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Offshore Finance – Markets

(Market review as at 30 September 2016) 

The oil price reversed its slide early 2016 and reached a level of US$49 per barrel (Brent) by the end of the second quarter 2016, stabilising at that level since then. However, that is not enough to provide comfort for the offshore industry. Oil and gas companies continue to reduce their spending budgets, which affects demand for offshore units. Shipowners and rig owners are adapting to the continued deterioration of the market environment. Many players have entered restructurings in 2016.

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Offshore support vessels

Demand for larger anchor handling tug and supply (AHTS) vessels continued to decline during the third quarter of 2016. Supply remained relatively stable since the beginning of 2016. As a consequence, the average fleet utilisation deteriorated to 60% in the third quarter of 2016.

The decrease in demand for larger platform supply vessels (PSVs >2,000 dead weight tonnes, dwt) continued, with a decline of 2% during the third quarter of 2016. Unfortunately, supply increased by 1.2% over the same period. This resulted in a decline in average fleet utilisation for large PSVs from 65% to 63% for the third quarter.

Under pressure from low term rates and competition for employment, shipowners were stacking unemployed units to save costs. As of end of September 2016, 89 large AHTS and 290 large PSVs were cold-stacked worldwide.

Term rates for AHTSs and PSVs (world average)

Offshore markets: term rates for AHTSs and PSVs as at 30 September 2016

Rigs (jack-ups and floaters)

Demand for jack-ups continued to decrease, accumulating a total reduction of 15% since the beginning of the year. The fleet remained relatively stable. During the third quarter of 2016, average fleet utilisation stood at 57%.

Demand for floaters (semi-submersibles and drillships) kept declining over the past quarter. Supply adjustments only had a limited effect with a minor decrease in fleet size. Fleet utilisation reduced again and stood on average at 56% for the third quarter of 2016.

Oil and gas companies have reduced their drilling requirements, sometimes leading to early termination of contracts. This notably affected floaters. Rig owners have thus reduced available supply through scrapping (30 rigs since early 2016) and cold stacking (currently up to 130 drilling units).

Dayrates for jack-ups have been stabilising at low levels, while dayrates for semi-submersibles and drillships are still coming down.

Average actual dayrates for rigs

Average actual dayrates for rigs as at 30 September 2016

Subsea vessels

Oil and gas companies have been delaying projects over the past two years, which creates a strong negative impact on demand for subsea vessels. Meanwhile, the backlog of long-term contracts signed over the past few years has reduced. As a consequence, the subsea fleet suffers from low utilisation levels. Competition for employment is strong and term rates are below breakeven levels. This especially affects high-end units dedicated to construction work. Less sophisticated units are not as strongly affected as their core market (maintenance, inspection and repairs) which is more stable.

Floating production units

While floating production storage and offloading units (FPSO) remain a preferred solution for the development of offshore fields, the low oil price environment affected this market as well. New projects were delayed and tendering activity has come to a halt. Several contracts for units coming off operations were not renewed, contributing to an increase of the idle fleet. Some field operators have also initiated rate negotiations for existing contracts.

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Henriette Brent-Petersen, Head of DVB's Shipping & Offshore Research 

 

Offshore markets in 2015
Henriette Brent-Petersen

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Video

Geir Sjurseth, Head of DVB's Offshore Finance 

 

Offshore industry in 2015
Geir Sjurseth

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Contact

Henriette Brent-Petersen
+31 88 399 7960

henriette.brent-petersen@dvbbank.com

Celine Labelle
+31 88 399 7984

celine.labelle@dvbbank.com