Monday, July 10, 2000 Provincial help for FGH's Canadian yard? According to Canadian online news service CNEWS, Newfoundland Premier Brian Tobin says he is considering offering incentives to bring work to the province's ailing shipbuilding industry. The comments came on Saturday as shipyard workers from Marystown, on the Burin Peninsula, staged a protest march to St. John's. Tobin told radio station VOCM, that the province is trying "to put in place necessary incentives to try and bring work to Newfoundland, specifically to Marystown." CNEWS says "a steady stream of workers has been laid off from the shipyard" which has "seen employment slide from a peak of 1,100 to current levels of a few dozen people. " Friede Goldman Halter bought the yard in 1997 for a dollar. The province agreed to assume the yard's $70-million debt, and hoped the yard's fortunes would revive. Instead, says CNEWS, many of the workers have been laid off twice in the last 18 months. Tobin wasn't specific about what incentives he has in mind for the yard, but CNEWS quotes Jerome Walsh, the president of local 20 of the Marine Workers Union as saying he hopes it means the province will help the company build a dry dock at Marystown. He said the province has been in talks since last December about providing assistance for the project, estimated to cost $60 million. Walsh said workers want more definite information from Tobin before they call off their protests. "We've heard promises of assistance three times before," he said. He said it will take that long before work from Newfoundland's Terra Nova offshore oilfield consortium kicks in. The companies in the group have held discussions with Friede Goldman about building a vessel that will pump and store oil from the oil field. MarAd approves acquisition of Farrell Acting Maritime Administrator John E. Graykowski has consented to the merger of Farrell Lines Inc. and P & O Nedlloyd Acquisition Corp., a wholly owned U.S. subsidiary of P & O Nedlloyd Limited (PONL). PONL is a corporation organized in the United Kingdom. The approval includes the transfer of three Maritime Security Program operating agreements to E Ships, Inc. Under the merger process, Farrell will spin off its own wholly owned subsidiary FLI Ships, Inc., which will be renamed E Ships. This will be accomplished through the transfer of FLI/E Ships stock to E-Class Holdings, Inc., a new independent corporation, which will become the parent of E Ships. After the merger with P & O Nedlloyd Acquisition, Farrell will become the successor entity of the merger and a wholly owned subsidiary of PONL. FLI currently owns the containerships Endeavor, Endurance and Enterprise, and Farrell holds the associated MSP operating agreement. E Ships will own and operate the vessels under the MSP agreements after the spinoff. E Ships will obtain its operating personnel from among former Farrell operating employees and will time charter its vessels to Farrell for operation. Two other MSP vessels, Chesapeake Bay and Delaware Bay, owned by First American Bulk Carriers Corp. will continue to operate under existing time charters with Farrell. Farrell also operates two vessels under bareboat charters. The charter of the Argonaut is part of a sale/leaseback agreement, and will continue. The Resolute is subject to a long-term bareboat charter from the Maritime Administration (MARAD), and is to be returned to MARAD. The vessels remaining in Farrell's service will continue to operate between the United States and Europe, principally in the Mediterranean. Frontline plan for Golden Ocean meets competition Bermuda-based Frontline Ltd is continuing its attempt to absorb Golden Ocean Ltd. On July 7, Frontline filed its financial restructuring plan for Golden Ocean, which is currently under Chapter XI administration. However, two competing plans were also filed within the time limit set by the Bankruptcy Court. Frontline's Board decided in this situation to increase the cash alternative offered to the unsecured creditors from 15 to 17 % of face value. At the same time the board decided to eliminate the Frontline share and warrant alternative, which was a part of an initial agreement with the Golden Board. Under Frontline's proposal, all assets and senior loans will be absorbed by the reorganized Golden Ocean Group. Unsecured creditors will receive a cash dividend of up to 17% of face amount. In Frontline's plan, total unsecured claims are capped at a maximum $305 million A disclosure hearing in court has now been set for July 28. At this hearing the contents of the plans will be evaluated, and the approved plans will then be distributed to the creditors for the solicitation of votes. After an initial review of the two alternative proposals, Frontline's Board is confident that Frontline's plan offers the best value to Golden Ocean's creditors. As of July 7, Frontline and affiliated parties controlled 32% of Golden Ocean's outstanding bond issue. The Frontline Board says it remains confident that Frontline "as the largest unsecured creditor in Golden Ocean and as the industry leader" will take a leading role in the restructuring of Golden Ocean. OECD still seeks to level