator in Norway, with a fleet of over 150 large modern vessels working worldwide, is ongoing: http://gcaptain.com/farstad-solstad-and-deep-sea-supply-merger-to-create-offshore-supply-vessel-giant/
But there will probably be some surplus vessels available at “fire sale prices” from that union. The gribbs are circling.

Another Offshore company with roots in Norway is heading for the “scrap heap of history”, after an illustriouse carriera of over 45 years (For AMC): http://splash247.com/emas-chiyoda-subsea-places-emas-amc-norway-liquidation/
AMC was originally Aker Marine Contractors, the Marine arm of Norwegian Contractors, the builders of the Condeep concrete platforms in the North Sea, and concrete structures in Canada, Sakhalin, the Philippines and Australia.

While the parent company EZRA Holdings from Singapore is restructuring under Chapter 11 in the US.

It is hard times in our industry.(But then you all knew that, right)

Oh the good ol’ Pioneer. Sad to see them all stacked like that. I definitely don’t miss that boat, although the accommodations were nice. I sure hope they haven’t thrown in the towel, i need a damn job.

[QUOTE=ombugge;195706]TDW have some modern vessels in their fleet outside GoM. They FINALLY learnt not to cut cost by reducing the equipment specs when building vessels to high specs design to try to compete on the international market. (Large PSVs and AHTS in the >15.000 Bhp class)

They also have a subsidiary in Norway operating a modern fleet under NOR and IOM flag: http://www.tromsoffshore.no/

They built a number of smaller AHTS (<6.000 Bhp)in China in late 2000s/early 2010s. These were intended to replace the old GoM boats that they originally took overseas and the second hand foreign built vessel they had purchased over the years. These were not a success as they were under spec relative to market requirement(new vessel w/1970s technology and DPS 0 class)They have been offered for sale for a long time now.

Here is a few of the vessels belonging/have belonged to TDW: http://www.shipsandoil.com/shipinformation/0Ship%20Info%20North%20America/Tidewater/Tidewater.htm
I don’t know how many are still in the fleet, where they are or anything else about their present status.

PS> Most of the “old crap” from the GoM have been idle for a long time, or been scrapped. I don’t know if they still have some operating in the GoM though??[/QUOTE]

I keep forgetting their Tromso Offshore group. There are a lot of old tonnage of theirs stacked in Amelia/Morgan City, Louisiana. Mostly UT hulls.

They have a small few operating here. Last I heard there were around 20 in Mexican waters and much less in US waters.

[QUOTE=John Galt;195728]I keep forgetting their Tromso Offshore group. There are a lot of old tonnage of theirs stacked in Amelia/Morgan City, Louisiana. Mostly UT hulls.

They have a small few operating here. Last I heard there were around 20 in Mexican waters and much less in US waters.[/QUOTE]

Yes they built at least 4 UT704s in the early 1980’s and bought a lot more second hand. The greatest OSVs ever built. Pitty to see the state of some of them now, but some are still serving well, even in the North Sea. (As ERRVs)

Do you see any of this type still in use:


Looks very similar to one of the boats I was on in 1970.

[QUOTE=ombugge;195737]Yes they built at least 4 UT704s in the early 1980’s and bought a lot more second hand. The greatest OSVs ever built. Pitty to see the state of some of them now, but some are still serving well, even in the North Sea. (As ERRVs)

Do you see any of this type still in use:


Looks very similar to one of the boats I was on in 1970.[/QUOTE]

That’s a 1980’s Halter Marine hull and there’s still a few of those working in the GoM. A few of the smaller companies own them.

Re-use is the name of the game for older PSVs: http://sysla.no/2017/03/01/nyheter/kjoper-opp-norske-supplyskip-til-bruk-i-oppdrettsbransjen_193272/

1980’s??? How long did they build them like that?? The Halter Marine boats that I have been involved with from about that time looked more like this:

Although I’m not surprised. They kept on building replicas of the same vessel designs for years.
A few years ago I came on board a brand new large US flag AHTS for an inspection. When I stepped into the Galley, I knew it was built by Halter Marine. Nothing had changed.

