As the market slowly improves, southeast Asian OSV owners are looking to merger and joint venture opportunities
A reshuffling of the OSV sector in southeast Asia is underway, as owners look to solidify their positions in a slowly recovering offshore market through mergers, acquisitions and joint ventures. Singapore exchange-listed Pacific Radiance Ltd, with more than 100 vessels in Asia, Africa and Latin America, is one of the OSV owners on the prowl. While OSV oversupply in the market persists alongside subdued charter rates, Pacific Radiance executive chairman Pang Yoke Min, says, “We continue to watch industry developments closely and be ready to respond to any emerging opportunities.”
In December, Pacific Radiance said it was looking to acquire an as-yet-unnamed vessel and logistics services business worth US$180M. To acquire this ‘target company’, Pacific Radiance is “in discussions with potential investors to provide debt financing and has received indicative proposals to this end.” In connection with the acquisition, Pacific Radiance says it also intends to issue new shares to raise equity funds.
While no potential investors have been publicly announced, one is believed to be Dubai-based Allianz Middle East Inc. Allianz has already been busy consolidating the market. In May, court-appointed managers for Singapore-based Swissco Holdings Limited completed the sale of a substantial part of its offshore support vessels division, including Swissco Offshore Pte Ltd and Singapore Marine Logistics Pte Ltd to Allianz Middle East Inc. The deal is worth about US$20.5M, with the possible acquisition of up to 25 vessels.
Recovering subsea market
In a move aimed at strengthening its presence in the subsea services market, Freemantle-based OSV owner MMA Offshore Limited will acquire the operating units of ASX-listed Neptune Marine Services in a transaction valued at about A$18.5M (US$13M).
Shareholders of Neptune Marine Services (NMS) will receive A$5.0M (US$3.5M) in cash and MMA Offshore shares worth A$13.5M (US$9.5M), or as high as A$16.2M (US$11.3M), depending on the share price at the time the transaction is approved.
The deal must be approved by shareholders of NMS and Singapore-based MTQ Corp Limited, parent of Blossomvale Investments Pte Ltd, which has the controlling stake in NMS. NMS shareholders will take up approval at a meeting in October and MTQ Corp shareholders in September. If approved, the acquisition is expected to be completed by November.
Both NMS and MMA Offshore have struggled during the prolonged offshore oil and gas downturn, but the combined businesses expect to benefit from a recovering offshore and subsea market. MMA Offshore managing director Jeffrey Weber called the acquisition “an important step” in expanding the company’s subsea service offering to existing and new clients.
“Combining MMA’s vessel assets with NMS’s subsea equipment and technical expertise will result in a stronger service offering to both MMA’s and NMS’s existing clients and provide an opportunity for MMA to capture a greater proportion of the value chain”, said Mr Weber. He added: “The acquisition is expected to enhance MMA’s return on assets through packaging value-added services to our vessels”.
The merged companies will have a strong presence in southeast Asia and Australia, with offices and facilities in Malaysia, Singapore, Batam and Indonesia and headquarters in Freemantle and Perth, and additional offices in Darwin and Melbourne.
By packaging back deck work, such as ROV and diving services, with its fleet of multi-purpose support vessels (MPSVs), MMA Offshore expects to realise an improved return on assets. MMA Offshore owns and operates a fleet of over 30 specialised OSVs, offering offtake, drilling, construction, seismic and survey support, and anchor-handling and towing, accommodation and walk-to-work services.
Headquartered in Perth, Western Australia, NMS services predominantly Tier 1 oil and gas and marine infrastructure clients through its operational centres in Australia, Southeast Asia and the UK. NMS generated revenue of A$84M (US$59M) and cash flow of A$0.4M (US$0.3M) for FY2019 ended 31 March 2019, as compared with revenue of A$68M (US$47M) and a loss of A$7.9M (US$5.5M) for the prior financial year.
New JV focuses on subsea activity
Expanding its portfolio of offshore services, particularly in southeast Asia, Hilong Marine Engineering (Hong Kong) Limited has struck a deal with Swiber Offshore Construction Pte Ltd to establish a joint venture company named Ocentra Offshore Pte Ltd in Singapore.
Ocentra will focus on services related to pipe-laying and the integration of pipeline systems, offshore heavy lifting and installation, subsea tie-in and underwater maintenance, barge/vessel management and chartering, and other infrastructure works.
A subsidiary of Hong Kong-listed Hilong Holding Limited, Hilong Marine Engineering (HME) specialises in the offshore petroleum engineering business and transportation and installation (T&I) project engineering and management.
HME will control a 51% stake on Ocentra, with the minority interest controlled by Swiber Offshore Construction. The interests are based on cash contributions made by the companies in the initial share capital of the JV.
The board of directors of Ocentra will be composed of three directors, two directors of which will be appointed by Hilong Marine Engineering, and the other by Swiber Offshore Construction.
Swiber Offshore Construction is a leading engineering, procurement, construction and installation contractor.
Sell-off non-core assets
It was a rough first half of the year for PACC Offshore Services Holdings Ltd (POSH). One of Asia’s largest OSV operators, POSH posted a loss of US$21.3M for the six months ended 30 June, adding to the red ink from the same period one year ago, when it posted a US$13.1M loss. In explaining its results, POSH said that the “oversupply of vessels continues to be a drag on charter rates, although there are signs of increased activities in select segments.” In the wake of the market conditions, POSH is considering selling off some of its non-core assets.
Its revenues from its offshore accommodation unit dropped 41% from a year ago, hurt by lower utilisation of one of its two semi-submersible accommodation vessels. In 2018, both the POSH Xanadu and POSH Arcadia were 100% employed. In June, POSH Arcadia started a short-term charter in offshore Malaysia. Built by PaxOcean Engineering Zhoushan Co Ltd, China, the sister vessels POSH Xanadu and POSH Arcadia are dynamic positioning class 3 capable, each accommodating 750, with 1,800 m2 deck areas.
If there were a silver lining for POSH, it was in the form of the performance of its two new business areas, renewables and transportation and installation. POSH Subsea completed two projects in H1 2019 and will focus on south Asia and the Middle East for further opportunities. In the renewables sector, POSH Kerry Renewables secured several contracts in H1 2019 to support offshore survey and preparatory works for windfarm construction in Taiwan. POSH expects revenue growth from these new business segments in the next 12 months.
Overall, utilisation rates for POSH OSVs nudged up to 73% in H1 2019, up from 72% in the same year earlier period. The company’s utilisation rates were in line with those reported for the southeast Asia market by UK-based vessel valuation firm VesselsValue. During June, OSVs had a utilisation rate of 74%, offshore construction vessels 80%, and mobile offshore drilling units, 75%.