CONFIDENTIAL
Swedbank Nordic Energy Summit 2015
Stig Erik Kyrkjeeide
+47
47 23 23 82 41 / +47
47 95 94 47 57
sek@swedbank.no
Mainly South America / Brazil has been the soft spot in recent years
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
USGOM
(floaters)
WA
NW Eur
Source: Swedbank Research, IHS
SouthAm SE Asia/Far Middle East
East
Mexico
2
!"#$ %&
Weaker supply/demand balance means utilization and rates lower
55%
50%
48% 49%
45%
44%
44%
42%
50%
43%
41%
39%
39%
40%
38%
37%
36%
35% 34%
35%
34%
35%
33%
31%
30%
25%
20%
Source: Swedbank Research, Companies
3
Relatively flat activity level on aggregated basis vs. 1y ago, expect weakness going forward
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
USGOM
(floaters)
WA
NW Eur
Source: Swedbank Research, IHS
SouthAm SE Asia/Far Middle East
East
Mexico
4
Means weakening supply/demand balance, only partly offset by delays/cnx and scrapping
2000
1800
1600
1400
1200
1000
800
600
400
200
0
1800
1600
1400
1200
1000
800
600
400
200
0
450
1816
200
Current fleet Before '90
1566
Orderbook
Future fleet
349
249
1483
!"
Current fleet Before '90
1583
Orderbook
Future fleet
Recent observations on older tonnage pushed out of the market (all reported 2013/14/15)
– Global Success I (13,500 bhp, 1984) scrapped, Maha Oya (4,250 bhp, 1982) scrapped, Normand Draupne (18,000 bhp,
1985) to renewable, Maersk Gabarus (10,884 bhp, 1983) scrapped, Thanh Long (8,700 bhp, 1983) scrapped, Maersk Clipper
(14,400 bhp, 1983) scrapped, Maersk Cutter (14,400 bhp, 1983) scrapped, Ocean Viking (13,040 bhp, 1983) scrapped, SCI03 (5,400 bhp, 1984) scrapped, A.H. Porto Santo (13,300 bhp, 1980) scrapped, Tourmaline (3,500 bhp, 1976) scrapped,
Offshore Supplier (1,200 dwt, 1974) scrapped, Hind Conqueror (6,000 bhp, 1975) scrapped, Hind Khush (12,240 bhp, 1983)
scrapped, Ocean Searcher (1,110 dwt, 1975) scrapped, Maersk Mariner (16,200 bhp, 1986) scrapped
Industry trend
– Various tender processes now including age restrictions and also applying for new companies / areas (Pemex, WA, etc.)
Source: Swedbank Research, IHS
5
!
!
40%
35%
30%
25%
20%
15%
10%
Q1 07
Q1 08
Q1 09
Q1 10
OSV
Source: Swedbank Research, Company
Q1 11
Q1 12
Q1 13
Q1 14
Offshore rigs
6
2015 will not materialize anything close to the order book based on early indications
45
120%
Planned
40
Delivered
Planned (as of Feb)
Delivered
% of plan
72
21
29%
100%
35
80%
30
25
Deliveries to reach order book
60%
20
40%
15
20%
10
5
0%
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Swedbank Research, IHS
2011
2012
2013
2014
2015
7
2014 saw ~50% of order book delivered
30
120%
Planned
25
Delivered
Planned (as of Feb)
Delivered
% of plan
50
11
22%
100%
80%
20
Deliveries to reach order book
60%
15
40%
10
20%
5
0%
Mar Apr May Jun Jul Aug Sep Oct Nov Dec
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Swedbank Research, IHS
2011
2012
2013
2014
2015
8
Vessels are consistently taken out of the “core” duties ad converted to niche segments
– Typically vessels with good station capability and large # of beds
– Less strict requirements
q
– acquiring
q
g older tonnage
g out of the market
A
Accommodation
d ti
– Significant activity in Europe in 2014/15 (also for newer vessels)
– Field developments shifting into increased IMR volumes
– Long term contract opportunities
Offshore wind
– Long-term contract opportunities
– Conversion of large PSVs
– Various projects calling on OSV capacity in non-O&G niches
Source: Swedbank Research
Well stimulation
9
Relatively busy recently, but various uncertainties in current market environment
• rigs available for 2015 campaign and industry
indications for activity, started to mobilize, but still uncertain
!
