Seacor eyes spin off of offshore business
NOVEMBER 30, 2015 — Seacor Holdings Inc. (NYSE: CKH) is positioning itself for a potential spin off of its offshore marine subsidiary, Seacor Marine Holdings Inc. (SMH). Seacor Holdings has agreed to
NOVEMBER 30, 2015 — Seacor Holdings Inc. (NYSE: CKH) is positioning itself for a potential spin off of its offshore marine subsidiary, Seacor Marine Holdings Inc. (SMH). Seacor Holdings has agreed to
Built for Great Yarmouth, U.K., based Seajacks International, the jack-up vessel is based on the Gusto MSC NG14000X design and has more than 8,000 metric tons of available variable deck load. Equipped with a 1,540-metric-ton Huisman leg-encircling crane and a usable deck space in excess of 5,000 sq m the unit is outfitted with 105-m legs with the ability to install components in water depths to 65 m in North Sea conditions.
The rig is capable of meeting the installation needs of jumbo-monopiles, jackets, and turbines of future wind farms in deeper waters farther from shore.
“Industry growth depends on innovation and new designs,” says ABS Chairman, President and CEO Christopher J. Wiernicki. “As a technology leader, ABS is pleased to work with Seajacks as it develops and launches vessels with increasingly greater capabilities.”
Seajacks CEO Blair Ainslie credits the strong working relationship among the project participants for the successful delivery of this unit.
“The cooperation among Seajacks, ABS and SHI was vital to the success of this newbuild effort,” he says. “As we bring new designs to the market, we rely on partners who are willing to take on projects like this one that break new ground in the industry.”
Since 2009, Seajacks has invested in five self-propelled jackup units, all of which have been classed by ABS. The Seajacks Scylla is a milestone for the company as it is considered to be the most technically advanced installation vessel in the market.
The Seajacks Scylla complies with ABS classification requirements for self-propelled jack-up units, including DPS-2 for dynamic positioning capability; ACCU, which applies to automatic centralized control unmanned units; and CRC for crane register certificate.
In early December, Seajacks Scylla will begin her journey from South Korea to Europe on-board the heavy load carrier vessel, HLV Osprey, and is expected to arrive in Rotterdam around the end of January. Seajacks operations teams will then prepare the vessel for her first project next spring.
According to the indictment, the defendants were involved in different capacities while construction work was being done of the West Delta 32 platform when it exploded.
Black Elk Energy Offshore Operations LLC and Grand Isle Shipyards Inc. are charged with three counts of involuntary manslaughter, eight counts of failing to follow proper safety practices under the Outer Continental Shelf Lands Act (OCSLA) and one count of violating the Clean Water Act. Wood Group PSN Inc., Moss, Dantin and Srubar are charged with felony violations of OCSLA and the Clean Water Act.
The Outer Continental Shelf Lands Act and federal regulations govern welding and activities that generate heat or sparks, known as “hot work,” on oil production platforms in U.S. waters. Because this work can be hazardous and cause explosions, regulations mandate specific precautions that must be taken before the work can commence. For instance, before hot work can be performed, pipes and tanks that had contained hydrocarbons must be isolated from the work or purged of hydrocarbons. Gas detectors and devices used to prevent gas from traveling through pipes must be used. According to the Indictment, these safety precautions were not followed and an explosion causing the deaths of three men and a spill resulted
“Workers lives can depend on their employer’s faithfulness to the law, not least of all those working in oil and gas production where safety must be a paramount concern,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and natural Resources Division. “The Justice Department is committed to enforcing the nation’s bedrock environmental laws that protect the environment, and the health and safety of all Americans.”
“The energy sector represents a vital industry in this region, but its work must be performed responsibly,” state U.S. Attorney Kenneth Polite for the Eastern District of Louisiana. “Today’s indictment underscores that we will hold accountable all parties – both businesses and individuals – whose criminality jeopardizes our environment or risks the loss of life.”
