The new reality in the offshore oil and gas market has not been kind to many firms – that is as true of the offshore accommodation market as any segment, but Prosafe sees a more promising outlook longer term
Prosafe remains the only listed pure play offshore accommodation company in the world and has been through a process of restructuring that has seen it streamline operations significantly.
In a recent presentation, it highlighted the fact that key market indicators are positive – the oil price is up (Brent crude was at US$68/barrel as of early January 2018), breakeven levels are down and the oil industry is cash positive. Moreover, as a mid to late cyclical company, Prosafe should benefit from several demand drivers across the value chain in a recovering market. It has achieved a significant reduction in run rate and recognised impairment charges in Q3 2017.
More problematic for the company is that it has several newbuilds under construction, the orders for which date from before the downturn. Negotiations with Cosco regarding Safe Nova, Safe Vega and Safe Eurus are ongoing, and the company extended a standstill agreement with Cosco related to Safe Nova and Safe Vega until December 2017. More recently, the standstill agreement for Safe Nova and Safe Vega was extended until 20 April 2018. It continues to focus on value creation potential from financing terms, price and timing of the delivery of the vessels and retains the right to cancel Safe Nova and Safe Vega newbuild contracts and claim a refund of instalments plus interest equal to approximately US$60M, which is secured by Bank of China. Towards the end of 2017, Prosafe extended a standstill agreement with Cosco for Safe Eurus, which is in a preserved ‘strategic stacking’ mode. Negotiations continue with Cosco to find a workable commercial solution.
In the December 2017 presentation, Prosafe said nine tenders were ongoing for 2017 through 2019 and that its prospect list with three-year lookout remains at a relatively high level. At that time, it had 18 prospects with high probability of going to tender, the majority from 2018 onwards.
Looking at the North Sea market, Prosafe said it sees prospects developing from 2019 onwards. For the time being, tendering activity is low due to low and deferred operator spending. Longer term, it expects increased tendering and contracts related to supporting accumulating maintenance backlog and modification work.
In Brazil, the company also anticipates tender activity in the long term. It noted that Petrobras’ technical specifications for accommodation units have evolved significantly in the last few years. It now has some of the highest requirements of any operator – a trend that is advantageous to Prosafe given its focus on high-spec semi-submersibles. It also anticipates tender activity in the Brazilian market in response to address vessel shortage.
It expects Mexico to become a strong market longer term and noted that ageing infrastructure will mean an ongoing demand for maintenance. Currently, only five vessels are active there, and in future, like Petrobras in Brazil, Pemex is expected to demand better-quality, high-end vessels. Longer-term demand is also expected from other E&P companies now positioning themselves in the Mexican market in connection with farm-out projects.
Wagenborg bags long-term deal in North Sea
Wagenborg Offshore has been awarded a six-year contract to provide walk-to-work services in the southern North Sea. The contract will see Wagenborg Offshore support Nederlandse Aardolie Maatschappij and Shell UK Exploration & Production with walk-to-work and emergency response and rescue vessel services.
Under the terms of the deal, the Ulstein-designed PX121 PSV Blue Queen will be operated by Wagenborg Offshore as a standby and support vessel for inspection and maintenance of unmanned platforms in Dutch and British waters.
The vessel is due to be delivered to Wagenborg Offshore in March 2018 and will begin operations in Q1 2018.