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May 1, 2009

ABS readies for challenges ahead

ABS Chairman and CEO, Robert D. Somerville told the society's annual members' meeting that 2008 was a "successful, challenging and extraordinary" year. Success stemmed from a record classed fleet, a record orderbook and continued solid financial performance. He noted that the challenges grew as the year came to a close and the global economy, and the shipping markets, weakened.

Somerville told the assembled members that the class society closed the books on 2008 with a fleet that exceeded 144 million gt, the largest ever, and that the growth had continued through the first quarter of 2009 with the classed fleet reaching 148 million gt at the end of March. The year-on-year increase in the ABS classed fleet neared 9 million gt.

The past year also saw the orderbook of new vessels contracted to ABS class increase by more than 13 million gt to a new record of 51million gt for which formal requests for class had been received. An additional 21million tons of orders were pending to ABS class.

Mr. Somerville noted the growing industry concern that the size of the world orderbook may have reached a "distorted and possibly unsustainable level" but was confident that "a substantial proportion of those orders to ABS class will be built, particularly those contracted for delivery within the next twelve months." Continued conversion of pending orders into firm requests for class through the first part of this year contributed to that confidence.

Mr. Somerville said that ABS had undertaken a comprehensive risk analysis to assess every newbuilding order it holds. "As a consequence, we feel that we have as good an insight, as current economic and market conditions allow, into the impact the downturn will have on our orderbook and we are adjusting our operations and staffing accordingly," he said.

Thoigh the current level of activity at ABS remains "very high," Mr. Somerville predicted that the wider market downturn would begin to translate in a slow down in 2010 lasting until possibly 2012. Reminding the ABS members of the last period of massive overbuilding in the 1970s he predicted that "it is reasonable to expect a similar period of supply-demand realignment that will leave us with a much more modest orderbook for some years to come."

Saying that "there is also a silver lining to this gathering cloud," Mr. Somerville outlined a program of research and development that will be undertaken during the expected period of reduced newbuilding activity. "We see this as an opportunity to chart a new course, one that will be even more closely aligned to the provision of integrated life cycle services that help our clients to operate more safely and efficiently and that also dovetail more closely with our engineering and survey responsibilities," he said.

ABS President and Chief Operating Officer, Christopher J. Wiernicki, provided the members with statistics showing that ABS had continued its traditional strength in the tanker sector, holding a clear market lead with a 33 percent share of all tanker tonnage on order at the close of the year. The society also rose to the number two ranking within the bulk carrier orderbook with a 23 percent share comprised of 540 vessels aggregating 21m gt.

ABS held the largest share of all newbuildings contracted from both Korean and Chinese shipyards with a 24 and 27 percent share in each country respectively. It also retained its position as the preferred class society for owners ordering in U.S., Singaporean, Danish and Taiwanese shipyards.

Wiernicki said the society maintained its leading position within the offshore sector with the largest share of exploration units (MODUs), production units, and offshore support vessels (OSVs) in service and on order. The orderbook included contracts for 87 jackup units, 14 deepwater drillships and over 600 OSVs.

With more than 800 vessels of all types delivered into ABS class in 2008, the age profile of the society's fleet continued to trend down with 58 percent of the existing fleet at end-2008 being aged 10 years or younger and with almost 30 percent of the fleet less than five years old.

Wiernicki also highlighted the growing importance of naval contracts to the society including reaching an agreement with the U.S. Navy for future combatant vessels built to the ABS Rules being retained in ABS class on delivery, subjecting them to class survey.

The growing relationship between ABS and the Navy resulted in the award of a $55 million contract, the largest ever awarded to ABS, which was signed in December and addresses the level of effort that will be applied to supporting the classification of naval vessels over the next five years.

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