• "
$
somewhat declining drilling activity with
development projects being delayed
• %
&
both drilling campaign and pipelaying
campaign (the latter currently in standby mode)
"
• start-up early 2015 with rig and
vessels already in place
#
• #
activity in Great Australian Bight scheduled
for early 2016 with BP (rig contracted)
• '()
&
seasonal campaigns scheduled for
2014 onwards, but significant uncertainty 2015 onwards
• !
&(
various opportunities, but very specialized
tonnage
Source: Swedbank Research
10
Some regional and segment differences, but big picture is fierce competition pushing rates down
!"
#$%
&"
22,000
20,000
18,000
16,000
14,000
12,000
10,000
1q05
1q06
1q07
1q08
1q09
Source: Swedbank Research, Gulfmark Offshore
1q10
1q11
1q12
1q13
1q14
11
But this time Brazil probably not able to absorb North Sea tonnage
60 %
180 %
160 %
50 %
140 %
40 %
Feb’09
120 %
Feb’09
100 %
30 %
80 %
20 %
60 %
Feb’15 40 %
Feb’15
10 %
20 %
0%
2003
0%
2005
2007
2009
Source: Swedbank Research, IHS
2011
2013
2015
2003
2005
2007
2009
2011
2013
2015
12
Discussion points: Efficiency, area of operations, exploration vs. production wells, pre-lay etc.
!
"#
$
"
%
&
14%
13%
12%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-5%
-6%
NW Europe contracted
rigs
Source: Swedbank Research
PSV demand
AHTS demand
13
Inflow of vessels from other regions likely to be a 2015 industry trend
35,000
100,000
90,000
30,000
80,000
25,000
70,000
60,000
20,000
50,000
15,000
40,000
30,000
10,000
20,000
5,000
10,000
Avg 06-14
2015
Last week
Avg 06-14
2015
Last week
0
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Swedbank Research, Clarksons
Jan Feb Mar Apr May Jun
Jul Aug Sep Oct Nov Dec
14
Despite solid floater activity, weakening supply/demand means vessels are pushed into intl’ waters
&)*+
(
!"#$%&'(
,
- .(( /0 1 50%
50
In service
On order
PSV f leet
45
40%
40
30%
35
20%
30
Contracted floaters
Contracted rigs, f loaters+JU
10%
25
0%
20
-10%
15
-20%
10
5
-30%
0
-40%
67 70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15
Source: Swedbank Research
2007
2008
2009
2010
2011
2012
2013
2014
15
"!!# !$%
!&!&!!'
Development portion of the fleet in general on long term contracts vs. exploration exposure
!
Transocean (rig)
Farstad (OSV)
Diamond (rig)
Tidewater (OSV)
70%
Tidewater (OSV)
20%
60%
50%
Diamond (rig)
42%
40%
30%
Farstad (OSV)
21%
20%
10%
Transocean (rig)
33%
0%
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Source: Swedbank Research, Companies
0%
20%
40%
60%
16
Old / less capable vessels to be hurt the most
Source: Swedbank Research, Farstad Shipping reports
17
Transactions still made at decent levels, but not yet reflecting current industry backdrop
900
800
700
600
500
400
300
200
100
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Skandi Seven
Ocean Protector
Geoholm
Source: Swedbank Research, DOF Subsea quarterly reports
Skandi Patagonia
18
But also note subsea contractors own a large portion of old vessels, newer more efficient
!"
# #
9
3rd party
JV
Owned
!"
