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Middle East owners could help industry emerge from recession

Thu 12 Oct 2017

Middle East owners could help industry emerge from recession
Topaz Energy and Marine has made the best of a bad market and has an industry-leading backlog

Itís not just the Middle East offshore support vessel market that offers potential for growth Ė owners based there have plenty of potential

 

Opinions differ about whether the offshore support vessel market in the Middle East is holding up better than others elsewhere and about how quickly the Middle East market might return to growth. However, one thing that is certain is that the region has become increasingly important to a growing number of owners and that owners based there could play a role well beyond the region as the market returns to growth.

Home to around 650 offshore support vessels, the region has seen rates take a hit but not to the extent seen in other markets. As Clarksons Research noted recently, operators in the Middle East are faced with relatively elderly declining fields, with fixed infrastructure in need of redevelopment located in shallow, benign environments. Lower costs for offshore services seem to be encouraging an uptick in redevelopment and maintenance work.

Recently, there have been signs that the market is continuing to improve, although the size of the supply side remains an issue, as it does pretty much everywhere else. Unlike some regions, itís possible to make money in the Middle East, as Singapore-based but Middle East-owned Vallianz Holdings announced last week.

It must be one of only a very few OSV owners to have posted an increase in net profit recently, something that it attributed largely to new long-term charter contracts with a national oil company in the region.

Although Singapore-based, Vallianzís business is anchored in the Middle East nowadays. It says it expects more contracts on top of those it already has with the NOC and, with the strong support of its Middle East-based partner Rawabi Holding, intends to maintain its focus on expanding in the region whilst making inroads into Egypt and Turkmenistan. However, itís not just the Middle East market that is important to the industry. Owners based there will play a growing role.

Based in Dubai, Topaz Energy and Marine continues to make the best of a bad market. Topaz may have seen its revenue and EBITDA decline in Q2 2017 compared with the same period last year, but it has an industry-leading backlog. It recently refinanced and has a sustainable capital structure that positions it for growth. It has a leading position in the Caspian from which it is unlikely to be dislodged any time soon.

With operating centres in the UAE, Qatar, Kazakhstan, Azerbaijan, Russia, Nigeria, Angola, the Kingdom of Saudi Arabia and Turkmenistan, Topaz is a subsidiary of Renaissance Services SAOG, a publicly traded company listed on the Muscat Securities Market in Oman.

In Renaissance, Topaz has a strong owner. It has a secure position in markets that are outperforming others. Its financial position means it is well placed to structure long-term contracts that offer predictability and value to its clients at low counterparty risk. It has a backlog that most companies would kill for. With an average age of only 7.4 years, its fleet is a modern one.

It has a couple of expensive subsea newbuilds it has yet to find work for and has been criticised for failing to recognise impairment on its vessels, which it has now done, but with experienced management at the helm and an ability to secure long-term contracts in a weak market, Topaz is undoubtedly one to watch and could play a leading role reshaping the OSV industry as it emerges from recession.

Mermaid secures contract extension

Mermaid Maritime has secured a contract extension worth approximately US$96M from an unnamed oil major.

The contract was awarded to a joint-venture company formed between Mermaid and a local offshore services operator in the Middle East. The contract extension duration is for a firm one year plus a one-year option.

The contract is for inspection, maintenance and repair services. Work is due to get underway under the extended contract in the Q4 2017. 

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