Sale of 37 platform suppy vessels will see Solstad exit PSV sector to focus on growth in AHTS, subsea construction and maintenance support vessel fleet, and offshore renewables
In a brief update to its shareholders, Solstad said the sale of its vessels to Tidewater "is scheduled to be completed in week 27," which is the week beginning 4 July, 2023.
Solstad and Tidewater announced the sale in a stock exchange notice on 7 March 2023.
7 March 2023
Tidewater Inc has moved again to take a dominant position in the global offshore vessel market by acquiring Solstad Offshore’s platform supply vessel (PSV) fleet.
To cut some of its US$2Bn in debt, Solstad will sell 37 PSVs to the world’s largest offshore support vessel (OSV) owner Tidewater for US$577M, reducing the size of the Solstad fleet of OSVs to 49 anchor handling tug/supply (AHTS) and subsea construction and maintenance support vessels (CSVs).
Tidewater said the deal solidifies its position as the leading high-specification PSV operator worldwide, with a fleet that it said has demonstrated the highest utilisation in the market through recent up and down cycles.
With the purchase, Tidwater’s fleet will grow to 228 vessels, expanding a modern fleet of 199 PSVs and AHTS ships with an average age of 11.3 years; 65% of which are high-specification vessels.
The deal will also create the world’s largest hybrid-propulsion equipped sub-fleet within Tidewater’s wider fleet, with the company owning a combined 14 battery hybrid and two LNG-capable vessels.
“This agreement to acquire 37 PSVs from Solstad Offshore marks yet another important milestone in the strengthening of Tidewater’s leadership position as we continue to capitalise on the rapidly improving OSV market,” Tidewater president and chief executive Quintin Kneen said. “These vessels make up the highest specification PSV fleet of its size anywhere in the world.”
Mr Kneen added that “All 37 vessels are currently active and are working throughout the world, principally in the North Sea, but also in Brazil, Australia and West Africa.”
The Solstad PSVs moving to Tidewater’s fleet have a total contract backlog of around US$620M, including contract option periods, and significant potential cash flow generation upside as maturing contracts roll on to higher day rates in an improving market.
“Assuming the transaction closes at the end of Q2 2023, we are updating our revenue guidance for 2023 to approximately US$1.03Bn and our vessel operating margin guidance for 2023 remains the same at about 50%,” said Mr Kneen.
“This transaction is just the latest in a series of transformative steps Tidewater has taken to drive long-term earnings and cash flow generation,” he continued. “We are focused on bringing together the world’s best OSV fleets to create the safest,” most sustainable, most reliable, most profitable high-specification OSV fleet in the world.”
Sale of the PSVs will lower Solstad’s net debt by around Nkr6Bn (US$574M) to Nkr15.4Bn (US$1.47Bn) and will considerably strengthen Solstad’s balance sheet, debt service ability and liquidity position, according to the company.
Solstad said the transaction repositions the company as one of the main global owners and operators of high-end AHTS and CSVs which are increasingly in demand, particularly in the offshore renewables segment.
Exiting the PSV segment will significantly reduce Solstad’s capital expenditure programme in 2023 and 2024, but still leaves the company with a firm contract backlog of Nkr6.3Bn (US$600M).
“The sale of the PSVs represents a shift in our strategy in a changing market,” said Solstad Offshore chief executive Lars Peder Solstad. “The PSVs mainly support the oil and gas industry, while the AHTSs and CSVs can service all offshore energy sectors, including oil and gas and renewables,” he said.
“This move is therefore in line with our strategy of being a key enabler in the energy transition and gives Solstad greater financial leeway and a significantly improved debt and cash position going forward.
Following completion of the transaction, Solstad’s total fleet in operation will number 41 high-specification OSVs and six vessels that are non-operational and set to be sold. Solstad has said it will maintain its global footprint in all key offshore regions, including the North Sea, Brazil and Asia Pacific.
“Following the transaction, the core competence of future Solstad will be even better-applied to further developing the CSV and AHTS segments, including building up our service division and capitalising on a stronger position in the renewable energy market,” Mr Solstad said.
“The generally higher margins for AHTS and CSVs will allow us to improve our financials, strengthen our renewable energy presence and put us in a position to, over time, renew our fleet.”
Tidewater intends to fund its US$577M purchase through a combination of new debt and cash on hand. The company has received commitments from a group of financial institutions, led by existing lender DNB Bank, for a three-year senior secured credit facility of up to US$325M.
Now the deal has been unanimously approved by Tidewater’s board of directors, closing of the transaction is subject to customary regulatory approvals, agreement on satisfactory documentation and satisfaction of customary conditions precedents, while there is also a financing contingency.
Clarksons Securities and Evercore are serving as financial advisors to Tidewater; DNB Markets is serving as debt advisor to Tidewater; Vinson & Elkins, Advokatfirmaet Wiersholm and Clyde & Co are serving as legal counsel to Tidewater.
The announcement of the agreement comes one month after Riviera Maritime Media’s Annual Offshore Support Journal Conference, Exhibition and Awards 2023, where both Tidewater president and chief executive Quintin Kneen and Solstad Offshore chief executive Lars Peder Solstad presented their respective company strategies.
Fleet sales were touched upon in some of the market analysis that opened the event, including a proclomation by VesselsValue’s head of offshore Robert Day that ’oil and gas isn’t dead’. In January 2023, Vroon confirmed its own plans for an offshore fleet sale alongside a restructure and exit of its chief executive.
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