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Drilling down on soaring asset values for OSVs

Photo: Marcus Hand Swire Pacific OSVs at anchor in Singapore
Swire Pacific OSVs at anchor in Singapore
The revival in the US oil patch is real even though offshore service vessels (OSVs) have not received the widespread exposure of other sectors.

The boats, serving the oil patch currently, and perhaps offshore wind in the future, were covered in depth at Marine Money’s end-November Marine Finance Forum, held in New Orleans. The energy was palpable throughout the conference which featured speakers that included the vessel owners, many of which are privately held, and from the specialist financiers covering the sector.

A presentation from VesselsValue (VV), who track the sector, said it all. In remarks, Robert Day, who heads up the offshore coverage at VV, described the meteoric rise in valuations. The broader backdrop is what Day called “action at the drill bit” which includes re-activations of rigs, with strong utilisation and drillers seeing a growing contract backlog.

Drilling down on US owners, all attending the conference, and appearing on subsequent panels, he pointed to a strengthening during 2022 for Hornbeck Offshore Service (HOS), Harvey Gulf International Marine, Tidewater, and Edison Chouest.

For HOS, which, along with peer companies, had been forced to restructure, in 2020, during a lengthy downturn that began post- 2016, VV cited a gain approaching $400m in the value of its PSV fleet, between January, 2022, and end November. In a slide zeroing in on the vessel Hos Rosebud, a 280 class OSV bought by Hornbeck in February, and working under a contract with the US Navy, 2022 for $10.7m, VV puts a price of $18.2m on it just ten months later. The VV analysis shows estimated gains on the values of equipment at Tidewater (NYSE: TDW) and Edison Chouest (privately held), with large PSV fleets, $714m and $507m respectively.

In wrapping his presentation, VV’s Day highlighted that some of the vessels coming out of lay-up are being scrapped, and said: “The market’s moving along- it’s moving on out.”

On a different panel, Todd Hornbeck, the eponymous CEO of HOS, had said, “The US Gulf has a great story to tell…we are a big fossil fuels consumer…we are not going to get off fossil fuels anytime soon”.

In talking about HOS’s strategy for buying (and selling) assets, he said, “We are trying to make our portfolio what we want it to look like in the future…and get vessels that our clients want.” He stressed that second hand asset acquisitions were the way to build the fleet, echoing Mr. Day’s views, saying “With supply chain issues, it's very hard to building anything today….the secondary market is where we are focused.”

Another current swirling through the day-long Marine Money event was the possible revitalisation of assets built for work in the US oil patch, for use in the burgeoning offshore wind business. At the time that Hornbeck purchased the DP2 Hos Rosebud in an auction, along with two other vessels, from the US Maritime Administration (MARAD), Hornbeck’s CEO had said that: “these particular ships are excellent candidates for deployment in the growing US domestic offshore wind industry”. 

Nearly a year later, while the wind business is evolving with demand for vessels looked for in the mid 2020’s, the oil business has come back to life, as explained by VV’s Day- resulting in the good fortunes for owners of vessels serving platforms and drill rigs in the US Gulf.