How charter rates and utilisation will impact the sale and purchase market
A step up in rig move activity, coupeld with pressure on owners from lenders to have assets in employment instead of idle are the two main driving forces in the OSV market so far this year. Based on the average utilisation to date, the large AHTS fleet is enjoying its best level of utilisation since 2014. Norwegian OSV brokerage Seabrokers attributes the firm levels of utilisation to pockets of scarcity in the North Sea. The large AHTS fleet supply of available tonnage has been relatively tight. The broker noted that a few days of bad weather locking in vessels in port, at the same time as rig moves, has been enough to see 100% utilisation on some days.
The impact of this was an increased AHTS utilisation rate in the summer of 2019, which reached a peak of 78% in August. As late as October the level of utilisation was still a healthy 69%. While this was a slight fall on the previous month, it was more than 9 percentage points above the median since data began.
There have been periods when no vessels were available for hire for several days at a time. This stretched the range at which owners were able to push rates upwards. Some owners were able to command £45,000/day before rates punged back to GBP15,000/day. The extreme swings produced an average of £30,000/day in October, a significant increase (130% plus) on the £12,000/day average attained 12 months’ previously.
The improvement in the market was enough to see more AHTS vessels come out of lay up. An example was Boa Nord and Boa Jarl. These VS 491 CD design AHTS had been placed on the sales list by the Bergen Group. The two AHTS had been laid up in Poland but have now been chartered out to the Norwegian Coast Guard for five-year charters, with options for a further five years.
Outside of the North Sea, Total continues its drilling programme in South America and has turned to Solstad to cover the support work. The two large AHTS, Normand Drott and Normand Prosper (both STX Vard AH12 designs) are scheduled for South America once their current work is completed. Still in South America, Petrobras has renewed its charter of Far Santana (2000-built UT 730) and Far Scout (2001-built UT 722 L) by picking up the one-year options. Petrobras also fixed a one-year contract for the 2007-built Skandi Fluminense. This is the second year in succession the vessel has been fixed with Petrobras.
Also involved in the South American market are the two Swire Pacific vessels (Pacific Dispatch and Duchess) that had already been fixed for work in Mexico. Further south, the development of Equatorial Guinea hydrocarbon energy resources sucked in three Maersk Supply AHTS (Maersk Lancer, Laser and Maker). The rates were not reported.
On the sale and purchase side, Standard Drilling of Norway reports the sale of the 2010-built Standard Provider. The vessel was reportedly sold in early October 2019 for US$13.5M to Rohde Nielsen of Norway. Almost exactly two years earlier, the vessel had been bought by Standard Drilling of Cyprus’ subsidiary Wanax for US$11.1M from Nordcapital Investment of Germany. Wanax is a specialist in purchasing OSVs that are percieved as under-valued. In April this year the company reportedly paid US$8.1M in cash for the 2014-built Havyard 832 design Olympus (now Standard Olympus) at an Admiralty Marshal auction at the Supreme Court of Gibraltar. VesselsValue estimates the value of the Standard Olympus at US$11.1M.
Play and delay
As one company makes an asset play, another makes an asset delay. Viking Supply Ships is selling a 16-year old AHTS out of the fleet. The French owner SeaOwl Group is purchasing the 182-bp Odin Viking (built 1983) to charter out to the French navy as a training vessel. The vessel has been in lay-up and was sold to Viking for US$1 by a major shareholder in a deal that sees cancellation of debt and other commitments. VesselsValue rates the unit as worth US$1.22m, suggesting there is some bargain in the deal.
The large PSV sector has not been as fortunate. Utilisation fell by 15% month-on-month to 63% in October 2019. This is a new low for the month of October and significantly below the median of 78% utilisation recorded so far since 2012. At the current rate of utilisation, 2019 may have the lowest average level of utilisation in the large PSV sector since SeaBrokers started collecting data.
The fall in utilisation and the increase in large PSVs available for work has played havoc with day rates. On a year-on-year basis, day rates are nearly a third lower than 12 months ago, at just below £7,000/day.
OKEA engaged Tidewater’s Troms Sirius, a VARD PSV 09CD design for work in the North Sea. The 2009-built UT 776 CD PSV Island Chieftain attained a six-month contract with Repsol. No charter rates were reported. Also in the North Sea, but in the Danish sector, Hess Denmark chartered in Hermit Horizon (VARD 1 08 PSV) and NAO Prosper (Ulstein PX 121 PS).
Elsewhere, two PSVs headed out of the North Sea spot market on period charters with an undisclosed client. Energy Duchess and Energy Empress are 2019-built units that have been sold by the shipyard Nantong Rainbow Offshore for a reported US$18.1M each to Golden Energy Offshore of Norway. The undisclosed charterer has taken the vessels for 90 days. Golden Energy’s chief executive officer Per Ivar Fagervoll commented: “I am very pleased that we have now been able to secure some winter work for the vessels, which is very important for us. [We] continue to maintain a very high utilisation of the fleet for the rest of 2019 and in to 2020.”
In the sale and purchase market, Viking Supply Ships AB teamed up with funds managed by Borealis Maritime to buy two dual-fuel resale PSVs. The two new vessels are high-end Wärtsilä VS 4411 DF designs and will be completed by Remontowa Shipbuilding in Gdansk, Poland. The vessels are set to deliver from the shipyard in Q4 2020 and Q1 2021. The PSVs have dual-fuel capabilities: they can run on LNG or MGO and will also come fully equipped with a battery pack solution which will further reduce consumption and emissions. No price has been disclosed, but it is believed to be a discount on the price agreed by the original contractor, Siem Offshore. The price has been estimated at €22M (US$24.5M) each.