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PROPOSAL

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Table of contents page

1, Introduction 1

2 Proposal background 2

2.1 Investment climate 3

2.2 Cabotage 3

2.3 Local content 4

2.4 Nigeria’s main oil and gas companies 4

3 Vision 5

4 Proposal 5

5 Scope of service 5

5.1 Marine logistics 5

5.2 Facilities engineering 5

5.3 Technical procurements 5

5.4 Others 5

5.4.1 Local presence 5

5.4.2 Management 5

5.4.3 Capabilities 5

5.4.4 Working capital 5

6 Strategy 6

6.1 Local resource 6

6.2 Quality 6

7 Activity grouping 6 7.1 Base office 6

7.2 Management 6

7.3 Contract 6

7.4 Technical partners 6

7.5 Marketing 6

7.6 Vessels 6

8 Offshore support vessels 7

8.1 Types of vessels 7

9 Charter 10

9.1 Time of permanent charter 9

9.2 Voyage or spot charter 9

9.3 Market outlook 11

9.4 Table daily charter rate 12

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10 Commercial and economic viability 13 10.1 Anchor handling tug and supply vessel 15

11 Viability Chart (Cost Analysis) 16

11.1 Cost Factor 16

11.2 Running Cost 17

11.3 Revenues ( @ Charterers Expense) 19

11.4 Profit Analysis 20

11.5 Pay Back Time 21

12 S W O T analysis 22 12.1 Opportunities and threats 22

12.2 Strength and weakness 23

12.3 SWOT matrix 24

12.4 Summary SWOT analysis 25

13 Organization 26 13.1 Organizational chart 26

13.2 Man power plan 27

13.2.1 Man power requirement – vessel 27

13.2.2 Crew certification 27

13.2.3 Experience 27

13.2.4 Local crew 28

13.2.5 Foreign crew 28

13.2.6 Crew salaries and incentives 28

13.2.7 Crew change 29

13.3 Man power requirement- office 29

13.3.1 Wages and incentives 30

13.4 Base office infrastructures 30

13.5 Registration 31

13 Conclusion 32

1155 Intended Vessel For Purchase 33

15.1 Survey Status Report 34

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Private Use

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1, INTRODUCTION

The MARITIME TRANSPORT industry is known to be very extensive, it also

encompasses a very lucrative business venture in its many dimensions.

One of its major sub-sectors, is the TRANSPORT SERVICE in the OIL & GAS

INDUSTRY known as the OFFSHORE OIL FIELD SUPPORT SERVICES.

In this sub-sector are wide range of maritime investments opportunities, which with

the right footing, vital technological capabilities, good technical know-how, modern

managerial expertise and adequate information networks, an INDIGENUOS marine

shipping company or an oil service company, can be made a success story.

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2, PROPOSAL BACKGROUND

The NIGERIAN OIL INDUSTRY, consisting of the Upstream and the Downstream

sector; ( Exploration and production activities :- Upstream , and Distribution :-

Downstream ), is a dynamic and blossoming industry that is a constituent of the

international acknowledged GULF OF GUINEA blocs, a source of interest to the

global oil industry.

It consist of several segmented, but continuously linked blocks of large and small

holdings worked by various international and indigenous operators, under various

forms of Petroleum Contract Agreements; Joint Ventures ( JV ), Production Service

Contracts ( PSC ), Risk Service Contracts ( RSC ) and Joint Development Zones ( JDZ)

The oil fields distributed in Onshore and Offshore environments pulls an aggregate

production figures equivalents to the OPEC production quota of about 2 million

barrels daily, equivalent to an average of USD 140 million daily industry turnover.

Nigeria has a dual economy with modern segment dependent on oil earnings,

overlaid by a traditional agricultural and trading economy. The oil sector , which

emerged in the 1960’s and was firmly established during the 1970’s is now of

overwhelming importance to the point of over-dependence. The country is listed among

the first 10 world largest oil producing countries. Oil provides about 95% of foreign

exchange earning, and 65% budgetary revenues.