“Developing domestic sources of energy must be done responsibly and safely,” said Assistant Special Agent in Charge Dan Pflaster of EPA’s Criminal Enforcement Program in Louisiana. “EPA will continue to work with its law enforcement partners to hold companies fully accountable for illegal conduct and to assure compliance with laws that protect the public and the delicate Gulf Coast ecosystem from harm.”
The Department of Justice notes that “an indictment is only an allegation of wrongdoing and the defendants are presumed innocent unless proven guilty at trial.”
The case was investigated by the U.S. Department of Interior Office of Inspector General and EPA’s Criminal Investigations Division. The case is being prosecuted by Emily Greenfield of the U.S. Attorney’s Office for the Eastern District of Louisiana and by Kenneth E. Nelson of the Environmental Crimes Section of the Department of Justice.
NOVEMBER 18, 2015—Are you ready for an oil rebound? Barclays Corporate Banking is predicting that next year the demand for oil will triple and crude oil will hit $60 per barrel. Barclays
The good news is that subsidiary Sembcorp Marine Rigs and Floaters Pte. Ltd. has secured a contract to design and build a new floating, storage and offloading (FSO) vessel for MODEC Offshore Production Systems (Singapore) Pte. Ltd. (MOPS), a subsidiary of MODEC, Inc.
The bad news is Marco Polo Marine Ltd yesterday canceled a $214 million contract placed by subsidiary MP Drilling at Sembcorp Marine’s PPL Shipyard for the construction of a high-spec Pacific Class 400 jack-up.
“In arriving at this decision to terminate the rig construction contract,” said Marco Polo, it had taken into account “various factors including cracks found on all three legs of the New Rig during two rounds of tests, notwithstanding repair works carried out by PPL after the first round of tests.”It said it would not be taking delivery of the rig and would be seeking return of its initial $21.4 million payment, plus interest.
Today, Sembcorp Marine said that PPL Shipyard had not received any notice of termination of the construction contract at the time it learnt of the announcement.
“PPL Shipyard disagrees with the allegations in the announcement and will regard this as repudiatory breach of the contract, and will terminate the Contract and claim amounts due under the Contract against MP Drilling and its guarantor Marco Polo Marine,” said Sembcorp Marine. “PPL Shipyard will take the necessary steps to enforce its rights.
MODEC FSO
Scheduled for delivery in first quarter 2018, the new floating, storage and offloading (FSO) vessel ordered by MODEC Offshore Production Systems (Singapore) Pte. Ltd.(MOPS) will be Sembcorp Marine’s first FSO newbuilding secured on a full turnkey project basis including Engineering, Procurement, Construction and Commissioning (EPCC). MODEC will supply the internal turret and topside modules (vapor recovery unit and metering skid) which Sembcorp Marine will install and integrate.
Mr. William Gu Wei Guang, Head of Sembcorp Marine Rigs & Floaters, said: “This is our 24th project working with MODEC and the first newbuild FSO for SCM Rigs & Floaters. The FSO will be built using our facilities at Tuas Boulevard Yard. We thank MODEC for placing their confidence and trust in us.”
When completed, the FSO will be deployed at Maersk Oil’s Culzean field, the largest new oil and gas field to have been discovered in the North Sea for a decade, and recently approved by the UK Oil & Gas Authority for development.
NOVEMBER 18, 2015—Aluminum boatbuilder Gulf Craft, LLC, Franklin, LA, has long been known as a leader in building high-speed fast supply boats and crewboats. Its latest delivery is the 206 ft x
The highly specialized 257 ft x 52 ft vessel features a helideck, a 60 ton AHC crane with 3,000 m of wire, POB (60), a mezzanine deck with internal office and control rooms capable of supporting two full work class ROV systems. The vessel also offers 6,200 sq. ft. of clear useable deck space.
The Brandon Bordelon is equipped with two Sonardyne Ranger2 Pro thru-hull USBL full systems. Ranger 2 is a high performance acoustic position reference system designed for tracking underwater targets and positioning dynamically positioned (DP) vessels. It uses the Ultra-Short BaseLine (USBL) positioning method to calculate the position of a subsea target, for example an ROV, by measuring the range and bearing from a vessel-mounted transceiver to an acoustic transponder fitted to the target.
