The first four months of the year constitute a sufficiently extensive period to form a comprehensive idea of how the offshore industry has been faring so far in 2018. A general observation would be that the overall market mood has been positive, with expectations built last year for a further improvement of the market so far met. There is definitely a long way before we call this a recovery, but if we compare the market today to that of the 2015 – 2017 period, we are certainly seeing improvements, with oil prices substantially higher, ranging between high $60/bl – low$70/bl.
During 2017, more than 25 offshore projects were approved for 2018, almost double compared to what was approved in 2016 for 2017. This increase has definitely supported sentiment and helped a bit with the overcapacity issue that has been the main problem during recent years intensifying demolition activity as far as older or laid up units were concerned.
The extension of the production cap policy between OPEC and non – OPEC producers until the end of this year has also played a major role in this positive reversal. This policy will once again be revisited by major producers complying with the cuts in a meeting expected to take place sometime during mid – year.
As far as second – hand sales are concerned, we have been noticing increased appetite for AHTS units built 2000 onwards, with perspective Buyers trying to take advantage of the low values, particularly those concerning distressed deals, in an effort to modernize their respective fleets by adding younger vessels and selling older units for further trading or for demolition. This trend together with the high demo prices of the past months have also helped scrapping activity significantly, with a substantial number of sub- mersible rigs and offshore units – PSVs in particular – being sold for demo and most deals agreed on an “as is – where is” basis.
All these rather encouraging developments in the offshore market have also impacted positively all companies offering other types of offshore services. After a long time, these firms are now reporting an increased number of enquiries and tenders and are confident that this positive trend will resume in the following months as well.
When we look back to the admittedly distressed period the offshore market went through, we can say with certainty that slowly but steadily a recovery has been taking place. The lows of this cycle are most probably well behind us and there is definitely increased interest for new drilling offshore projects around the world.
Besides this, market participants that are responsible for the fate of the industry seem to have also revised their strategy. They are now focusing on a commercial model of business that is mainly based on innovation and develops around a structure that allows them to quickly revise and adjust their synergies in order to be able to respond fast to market developments and without focusing too much on long term projections.
Source: Intermodal Weekly Market Report [W18]
By Panos Makrinos – Offshore Director