Offshore Supply Vessel Owners Face Bankruptcy with Drop in Drilling Rigs
By David Wethe
(Bloomberg) — The comparatively unheralded nook of the oil sector that sends provide boats out to offshore oil rigs might even see bankruptcies because the worst crude market downturn in a long time spreads.
More than half of the general public corporations within the offshore supply-vessel business face a excessive likelihood of restructuring or chapter, based on analysis launched Tuesday from the consulting agency AlixPartners.
The vessels are a lifeline to the rigs, hauling all the pieces from pipes to meals from shore. The provide boats are custom-made for the oil business and rely upon the rigs for work, Esben Christensen, a director on the agency’s maritime apply in New York, mentioned Monday in a cellphone interview.
“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 mentioned. “They really go hand in hand.”
Similar to the offshore rig business, the place new rigs proceed to be constructed amid a droop in demand for the tools, the vessels are going through a glut. There are actually greater than 5 provide vessels for every offshore drilling rig, based on AlixPartners. That’s up from roughly three vessels per rig in 2008.
Double Whammy
The offshore business is going through the double whammy of falling demand from steep prices on the identical time that new rigs maintain rolling out of the shipyard and add to the worldwide glut of kit. All that’s occurring through the worst crude market downturn in a long time. West Texas Intermediate crude, the U.S. benchmark, is down 40 p.c previously 12 months.
Oil costs might stay decrease for longer than many anticipate after the Organization of Petroleum Exporting Countries mentioned Dec. 4 that it was basically lifting its manufacturing goal for crude. WTI fell 5.8 p.c to $37.65 a barrel Monday on the New York Mercantile Exchange.
The quantity of debt the businesses carry in contrast with earnings earlier than curiosity, taxes, depreciation and amortization, which is named leverage, climbed over the 12 months led to June, based on AlixPartners. Sustained debt that’s greater than 4 instances Ebitda is usually a precursor to restructuring or chapter, based on the agency, which checked out 33 publicly traded corporations as a part of the research.
Transocean Ltd., the world’s largest provider of offshore drilling rigs, has mentioned the difficult offshore market is anticipated to final into 2017.
©2015 Bloomberg News
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