The vessel delivers a fully integrated ROV control room, ROV support offices, below deck work and storage spaces, extensive communications and ROV data network, plug and play, with patch panel racks installed — all tied into the vessel systems, bridge, office, and accommodation spaces.
The vessel is designed with removable bulwarks around the entire aft of vessel along with power, water, air, and hydraulic oil connections on the deck.
Four additional below deck Tier 3 generators provide fully redundant power to the crane and ROV systems.
“We are very excited to introduce the M/V Brandon Bordelon,” says CEO Wes Bordelon. “This vessel is the next generation design of the Stingray series and continues our commitment of the ULIV concept to the subsea market. With the addition of a helideck and other integrated systems the Brandon provides an additional highly capable and low cost vessel option to our clients.”
Download the vessel’s specs HERE
The form S3 positions the offshore services company to sell up to $250 million in securities “from time to time after the effective date of this registration statement, as determined by the registrant.”
The filing says that the company “will use the net proceeds from the sale of securities sold by us for general corporate purposes, which may include the repayment of debt, acquisitions, capital expenditures and working capital. We may temporarily invest funds we receive from the sale of securities by us that we do not immediately need for these purposes.”
According to the filing, in the nine months ended September 30, 2015, Gullmark Offshore’s losses from continuing operations were $198.6 million.
That’s heartening news for Offshore Support Vessel (OSV) operators such as Tidewater, Edison Chouest, Bourbon, Hornbeck Offshore, Seabulk and Maersk, which are dealing with the current challenging offshore oil and gas market. In a presentation at the recent Johnson Rice 2015 Energy Conference, Tidewater reported it had 38 vessels stacked as of the end of June and planned to scrap 11 older vessels.
In its monthly report for September, Baker Hughes reported that there were 29 drilling rigs operating in the Gulf of Mexico, down from 59 a year ago.
Mordor Intelligence’s report, the “Global Offshore Support Vessel Market,” focuses on the market sectors by vessel type, including Anchor Handling Tug/Anchor Handling Towing Supply Vessels (AHT/AHTSs), Multi-Purpose/Multi-Role Supply Vessels (MPSV), Platform Supply Vessels, Construction Support Vessel (CSV), Specialty Vessels and others. It also breaks down activity by region: North America, Europe, the Asia-Pacific (APAC), South America and Middle-East & Africa (MEA). The report analyzes and projects the market share of each region for the next 5 years.
Most promising regions for OSV market are the Gulf of Mexico, Brazil, West Africa, the North Sea, South East Asia, the Middle East and Asia. Mordor Intelligence estimates that major part of the demand will be for AHTS, PSVs, and seismic research vessels.
As oil and gas explorations move towards deeper waters, explains Mordor Intelligence, multi-functional offshore support vessels are now called upon to perform different tasks, and have created various niches or categories within the market. Present day offshore support vessels are equipped with increased cargo capacity, panoramic navigation bridge visibility, large accommodation spaces, enhanced crew amenities and state-of-the-art propulsion and automation systems.
According to Mordor Intelligence, AHTS vessels comprise a 56% of the market share, followed by Platform Support Vessels. Inspection, Maintenance and Repair (IMR) Vessels are generally equipped with large accommodation spaces, heavy lift cranes, helidecks and streamlined bow forms for operation in harsh environments. Vessels specialized for multi-tasking carry out maintenance and repair operations on platform facilities, as well as subsea pipelines and equipment.
The current downturn in the offshore oil market is probably one of the most severe since the 1980s. Oil companies are deeply cutting E&P spending for 2016. During its midyear analysis of the oil market, investment banker Cowen & Company reported that it expected global E&P expenditures in 2015 are now estimated to be down by 22% from the 2014 level to $545 billion. The “Original E&P Spending Survey,” initiated by Cowen’s James Crandell, estimates a 13 percent decline in E&P spending by the super majors— ExxonMobil, Royal Dutch Shell, Chevron, BP, ENI, ConocoPhillips and Total—for next year.
