The Rising Tide May 2019 - Marine Money
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The Rising Tide
May 2019
1
Agenda
Contact Details
Underlying Drivers 3
Gregory Brown
Echoes from the Past 7
Associate Director - Offshore
The Shape of Things to Come 12
gregory.brown@msiltd.com
Where Could it All Go Wrong 16 +44 (0) 20 7940 7190
© Maritime Strategies International www.msiltd.com
Underlying Drivers
Moving in the right direction
© Maritime Strategies International 3 www.msiltd.comState of the Nation
US Gulf of Mexico Drilling Fleet US Gulf of Mexico OSV Fleet
# of Rigs # of Vessels
30 300
In Service Laid-up In Service Laid-up
25 250
20 200
15 150
10
100
5
50
0
0
Jack-up
Semi-sub
Drillship
PSV
AHT(S)
US Gulf of Mexico Drilling Fleet US Gulf of Mexico OSV Fleet
# of Rigs # of Vessels
18 100
Semi-sub Jackup Drillship PSV AHT(S)
16 90
14 80
70
12
60
10
50
8 40
6 30
4 20
2 10
0 0
Adriatic Marine
SEACOR
Harvey Gulf
Edison Chouest
Tidewater
Otto Candies
Hornbeck
Crosby Tugs
GIS Marine
Ensco
Diamond
Atlantic Drilling
Spartan
Maersk
Rowan
Enterprise
Seadrill
Pacific Drilling
ADES
Noble
Transocean
© Maritime Strategies International 4 www.msiltd.comOffshore Contract Awards
Offshore Project Awards
$ Bn
50
Middle East Europe Asia Pacific Americas Africa
45 Offshore awards increased by
around 5% in 2018
40
35 Awards to market tracking more
30 than 30% higher y-o-y after robust
Q1 for subsea and LNG
25
20 Gulf of Mexico accounted for around
15
10% of incremental investment in
2018 – 15% y-t-d
10
5 If you’ve made it this far…
0
2018
2014
2015
2016
2017
2019
© Maritime Strategies International 5 www.msiltd.comGlobal Benchmarks
Employment Rate
100%
PSV AHTS Jack-Up Floater
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000
2001
2003
2004
2007
2008
2011
2012
2014
2015
2018
2019
2002
2005
2006
2009
2010
2013
2016
2017
© Maritime Strategies International 6 www.msiltd.comEchoes from the past
The 1980s reborn?
© Maritime Strategies International 7 www.msiltd.comA Throwback to the 80s
Jack-Up Employment Floater Employment
Employment Employment
Rate Rate
95% 95%
Jack-Up Employment 81-88 Floater Employment 81-88
Jack-Up Employment 12-19 Floater Employment 12-19
85% 85%
75% 75%
65% 65%
55% 55%
45% 45%
35% 35%
1
2
3
4
5
7
8
6
1
2
3
4
5
7
8
6
Year Year
© Maritime Strategies International 8 www.msiltd.comA Throwback to the 80s
1981-1988 2012-2019
# Active Rigs # Active Rigs
600 800
Floater Demand Floater Demand
Jack-Up Demand
Jack-Up Demand 700
500
600
400
500
300 400
300
200
200
100
100
0 0
1981
1982
1983
1984
1985
1986
1987
1988
2012
2013
2014
2015
2016
2017
2018
2019
© Maritime Strategies International 9 www.msiltd.comAfter the Goldrush
Rig Fleet 1980-2008
# of Rigs
700 120
Floater Fleet
Jack-Up Fleet
Deliveries (RHA)
Retirements (RHA)
600
100 After the 1980s boom in drilling newbuilds,
the market entered a twenty year downturn
500
80
Rates were more solid…
400
60 A steady stream of retirements, and lower oil
300 volatility propped the market up, but there
was little to excite the market until…
40
200
20
100
0 0
1980
1981
1982
1984
1985
1986
1987
1989
1990
1991
1992
1993
1994
1995
1997
1998
1999
2000
2002
2003
2004
2005
2006
2007
2008
1983
1988
1996
2001
© Maritime Strategies International 10 www.msiltd.comAfter the Goldrush… The Harvest?
