The brightening outlook for the OSV market is clouded by political pressure to end oil and gas development, making investment in new assets and recruiting talent a challenge, says SEACOR Marine president and chief executive, John Gellert
High utilisation, improving day rates and tight availability have created opportunity to generate positive cash flow, but OSV owners are facing headwinds from an aging global fleet, inflationary costs and political pressure to end oil and gas development.
Supply and demand remains “very favourable” in the current upcycle said SEACOR Marine chief executive, John Gellert, in opening the Annual Offshore Support Journal Conference in London in February. “I think our first opportunity in this environment is to make money,” he said, noting the downturn started in the offshore oil and gas market 10 years ago.
In its most recent results, the Houston-based OSV owner maintained strong average day rates near recent highs in Q4 2023, with revenues up 26% over the same period year-on-year.
SEACOR Marine’s consolidated operating revenues for Q4 2023 were US$73.1M, operating income was US$22.6M, and direct vessel profit (DVP) was US$29.8M. This compares favourably to consolidated operating revenues of US$57.9M, an operating loss of US$10.5M, and DVP of US$13.6M in Q4 2022, and consolidated operating revenues of US$76.9M, operating income of US$9.8M, and DVP of US$36.8M in Q3 2023.
SEACOR Marine reported average day rates of US$18,031, a 31% improvement from Q4 2022, and essentially flat from Q3 2023. Vessel utilisation was 71% in the quarter, down slightly from 73% in Q3 2023.
“How do you recruit for an industry that some people think has a limited future?”
For Q4 2023, net income was US$5.7M (US$0.21 earnings per basic share and US$0.20 earnings per diluted share). This compares to a net loss for Q4 2022 of US$13.3M (US$0.50 loss per basic and diluted share).
“Tendering activity remains high, particularly in international markets, and we expect to continue to charter vessels at improved terms and pricing as they roll off their contracts,” said Mr Gellert.
Beyond legacy offshore oil and gas regions like the Gulf of Mexico and the North Sea, Mr Gellert pointed optimistically to emerging sectors like Suriname and Namibia, which “require more boats, more services and more support.”
But Mr Gellert posed the question: “How do you survive and thrive in an industry that is unloved?” citing the mounting political pressure to halt the development of oil and gas.
“There’s still an overall headwind of investment. How do you plan in an industry that some people think won’t be around for 20 years?,” he said, adding, there is a “mismatch to building long-lived assets in a short-cycle investment approach.”
SEACOR Marine’s approach is to invest in “low-hanging fruit” to make its current OSV fleet as efficient as possible. In 2024 and 2025, it will convert four platform supply vessels to hybrid-battery propulsion to reduce fuel consumption and emissions.
If oil and gas is viewed as a sunset industry, attracting the next generation of seafarers is also problematic. “How do you recruit for an industry that some people think has a limited future?” he asked.
But Mr Gellert thinks improved cash flow will drive investor interest and, in turn, financial interest. Additionally, he sees emerging opportunities in the energy transition that will eventually underpin investment in newbuilds.
“Newbuilds will have to be more flexible, not only dedicated to oil and gas, but servicing wind, carbon capture, plug and abandonment and decommissioning,” concluded Mr Gellert.
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