The OSV sector has seen a steady increase in the volume of sales over the last 12 months, but this does not herald a market revival
Judging by the volume, sale and purchase activity in the OSV sector appears healthy. But volume alone fails to tell the whole story. If there is such a healthy demand for OSVs why have newbuilding orders trickled away to nothing and demolition sales soared to new heights?
VesselsValue (VV) head of offshore Robert Day points out that many sales are not what they first seem. “On the offshore supply vessel side, most of them have been sold “Special Survey” due and may have been laid up for some time, requiring further investment to bring them up to standard,” he says. “Or they are distressed sales forced by the bank concerned,” he adds.
Mr Day cites a prime example of the sale of the Toisa vessels, which had been bought at “rock-bottom” prices and cast an influence over the rest of the market. One example is the 2005-built multipurpose support vessel (MPSV) Toisa Valiant, which was built at Wuhu Xinlian in China. The MPSV was purchased by Oceanpac Servicos Maritimos for in May 2019 for US$2.3M – virtually the demolition value. Since 2014 to March 2019 the vessel had been working field support for Petrobras. Toisa Valiant is now renamed Parcel Das Paredes and has been laid up in Rio de Janeiro, Brazil since March 2019 with no current forward work planned as of August 2019.
In another example, VesselsValue applied a value of US$56M to MPSV Seven Pegasus in May 2018; 12 months later the same vessel was valued below US$40M.
Mr Day also notes that companies are not divesting of working tonnage. An OSV that holds all the necessary certificates, conforms to charterers requirements and has been in regular employment is affected by the last done sale of the less than prime tonnage. In that respect, there should be a two-tier market, but the massive overhang of surplus tonnage is pushing down values. The bulk of sales fall into the less attractive end of the market: “Distressed sales, lacking Special Survey, not having DP2, and 10 - 15 years’ old are the characteristics of many of the OSVs that have been sold or are for sale,” Mr Day says.
A two-way street
Compounding the issue is the initiative by Tidewater to set a certain standard for a “Tier 1” vessel: Tidewater’s Tier 1 states that PSVs require a deck area of greater than 800 m2 and AHTSs need a bollard pull of greater than 80 tonnes, while both need to be under 10 years’ old with DP2 to be competitive.
“Tidewater is setting the standard for the rest of the offshore industry with what constitutes a Tier 1 OSV,” explains Mr Day, noting that the ceiling on OSV values works both ways and buyers have been able to pick up bargains. Two Canadian companies have been able to purchase vessels significantly below original values, a double bonus in that the import duty rate of approximately 25% is payable on the fair market value, not the original value.
In March 2019, Horizon of Canada purchased the 2016, Norwegian-built Bourbon Arctic for US$41.5M, versus a VV value of US$39.6M. Bourbon Arctic had an original price tag of US$119M in 2014.
Canadian owner Atlantic Towing purchased Atlantic Harrier, a Norwegian-built PSV for a rumoured US$20M to US$21M, against a VV price of US$21.8M (day before sale).
Currently, re-sales for OSVs are pitched below US$20M depending on the specification, and far below the original purchase price. There are now less re-sales available in China, as the ‘good’ ones have been sold and after so many inspections the market is fully aware of the status of the remaining few. Of course, there are no newbuilding orders in the OSV sector.
In this respect, there had been a window of opportunity to purchase quality unfinished OSVs from Chinese shipyards. “There were a lot of inspections, and buyers were soon aware which ones to cherry-pick. Most of the quality tonnage has now been purchased,” says Mr Day.
There are even some re-sales and unfinished OSVs still available in Norway. Following the merger of Solstad Offshore, Farstad Shipping and Deep Sea Supply in 2017, a new company, SolstadFarstad, was formed before changing to Solstad Offshore. The Farstad name is back in the offshore game having been revived by Sverre (Andy) Farstad through a new company Sverre Farstad & Co, which has purchased the Ulstein Design & Solutions PX121 type PSV Blue King for a rumoured US$20M. In theory, this is a 2016-built vessel but not completed and therefore could be designated a 2019 creation upon completion.
Other re-sales include VOS Charm; according to Clarksons the 85 tonne bollard pull AHTS was cancelled by Vroom in 2017, but is now listed as sold for US$9.7M direct from the yard. Delivery is due in the third quarter of 2019 and it will be interesting to see if this vessel is classed as a 2019- or 2017-built vessel.
S&P activity by the top 10 OSV owners to date in 2019.