# 20.0
8
18.0
7
16.0
6
14.0
17.1
12.0
5
10.0
9.0
4
8.0
7.0
3
6.0
4.2
2
4.0
1
2.0
0.0
0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
Source: Swedbank Research
3rd party
JV
3rd party + JV
Owned
19
Petrobras remains the largest client of OSV tonnage in key segments
!"#$%
&'%%(
&)#!*+
25%
350
322
21.2%
299
20.9%
329
307
300
20%
263
17.2%
15.7%
250
15%
12.1%
188
200
166
150
10%
100
5.1%
5%
50
0%
AHTS
total
> 18k
bhp
> 15k
bhp
> 12k
bhp
Source: Swedbank Research
PSV total > 3k dwt
0
2008
2009
2010
2011
2012
2013
2014
20
1) Moderate day rate vessels more likely to be extended 2) Brazilian flag ahead of intl’ flag
%
!&
!"#$
%
!&
'
45,000
20
40,000
18
16
35,000
14
30,000
12
25,000
10
20,000
8
15,000
6
10,000
4
5,000
2
0
0
1
51
Source: Swedbank Research
101
151
1
51
101
151
21
!" !#
Source: Swedbank Research
22
!"#$
%&
30000
MCAP
50%
NIBD
25000
45%
45%
46%
20000
45%
15000
40%
10000
35%
5000
30%
0
FAR
SOFF
DOF
HAVI
EIOF
REM
%$'
25%
3000
22%
20%
19% 18%
17%
15%
MCAP
NIBD
2500
2000
14%
1500
10%
8%
8%
5%
1000
6%
500
0%
FAR
SOFF
DOF
HAVI
EIOF
REM
DESSC SIOFF
GLF
TDW
HOS
0
DESSC
Source: Swedbank Research
SIOFF
GLF
TDW
HOS
23
Company/investors will have to cope with some elevated uncertainty on counterparty risk
Capex coverage 2008
Capex coverage 2015
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
DOF
DOFSUB
FAR
SOFF
Source: Swedbank Research, Companies
HAVI
REM
OLSH
SIOFF
VSS
24
30,000
Listed OSV
Privately held companies
25,000
20,000
15,000
10,000
5,000
0
MCAP
Source: Swedbank Research
BONDS
25
!"#
1800
1600
1400
1200
4000
REM03
REM02
3500
SOFF03
OLSH01
HAVI09
BOAO01
ATOFF02
ATOFF01
VSS01
3000
VEOF01
2500
VOSUB01
WWS
1000
2000
800
IOSH01
DOFSUB06
1500
HAVI07
600
200
HAVI08
HAVI06
HAVI04
FAR03
DOFSUB05
DOF09
2016
2017
1000
400
DOF08
0
OLSH02
500
0
2015
Source: Swedbank Research
2015
26
But elevated uncertainty attached to fleet utilization, counter party risk and refinancing
0
100
200
300
400
500
600
700
SEATRK, 2018
GLF, 2022
HARK01, 2019
DOFSUB07, 2018
WWS, 2017
NORSHORE, 2018
BOA02, 2019
FAR04, 2018
SOFF04, 2019
Source: Swedbank Research
27
BOAO02
1900
BOA
Unsecured
1800
WWS
Secured
1700
HAVI08
1600
HARKAN
IOSH01
GDENRY
VSS01
1500
BOAS01
1400
WWS
ATOFF03
1300
TPZMAR
DOF10
1200
SIOFF02
VEOF01
1100
DOF11
OLSH03
1000
VOSUB01
HAVI04
900
HAVI07
FAR03
DOF09
800
700
VOLS01
600
REM03
ATOFF01
SOFF04
DOFSUB07
DOFSUB05
500
REM05
REM04 FAR04EFOR01
OTS02
OLSH02 SIOFF01
BOA02
EIOF01
SOFF03
DOFSUB06
400
BOAO01
300
200
100
ATOFF02
0
Jan-15
Jan-16
Source: Swedbank Research, Bloomberg, Stamdata
Jan-17
Jan-18
Jan-19
Jan-20
28
Markets set to soften
– Global supply/demand balance to weaken impacting utilization and day rates negatively
– Significant potential on the supply side to rebalance vs. demand (but weak market needed to trigger volumes)
…which means asset values will come under pressure
– Limited downward revision on asset values yyet, but softer markets will p
put p
pressure during
g 2015/16
– Expect delays in order book to increase and few new orders to materialize
Financing will be key topic and still in the early phase (banks are still open)
– Companies are well underway completing 2015 (re)financing (new builds, balloons etc.) and in early phase of ‘16
– Offers from banks remain attractive and probably a source to refinance bond maturities for some (also in 2016?)
– Expect more challenging discussions with banks as downturn progresses
Companies
–
–
–
–
More aggressive than historically on stacking/selling vessels
Positive surprises on cost cutting? (GLF indicates Opex and G&A down ~15% y/y, partly due to USD)
Additional contract duration to be traded for day rate (not seen much yet, but likely to materialize)
Larger companies with historical track record likely to have competitive advantage vs. newcomers (but with limited price
premium vs. competitors)
Source: Swedbank Research
29
Havila Shipping - Njål Sævik, CEO
DOF Mons
DOFM
A
Aase, CEO
Free lunch
Viking Supply Ships - Christian Berg, CEO
Boa Offshore – Rune Juliussen, Group Board Member
Source:
30
!"# !
$
%
!
%
&
'
%
! $
! (
! Source:
31