SINGAPORE – Low oil prices are putting the offshore marine supply sector under severe strain, warns analyst Douglas-Westwood (DW).
It points out that rig managers, offshore supply vessel contractors, and subsea vessel owners are trading at 60-70% discounts to 2013 highs, with a constant stream of profit warnings, impairments, or defaults.
Their oil company clients, while also under pressure, are in the driver seat when it comes to bargaining power.
DW estimates that average jackup fixtures have fallen by 50% whereas average offshore and marine costs per rig are down by 25-35%. This suggests buyers have been able to achieve greater efficiency in cutting their supply chain costs.
E&P companies are taking advantage of oversupply throughout the entire offshore marine segment. But despite the lower demand, there remains a limited number of competent crews, DW says, particularly trained personnel for DP operations and subsea work.
Contractors are unwilling to release capable staff for fear of losing out when the upturn arises, and also of jeopardizing HSE performance, which reduces the marketability of their assets.
Day rate growth appears unlikely over the next 12-18 months and the supply/demand situation may deteriorate further. In these circumstances, DW suggests offshore marine players may need to break away from their prevalent operating models.
Mid-size contractors, for instance, may have to consider increased. When the market does finally recover, DW expects those that have adapted to be the ones still standing.
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