Offshore Support Journal asked VesselsValue head of offshore Rob Day to share his thoughts on the top five trends that will define the offshore oil and gas market for OSV owners in 2021
Mr Day graciously obliged, highlighting the following five trends to watch in 2021.
US Offshore Wind
We are going to see more and more players enter the renewables market, from both an offshore and non-offshore background. Particular attention should be paid to the US market; as the US offshore windfarm market develops and grows it will be interesting to see how the region’s vessel portfolio grows or adapts to suit the country’s ambitions within the renewables sector.
Back in Business
During 2020, several large OSV owners managed to rectify their financing/money woes – Bourbon, Solstad, Havilla and Hornbeck. These companies are now in a much stronger position to plan their future business strategy. It has also placed them on a more level playing field with the other OSV owners who went through Chapter 11/restructuring in the years previous.
Mobile offshore drilling unit (MODU) owners have been hit hard by Covid-19; the next logical step for the suffering sector is to minimise fragmentation via consolidation. Safety in numbers seems like the best step forward. However, the reality of such a move is likely simpler on paper than in practice. With Seadrill entering Chapter 11 (for the second time), maybe once it emerges leaner and meaner it might be an attractive consolidation candidate?
OSV and MODU Scrapping
Within the supply vessel sector, one would hope that 2021 brings further removal and that more companies become involved (as opposed to just Tidewater). The OSV sector continues to suffer from a significant oversupply and there are plenty of suitable candidates for the breakers yards. We are all acutely aware of why scrapping remains limited, but maybe 2021 will be the year? Maybe Bourbon will be the company to watch?
In the MODU market, larger companies such as Valaris made good progress during 2020 to remove non-core tonnage. However, there are still plenty of demolition candidates remaining. Based on VesselsValue’s recent analysis of AIS data, there are about 120 MODUs (drillships, semisubs and jackups) that have not signalled in greater than eight weeks – these are considered long-term layup assets. Aside from Valaris, Transocean, Seadrill, Saipem and Diamond Offshore seem like the most logical candidates to lead this movement.
Another strong year for S&P numbers (but not values)
2021 will be another big year for larger OSV companies to sell off their non-core tonnage. Solstad has earmarked around 15 OSVs to be sold, Bourbon has announced it is to either sell or scrap about 100 vessels from the fleet as part of its future strategy. Tidewater still has a number of vessels across the globe which do not meet its core tonnage requirements. With so much potential tonnage for sale and values already under pressure, this huge volume of tonnage could have a further negative impact on asset values.
Values have been under pressure due to Covid-19, which has affected values across all vessel types – OSV, OCV and MODU.
The accompanying table outlines the YTD valuation for the top OSV companies. Excluding Tidewater, most companies experienced little to no decrease in fleet size, but the total company asset value has decreased significantly.