Banker Gives Sobering Assessment of Offshore Vessel Market

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Geir Sjurseth, managing director and global head of offshore finance at DVB Bank SE told the Annual OSJ Conference, Awards & Exhibition that the crisis in the offshore vessel industry could last at least as long as the crisis in the 1980s.

Speaking at the industry-leading event on 8 February, Mr Sjurseth said it is not unlikely that around a fifth of industry players could disappear if the crisis continues for another 4-5 years. “There are too many players, too much capacity,” he told delegates.  “Many of the start-ups in the last five years will disappear.”

He described the state of the platform supply vessels (PSVs) segment as “very negative” with a steep fall in utilisation and rates, over-capacity and values down 30 per cent from the end of 2015, although there are large differences among regional markets. As highlighted previously by OSJ, the PSV segment is also now the subject of a fair amount of speculation.

He said the seismic market is “very negative,” with the market dominated by five players, with consolidation ongoing, stacking and lay ups.  In the subsea and construction segments sentiment has also turned very negative.  Time charters are getting shorter and charterers are demanding cuts to rates.

Of the offshore vessel market as a whole he said: “Owner equity is basically lost.  Larger impairments are needed.  Only a few vessels have been scrapped or are leaving the market. Debt levels are still too high and there is too little new equity.  If there is a further deterioration in key markets or a prolonged slump the real clean-up will start and will have significant consequences,” he told delegates.

In these circumstances, he explained, there are a growing number of offers from companies proposing to manage other companies’ vessels on behalf of banks.  Others are considering setting up an outside vehicle funded by private equity (a so-called side-car arrangement) to acquire vessels to be managed by a sponsor company.  “Few players in the market want to use cash to buy anything – irrespective of the price,” he concluded.

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Source: OSJ Magazine

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