BTW; surprised to learn that VT Halter Marine is now a subsidiary of ST Marine, a Singapore Government affiliated company: http://www.stengg.com/about-us/companies/marine/vt-halter-marine-inc

PS> I found a picture of the Giant Tide, built at Ulstein for TDW in the early 1970’s and the start of their OSV building era:


Does this one, or any of the others in that series still exist??

[QUOTE=ombugge;195743]1980’s??? How long did they build them like that?? The Halter Marine boats that I have been involved with from about that time looked more like this:

Although I’m not surprised. They kept on building replicas of the same vessel designs for years.
A few years ago I came on board a brand new large US flag AHTS for an inspection. When I stepped into the Galley, I knew it was built by Halter Marine. Nothing had changed.

BTW; surprised to learn that VT Halter Marine is now a subsidiary of ST Marine, a Singapore Government affiliated company: http://www.stengg.com/about-us/companies/marine/vt-halter-marine-inc

PS> I found a picture of the Giant Tide, built at Ulstein for TDW in the early 1970’s and the start of their OSV building era:


Does this one, or any of the others in that series still exist??[/QUOTE]

I haven’t seen one of those types in a long time.

I sailed on the Sun Tide in the early 90’s up in Cook Inlet when she was under charter to CISPRI. She was in her final years but was a well designed and built workboat.

[QUOTE=salt’n steel;195758]I sailed on the Sun Tide in the early 90’s up in Cook Inlet when she was under charter to CISPRI. She was in her final years but was a well designed and built workboat.[/QUOTE]

I believe the Sun Tide was built by Tacoma Boat Yard some years after the vessels built to the same design at Ulstein Hatlo??
I don’t know if there were any design input by Ulstein, or if they just received engineering drawings and equipment from the US.

She apparently still exists, or at least did so until a few years ago: https://www.eagle.org/safenet/record/record_vesseldetailsprinparticular?Classno=7701346&Accesstype=PUBLIC&ReferrerApplication=PUBLIC

Were you involved in this incident??: https://incidentnews.noaa.gov/incident/6960

PS> Not to clutter up this thread with TDW talk only, I will post some more pictures of TDW boats in the Ship Photo thread.

^^^ I was transferred to Atlantic Seahorse just before incident. Mate dozed off on down current leg of a holding pattern - tried to turn at last minute and got pinned broadside to one of the legs. Bad day for TDW Alaska operations.

I did rig moves along side the Sun and the Moon in the 1980’s. I’m pretty sure they were both built by Tacoma Boat Yard.

[QUOTE=AHTS Master;195847]I did rig moves along side the Sun and the Moon in the 1980’s. I’m pretty sure they were both built by Tacoma Boat Yard.[/QUOTE]

I believe it was the MOON TIDE that came up to Seward AK in '77. I had a drink with the Tidex manager in the Showcase lounge. He gave me a spiel about how much better I’d be working for Tidewater. After listening to the crap and the free drinks I said, “How would I be better off working longer hitches with twice as many engines to maintain with a third less help for half the money?” He looked at me like I had 3 eyes…

[QUOTE=injunear;195848]I believe it was the MOON TIDE that came up to Seward AK in '77. I had a drink with the Tidex manager in the Showcase lounge. He gave me a spiel about how much better I’d be working for Tidewater. After listening to the crap and the free drinks I said, “How would I be better off working longer hitches with twice as many engines to maintain with a third less help for half the money?” He looked at me like I had 3 eyes…[/QUOTE]

My memory is bad but it’s not that bad.

[QUOTE=AHTS Master;195847]I did rig moves along side the Sun and the Moon in the 1980’s. I’m pretty sure they were both built by Tacoma Boat Yard.[/QUOTE]

Yes I can now confirm that these two were the only of the type built at Tacoma Boatbuilder Co.:

265 578729 Sun Tide Tidewater Marine OSV 1,165 Jan-77 Active (Vanuatu)
266 579657 Moon Tide Tidewater Marine OSV 1,165 Jan-77 Foundered 1997