shipyard playing field With the OECD agreement to end shipbuilding subsidies a dead duck (mainly because of U.S. failure to ratify the deal), the OECD Council Working Party on Shipbuilding is now looking for "viable policy alternatives" to alleviate shipbuilding market distortions and establish a "level playing field" among world shipbuilders. These will include meetings with non-OECD shipbuilding countries--particularly China. Non-OECD countries currently account for about 15% of world ship output. The working party, which met last week, is responding to instructions from the OECD Council, which met at ministerial level on 26-27th June. The working party voiced "serious concern" that the world shipbuilding market still remains in "a critical condition, characterized by significant over-capacity and depressed prices." This does not allow the industry to be commercially viable. World shipyard capacity had already exceeded demand by 30% back in 1998. The working party says this gap will continue to exist for the foreseeable future. It wants the various national shipbuilders associations to come up with a joint forecast of newbuilding requirements. In the meantime, the working party secretariat will collaborate with the associations to come up with its own shbort-term demand forecast to 2005. This forecast will be the basis for future working party policy discussions. While establishing normal competitive conditions would pave the way for the correction of the supply/demand distortion, the working party says "this is unlikely to work effectively in the current shipbuilding market as long as substantial over-capacity is allowed to exist." "The elimination of official support measures to shipyards in difficulties would, in that sense, contribute to the reduction of actual excess capacity," says an OECD statement./ The working party says that since the beginning of this year newbuilding prices have started to show modest increases, "but at this stage it is impossible to judge whether such increases will be sustained in the longer term. Even these higher prices are far lower than those of several years ago and certainly do not allow a viable economic development of the industry world wide." A large number of delegations to the working party were concerned that some pricing practices are still in place that distort international competition in the sector. There was agreement that all shipbuilders should ensure commercially viable pricing practices, in order to prevent any further damage to market conditions and an escalation of trade conflicts within the sector. Without market driven rationalization of over-capacity, the working party says "it is unlikely that there will be any fundamental solution available to sever the continuous circle of artificially low prices and an increasing supply/demand imbalance. Looking at possible options to pursue to establish normal competitive conditions, there was agreement that "a binding,solution to ensure the establishment and operation of normal competitive conditions was preferable to any non-binding agreement or understanding." The working party instructed the Secretariat to develop these options further for discussion and narrowing down at its December 2000 meeting, with the aim of arriving at a decision as soon as possible and not later than 2001. This activity was given the highest priority. At its December meeting, "the working party will also continue to explore further whether the 1994 revised Understanding or other options could be brought into force, bearing in mind the legal problems which might occur for Member countries." Rig count Baker Hughes Inc. announced today that the international rig count for June 2000 was 657, up 30 from the 627 counted in May 2000 and up 55 from the 602 counted in June 1999. The international offshore rig count for June 2000 was 192, up 26 from the 166 counted in May 2000 and down 8 from the 200 counted in June 1999. June 2000 Rotary Rig Counts June 2000 May 2000 June 1999 ------------- ---------------- ---------------- Land Off- Total Vari- Land Off- Total Land Off- Total Shore ance Shore Shore -------------------------------------------------------------------- Europe 35 55 90 14 38 38 76 45 49 94 Middle East 135 24 159 3 135 21 156 117 20 137 Africa 24 22 46 - 25 21 46 24 16 40 Latin America 190 35 225 10 182 33 215 143 44 187 Asia Pacific 81 56 137 3 81 53 134 73 71 144 -------------------------------------------------------------------- International 465 192 657 30 461 166 627 402 200 602 U.S. 739 139 878 34 706 138 844 458 100 558 Canada 286 5 291 102 185 4 189 181 6 187 -------------------------------------------------------------------- North America 1,025 144 1,169 136 891 142 1,033 639 106 745 Worldwide 1,490 336 1,826 166 1,352 308 1,660 1,041 306 1,347 June 2000 Workover Rig Counts June 2000 Variance May 2000 June 1999 ---------------------------------------------------------------------- U.S. 1,048 (58) 1,106 795 Canada 306 27 279 213 ---------------------------------------------------------------------- North America 1,354 (31) 1,385 1,008 News Index  Marine Log Home page

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