Rig Fleet 2008-2030E
# of Rigs
1000 60
Floater Fleet
Jack-Up Fleet
900
Deliveries (RHA)
Retirements (RHA) We think it’s different this time round
50
800
Scrapping at record levels
700
40
Tomorrow’s drilling requires different rigs –
600
automation, high pressure drilling, winterised
500 30 etc
400
Increasing environmental pressure
20
300
200
But – recovery is bifurcated – Floaters far
10 more robust relative to Jack-Ups
100
0 0
2009
2010
2011
2012
2013
2015
2016
2017
2018
2019
2021
2022
2023
2024
2025
2027
2028
2029
2030
2008
2014
2020
2026
© Maritime Strategies International 11 www.msiltd.comThe Shape of Things to Come
The rising tide will not lift all boats
© Maritime Strategies International 12 www.msiltd.comHow to make offshore competitive
An Engineers Influence
The downturn has been sufficient in length to enact
real structural change
Major Influence Decreasing Influence Low Influence
Technological innovations are changing the way
Project
Management
fields are developed
Next generation equipment is smaller, lighter and
features fewer component pieces
Expenditure
Influence
Construction
Management Fixed infrastructure moving towards unmanned
facilities
Detailed
Engineering
Floating platforms formed of modular equipment
from product catalogues – replica FPSOs to be
Conceptual and FEED
increasingly common
Drilling has a part to play – integrated drilling
contracts increasingly prominent
Plan Select Define Engineer Procure Construct Commissioning
OSVs – difficult to integrate services on vessel,
but still supply chain integration
© Maritime Strategies International 13 www.msiltd.comImplications for the Supply Chain
Contracted Units
Indexed at 2014 = 100
120
100
80
Jack-up
60 Floater
PSV
40 AHTS
20
0
2008
2009
2011
2013
2015
2017
2019
2021
2022
2023
2024
2010
2012
2014
2016
2018
2020
© Maritime Strategies International 14 www.msiltd.comImplications for the Supply Chain
Employment Rate
100%
Jack-Up Floater PSV AHTS
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2010
2011
2014
2015
2018
2019
2023
2024
2008
2009
2012
2013
2016
2017
2020
2021
© Maritime Strategies International 15 www.msiltd.comCloser to home
Active Units – US & Canada
2014=100
250
Jack-up Floater PSV AHTS
In the Gulf of Mexico – expect more
consolidation
200
Energy transition – IOCs to focus on
150
greenfield investment, plenty of room
for independents
100 Supply chain has a role to play – but
volumes will not match prior cycles
50
End market evolution – growth of
renewables
0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2021
2022
2023
2024
2019
2020
© Maritime Strategies International 16 www.msiltd.comWhere could it all go wrong?
Earnings, prices and positioning
© Maritime Strategies International 17 www.msiltd.comEarnings and Prices
Floating Drilling Rig Earnings Jack-Up Drilling Rig Earnings
k $/Day
700 k $/Day 250
UDW Drillship Dayrate Semi-Sub Dayrate Standard Jack-Up Dayrate
600 High-Spec Jack-Up Dayrate
200
500
400 150
300 100
200
50
100
0 0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
MSI View OSV Earnings
If you’ve made it this far…. 30 k $/Day
12-16 k BHP AHTS 3-4 k dwt PSV
25
Recovery is underway
20
Slow pace relative to history and unlikely to reach 15
peaks of last cycle
10
5
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
© Maritime Strategies International 18 www.msiltd.comWhere could it all go wrong?
MSI Oil Price Scenarios Drillship Scenarios
$/bbl $/bbl k $/Day
120 200 1000
Oil Price HC
180 Oil Price LC 900
100 Ultra Deepwater Drillship Dayrate HC (RHA)
160 800
Ultra Deepwater Drillship Dayrate LC (RHA)
140 700
80 617.5
120 600
60 100 500
80 400
40 60 300
Oil ($/bbl) 40
187.6
200
20 Base Case Scenario
High Case Scenario 20 100
Low Case Scenario
0 0 0
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
AHTS Scenarios Jack-Up Scenarios
$/bbl k $/Day $/bbl k $/Day
200 60 200 Oil Price HC 500
Oil Price HC
180
Oil Price LC
180 Oil Price LC 450
Dayrate - 9-11 k BHP AHTS - SE Asia - HC (RHA)
Dayrate - 9-11 k BHP AHTS - SE Asia - LC (RHA)
High-Spec Jack-Up Dayrate HC (RHA)
50 High-Spec Jack-Up Dayrate LC (RHA)
160 44.6 160 400
140 140 350
40
120 120 300
100 30 100 250
209.9
80 80 200
16.5 20
60 60 150
40 40 68.9
100
10
20 20 50
0 0 0 0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
© Maritime Strategies International 19 www.msiltd.comMSI – FMV Online Service
• MSI Forecast Marine eValuator (FMV) is the first web-based tool to provide forecast and historical price
data covering virtually all of the deepsea shipping fleet.
