The market may have finally reached the bottom, with observers noting a slow trend towards rebalancing and improved usage rates
Offshore oil production is projected to rise by 3.3% in 2019 and 0.6% in 2020 to reach 26.3m bpd (27% of oil production), while offshore gas production will increase by 3.5% and 3.6% in 2019 and 2020 respectively, to 130bn cfd (33% of gas production). The data, from Clarkson Research, also suggests the number of reported offshore field start-ups (39 in 2018) and field discoveries (70) have both reached long-term lows, though a small uptick in discoveries in 2019 is now expected. In the longer term, lower offshore break-even costs and the replacement of ‘lost barrels’ should support field development activity, albeit set against a stronger US onshore outlook.
Rig utilisation is continuing to edge forward, rising 3% in 2018 to 69%, with 470 rigs active. To date, an increase in Jack-Up activity (up 7% year-on-year (yoy)) has not been matched by Floaters (down 5% yoy), although nearly 40% of the Floater fleet has now been retired since 2014. Progress continues around consolidation, rig retirements, S&P activity and solutions for ‘stranded’ newbuilds. Rate progress is moderate and regionally mixed, aside from a doubling of harsh semi-sub rates.
The OSV sector may have turned a corner in 2018, with improvements in the number of working boats (up 84 to 2,076), utilisation (up 2% yoy, to 58% globally) and rates persisting into 2019, according to Clarkson Research. Clarkson also expects that merger and acquisition and restructuring in the offshore sector will continue, with the potential to help consolidation. In general, for offshore, significant challenges remain, but there are also likely to be more opportunities in the next phase of the cycle.
“Most participants across the offshore oil services market are reporting improved activity levels as we move into 2019”
Steve Gordon, managing director of Clarkson Research says that participants across the offshore oil services market are reporting improved yoy activity levels moving into 2019. “Conditions are still challenging however, with rates in general remaining depressed despite a moderate pick up from ‘bottom of the cycle’ levels, reflected in the Clarkson Research Offshore Index averaging 48.8, up 6% from 46.2 in 2017.”
Mr Gordon also notes a gradual trend towards rebalancing and improved utilisation exist, albeit the pace of progress varies across segments.
It is an opinion echoed by Bourbon, which notes in its annual report: “After four years of drastic reductions, the oil and gas majors have started to increase their investments again, mainly focussing on deepwater offshore drilling campaigns and maintenance activities for shallow water offshore fields. The recovery is already seen in demand for OSV vessels in several market segments and in several regions, notably, West Africa, the Caribbean zone and the North Sea.”
“The recovery can only be sustained if there is a reduction in over-supply and if modern vessels are re-activated”
Bourbon warns that this recovery can only be sustained if there is a reduction in over-supply and if modern vessels are re-activated.
Tidewater expects a peak utilisation of 93% in mid-2019
Tidewater however is more bullish in the short-term, anticipating that PSV utilisation in the North Sea could reach 93% in mid-2019, according to president and chief executive officer John Rynd and investor relations director Jason Stanley, commenting at the Scotia Howard Weil 47th Annual Energy Conference in March 2019.
Tidewater's overall fleet utilisation reached a post-collapse high in the final quarter of 2018
The OSV market has enjoyed a brief surge in work for specialised units of late. Maersk Supply Service’s (MSS) Stingray-class subsea support vessel (SSV) Maersk Involver has been fixed for 161 days by Total Denmark to support maintenance of the Dan F platform, located offshore Esbjerg, Denmark, for walk-to-walk and accommodation services. The contract is expected to start at the beginning of April.
This is the second walk-to-work contract awarded by Total Denmark to MSS; the first was awarded in July 2018 for anchor-handling tug supply vessel Maersk Tracker, to provide multi-purpose field support for three years in the North Sea.
“The work performed by Maersk Tracker demonstrated we can respond to specific client requirements and consistently deliver safe and successful operations,” said MSS chief commercial officer Carsten Gram Haagensen. “This second contract gives us the opportunity to showcase the advanced capabilities of Maersk Involver in the Danish North Sea and continue our co-operation with Total Denmark as a reliable long-term partner.”