OSV Owners Face Bankruptcy Risk
More than half of the public companies in the offshore supply-vessel industry face a high probability of restructuring or bankruptcy, Bloomberg reported quoting a research released from the consulting firm AlixPartners.
Even before crude prices collapsed and triggered a retreat from expensive deepwater projects, the offshore supply vessel industry was struggling with rising debt and too much competition jockeying for the same work.
In the past seven years, the service vessel fleet expanded by 38 percent, fueled by Chinese shipyards and access to easy credit that helped drive up vessel counts. At the same time, offshore rig counts grew just 5 percent.
Among the 33 offshore service vessel companies studied by AlixPartners, overall debt load had spiked $3 billion, or 16 percent, in the past four years.
As revenues continue falling amid waning demand, companies may struggle to make their interest and amortization payments, forcing some into financial distress if they don’t make changes soon, AlixPartners said.
The firm in its report said it identified at least 17 companies facing a high probability of heading toward bankruptcy, but did not reveal names.
The vessels are a lifeline to the rigs, hauling everything from pipes to food from shore. The supply boats are custom-made for the oil industry and depend on the rigs for work, Esben Christensen, a director at the firm’s maritime practice in New York, said.
“If the rig market is down or not doing well, it’s very, very difficult to find employment for this type of asset anywhere else,” Christiensen said. “They really go hand in hand."
The long-term outlook for the offshore industry still looks good, as exploration and production firms remain committed to their investments they’ve already made in expensive offshore infrastructure.
That means offshore vessel companies with the best, most coveted technology will be in a better position to meet demand when prices recover, AlixPartners said.