Island Offshore: Lower rates further weaken the market

Offshore shipowners are currently underbidding for spot work and offering dayrates below opex for their PSV vessels. This is further weakening the already weak offshore vessels market, Island Offshore, a Norwegian offshore ship supplier, said in its 3Q results presentation.

The PSV market is still soft across markets, Island Offshore said in its 3Q 2015 report on Wednesday. However, the company noted that contract coverage for its fleet was still relatively strong, with limited spot exposure.

The vessel provider also said: “We expect the current markets conditions to continue, but anticipate a gradual improvement of market balance from additional vessels in lay-up.”

The company added that, as a result of the continued weak market conditions, a number of operating cost improvement measures had been initiated, which would have full year impact from 2016 onwards.

Newbuilds delayed

Island Offshore reminded it had delayed deliveries for four of its newbuilds from Vard Brevik. In addition, the company is in discussions with the yard regarding further delays.

“The agreement to defer the new building program is important to mitigate the negative implications of a weaker market and will improve the short term cash flow for the Group,” Island Offshore explained.

Island Offshore’s fleet utilization for the quarter was 77% including vessels in lay-up.

The company, at present, has six vessels in lay-up comprising 3 PSVs, 1 SCV and 2 LWI vessels; the three latter in winter lay-up, and additional vessels may be laid-up depending on the market conditions in coming months.

The company’s profit before tax for the third quarter 2015 was NOK 58 million, compared to NOK 118 million in the same period last year.

The revenues for the quarter dropped from NOK 776 million in the third quarter 2014 to NOK 771 million in the third quarter 2015.

Focus on long-term

Regarding its outlook, the company said it had secured additional term contracts in 3Q adding to the order backlog. However, there is no improvement in the spot market for PSV and AHTS despite significant lay-ups, the vessel owner said, adding that its focus is on securing long term commitment with strategically preferred clients.

The company says that even though the flow of tenders is low, there are still chartering opportunities to explore.

Vessel conversions/modifications are considered if long term charter commitment opportunities arise, Island Offshore concluded.

The company’s order backlog excluding charterer’s options totaled NOK 5.1 billion at September 30, 2015, and contract coverage for 2016 is 66% of budgeted revenue.

Offshore Energy Today Staff