Offshore drillers are feeling the pinch—as are the shipyards that support them. Last month, another South Korean shipbuilding giant was hit with the cancellation of an offshore drilling unit order.
Pacific Drilling S.A. exercised its right to rescind the construction contract for the ultra-deepwater drillship Pacific Zonda “due to the failure by Samsung Heavy Industries (SHI) to timely deliver a vessel that substantially meets the criteria required for completion of the vessel in accordance with the construction contract and its specifications.”
Pacific Drilling says it made advance payments totaling $181.1 million under the shipbuilding contract, and will be seeking a refund of the installment payments.
The company inked a contract for the drillship with Samsung Heavy on January 25, 2013 that provided for a delivery date of March 31, 2015.
The cancellation comes after the October 27 news that Fred Olsen Energy had cancelled an semisubmersible drilling rig order at Hyundai Heavy Industries and the October 26 announcement that Transocean, Shell and Daewoo Shipbuilding & Marine Engineering Co. (DSME) had agreed to push back the operating and delivery contracts of two newbuild ultra-deepwater drillships – the Deepwater Pontus and the Deepwater Poseidon – by 12 months each.
Transocean is also scrapping rigs. Cowen & Company reports that the latest is GSF Rig 135, bringing the total number of scrapped rigs by company since October 2014 to 21, by far the largest number of retired units by any company this down cycle. Cowen and Company says, “With 14 rigs still cold stacked, we expect further rig retirements are likely.”
OSV operators hunker down
To survive in such a challenging environment, offshore support vessel operators have been hunkering down, enacting cost controls, including cold stacking vessels and preserving cash.
That was the strategy outlined last month by Hornbeck Offshore Services Chairman Todd Hornbeck during a recent conference call discussing the company’s third quarter of 2015 results. Hornbeck Offshore Services (HOS), with a fleet of 66 offshore support vessels (OSVs) and Multi-purpose Support Vessels (MPSVs), currently has 27 vessels stacked and expected to stack an additional 3 vessels by the end of the year.
When you cold stack a vessel, it means that you preserve that asset until there is an upturn in the market (and a rise in dayrates) that justifies putting that piece of equipment back in service. Cold stacking cuts OPEX costs. The downside is that you lay off valuable mariners and shoreside staff that are involved in operations.
CFO Jim Harp says that those 30 stacked vessels would save about $125 million in costs on an annual basis. HOS had also delayed cash outlays of $10 million on regulatory dry docks in 2015 by stacking vessels and expected to save $15 million in regulatory dry docking costs in 2016.
On a deadweight tonnage basis, the 30 stacked vessels represent 81,000 dwt or 28 percent of the company’s 295,000 dwt fleet. Hornbeck’s entire remaining operational fleet will be high spec 300 Class vessels and Multi-Purpose Service Vessels, all 6,000 dwt and above, DP2 Jones Act vessels.
Hornbeck believes that market conditions will continue to deteriorate and that the next two quarters are “going to be choppy.”
HOS has taken delivery of 17 of the 24 vessels under its HOSMAX newbuild program and another three OSVs will be delivered before the end of this year. There are an additional four MPSVs under construction for delivery in 2016. HOS has newbuild programs at Eastern Shipbuilding in Panama City, FL, Leevac Shipyards in Jennings, LA, and VT Halter Marine at Moss Point, MS.
HOS is trying to push back the delivery dates from the shipyards. “We are delaying their delivery as much as we can. We’re slowing the build process down to better align for the market recovery,” says Hornbeck, “and tweaking systems to make sure they are going to be the most optimal for the customer.” Hornbeck says the system modifications are based on the operational experience of the previously delivered HOSMAX vessels in the newbuild program.