• Data includes forecasts of newbuilding, second-hand prices, 1 year timecharter rates and operating costs
for specific vessels.
• MSI FMV draws on MSI’s proven, proprietary models and a consistent cross-sectional view across all
principal shipping sectors. It puts asset values in the context of the near term market to enable reliable
benchmarking with outputs based on annual averages.
Crude Oil Tanker Chemical Tanker Multi Purpose
Product Oil Tanker LPG Carrier Containership
Dry Bulk Carrier LNG Carrier PCC/PCTC
Jack-Up - NEW
AHTS PSV
© Maritime Strategies International 20 www.msiltd.comThank you
The Rising Tide
© Maritime Strategies International 21 www.msiltd.comMSI Offshore Team
James Frew Gregory Brown Dr. Ferenc Pasztor
Director of Consultancy Associate Director - Offshore Senior Offshore Analyst
+44 (207) 940 7194 +44 (207) 940 7190 +44 (207) 940 7196
james.frew@msiltd.com gregory.brown@msiltd.com ferenc.pasztor@msiltd.com
James has more than ten years experience Gregory leads the development of MSI’s Oil Ferenc is responsible for analysing the
of analysing maritime markets, and takes and Gas Project Tracker, as well as offshore oil & gas industry and related
overall responsibility for MSI’s analysis of delivering market consultancy, analysis and vessel markets as well as developing MSI's
the container shipping and offshore oil and commercial modelling to MSI’s offshore offshore support vessel and drilling rig
gas markets. In addition, James takes a client base of contractors, operators and the market forecast models. He is involved in
lead role in larger bespoke consultancy and financial community. bespoke research and consultancy projects
research projects across shipping sectors. and provides valuations for specialised
Gregory received his degree in 2008 from offshore vessels.
James holds an M.Sc. in International the University of Surrey’s School of
Trade, Finance and Development from the Management where he read Business Before taking this role at MSI, Ferenc
Barcelona Graduate School of Economics, a Management. Gregory is also an Authorised worked as a post-doctoral researcher at the
Graduate Diploma in Economics from Person with Part 4A permission under Commission of Atomic and Alternative
Birkbeck College, London and an M.A. in section 31 of the FSMA, 2000 and was Energy (CEA) in France. He has a Ph.D. in
Modern History from the University of admitted to the Association of Surrey with Natural Resources from BOKU, Vienna.
Oxford. He is a member of the Baltic Distinction. He is a member of the Society of
Exchange. Petroleum Engineers.
© Maritime Strategies International 22 www.msiltd.comMSI Background & Disclaimer For over 30 years, MSI has developed integrated relationships with a diverse client base of financial institutions, ship owners, shipyards, brokers, investors, insurers and equipment and service providers. MSI’s expertise covers a broad range of shipping sectors, providing clients with a combination of sector reports, forecasting models, vessel valuations and bespoke consultancy services. MSI’s team is comprised of professionals with extensive academic credentials, deep industry knowledge and many years experience of delivering successful client projects. MSI balances analytical power with service flexibility, offering a comprehensive support structure and a sound foundation on which to build investment strategies and monitor/assess exposure to market risks. While this document has been prepared, and is presented, in good faith, MSI assumes no responsibility for errors of fact, opinion or market changes, and cannot be held responsible for any losses incurred or action arising as a result of information contained in this document. The copyright and other intellectual property rights in data, information or advice contained in this document are and will at all times remain the property of MSI. © Maritime Strategies International 23 www.msiltd.com
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