A silver lining for HOS has been the sale of four 350 EDF Class OSVs to the Navy. During the quarter, HOS received $38 million for the sales of the fourth vessel to the U.S. Navy. As a result, HOS received $152 million for the purchase of the vessels and continues to operate them under contract. “It was a timely development during the industry downturn,” says Harp.
Investment analyst J.B. Lowe of Cowen & Company rates HOS as an “outperform.” In his latest equity research, Lowe outlines some of the highs and lows for the company during the quarter. “Effective utilization across the 41.5 average vessels that were active during the quarter (i.e., excluding the 18.1 average stacked vessels) was 72.2%, below our forecast for 43.0 average vessels and 76.8% utilization. Average OSV dayrates of $25,699 fell 3% shy of our estimate of $26,428, while off-hire days were 17% higher than we had forecast. While the company continued to withhold data on its MPSV segment for competitive purposes, we note that our estimated MPSV segment revenue of $37.5mm was 7% below our $40mm forecast. The OSV segment was even weaker, by our estimate, with revenues of ~$71mm trailing our ~$80mm forecast by 12%.”
Continues Lowe, “Although cost guidance for full-year 2015 was lowered by ~7% at the midpoint (to $223.9-$228.9mm from $238-$248mm), we do not expect it will be enough to alleviate investor concern over the weakness of the GOM market.
“Additionally, 2016 cost guidance was not released and will likely be a focus on the call this morning. Full-year 2015 G&A guidance was also lowered to $49.1-$50.1mm (from $50-$53mm).”
Shares of publicly traded OSV operators have been under pressure and are now trading substantially lower than they were one year ago (see Table 1). Last month, GulfMark Offshore, Inc., went so far as to part ways with its Senior Executive Vice President and Chief Operating Officer David Rosenwasser.
It would be no surprise during this downturn to see some consolidation among OSV operators as well as the shipyards that support them.
Harvey Gulf International Marine, New Orleans, LA, which purchased the Gulf Coast Shipyard Group, in June, has put the Trinity Yachts business up for sale. The sale would include the New Orleans facility, 20 fully engineered designs and a partially built 168 ft megayacht.
Squeezing out old tonnage
The current conditions are squeezing out older tonnage that might not ever return to the market.
According to Clarksons Platou, there are currently 5,301 OSVs in service and another 602 on order. The average fleet growth over the last 10 years has been 7 percent.
In its monthly blog examining the surplus of offshore support vessels in the market, Clarksons questions whether OSV operators will follow the lead of Mobile Offshore Drilling Unit (MODU) operators are begin to scrap vessels.
“OSV demand has fallen—at least 11% of the total fleet was laid up at start September,” writes Clarksons. “So far in 2015, 23 removals have been recorded from the OSV fleet (18 AHTS/AHT and 5 PSV/Supply vessels). For AHTS/AHTs this is a 29% increase on 2014 on an annualized basis. PSV removals, however, are down by 46%. In either case, the number of removals seems below what might be expected given the challenging market conditions.”
Clarksons points to several reasons for the low number of removals from the OSV market. It says the “likely reason for the low uptake in OSV removals relative to the MODU sector is that there is comparatively more value in scrapping rigs (in particular, floaters), compared to OSVs, on account of their larger size and steel content.
“Furthermore, it is relatively easy and cost-effective to lay-up or stack OSVs, which has been the preferred option for owners—at least 340 AHTSs and 254 PSVs are estimated to be laid up, although in reality this number may be even greater. Similarly, the sale of vessels for use in other sectors (e.g. utility support) provides some means of reducing active vessel numbers, although sales activity for OSVs in 2015 is currently down by 25% on an annualized basis.”
But Clarkson sees stacking as a temporary solution because the current size of the orderbook is “equivalent to 11% of the active fleet and, although some slippage is expected, 293 units are slated for delivery by end 2015.”
Clarksons concludes that with no significant upturn in oil prices likely in the near term, it expects pressures to continue. It says that fleet growth stands at 2.3% year-over-year, and “the issue of OSV oversupply is expected to remain significant. Against this background, the discussion of removals is likely to be ongoing theme.