As a result of the global increase in the price of oil, Nigeria is benefiting from

additional inflows of capital into the economy. The boost of the prices also gave rise to

additional activities for the oil company operating in the country, to increase their

productions. Between 2002 and 2006 there are 168 field prospects consideration or

planned to come o stream with reserves totaling 18 billion barrels of oil. Nigeria and

Sao Tome / Principe in a JDZ agreement for 9 deep water oil blocks in the Gulf of

Guinea, a newly opened area which holds an estimated 4 billion barrels of oil.

Activities within this area will expand the horizon for service providers.

Trends in the industry tends towards boosting the production capacity with the focus

on MARGINAL fields explorations and DEEP OFFSHORE fields developments. This

developments clearly providing new challenges for the industry, while also presenting

new opportunities for service providers; to enable this enhanced development targets of

the Nigerian oil industry.

The market size for operators and service providers in this situation, is therefore not

determined by the transactionary volume of production quota, but by the development

trends in the industry that emphasizes exploration thrusts with a view to enhance the

production capacity of the industry.

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Specifically for service providers, the opportunities are defined in the following

segments:

1, Requirement to service existing land and shallow waters fields.

2, Requirements to service contiguous deep offshore fields.

3, Requirements to service new developments in marginal fields.

A profile of services in this context ranges from shipping, logistics, facility

engineering to drilling and ancillary services. Variations in the requirements of each

services are determined by the environments of field – Onshore or Offshore and the

peculiarities of the environments dynamics. Thus the picture of a dynamic, challenging

and exciting sector is presented by a careful observation of the industry

2.1, INVESTMENT CLIMATE

The government intention of transforming opportunities in the Petroleum sector of

the economy to tangible LOCAL JOB OPPORTUNITIES, INDUSTRIAL GROWTH

and WEALTH, as well as its desire to reduce over 80% of the USD 8 billon annual

expenditure in the industry which flows out of Nigeria through Technical services and

goods produced outside the country, has brought about the introduction of the

CABOTAGE regime and the development of the LOCAL CONTENT POLICY.

Both policies which are focused on the revamping of the economy, by creating an

enabling environment for indigenous participation in the maritime sector and the oil

and gas sector.

2.2, CABOTAGE

Introduced to regulate the maritime industry, by restricting the participation of

foreign vessels in our domestic trade, and to promote the developments of

INDIGENUOS TONNGE, and related matters. It now offers the foreign partners the

opportunity to participate through joint ownerships with local investors.

2.3, LOCAL CONTENT

This policy also serves as a vehicle for the promotion of Nigeria’s indigenization in

the petroleum industry, which is the quantum of composite value added to or created in

the Nigerian economy through the utilizations of Nigeria’s resources and services in

the oil and gas industry; that translates into the developments of indigenous

capabilities, within acceptable quality, health, safety and environmental standards.

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This policy is to increase significantly over a defined time frame the proportion of

expenditure in the upstream sector, creating value addition in the economy. The

federal government set a minimum target; of 30% local content in any oil and gas

project by 2003; increasing to 45% by 2006 and 70% by 2010. Translating these targets

into monetary terms, assuming the average annual expenditure of 10 billion USD,

means that potentially 3.0, 4.5 and 7.0 billion USD would be spent in 2003, 2006 and

2010 respectively on local products and services. While this targets might look rather

too ambitious and probably too unattainable within the allocated time frames, it would

be appreciated that achieving even 20% local content translates to an annual

expenditure of 2.0 billion USD on local products and services; which you will agree

with me is quite SIGNIFICANT.

This stands to correct the adverse effect of the over dependence on foreign capacity

on the economy.

The above throws more light on the wide horizon of opportunities open to us as

indigenous oil service company.

2.4, NIGERIA’S MAIN OIL & GAS COMPANY

Shell,

Exxon Mobil,

Total / elf,

Chevron Texaco

Addax

Esso

Conoco.

3, VISION

Our VISION is to participate in this huge and still emerging markets as a

serious player, not only for profit but also for a long-term goal of establishing a

concern with capabilities to provide the highest quality of service and leadership in our

chosen sector.

4, PROPOSAL

Our PROPOSAL is to set up an oil service company, to service the oil industry in

Nigeria and possibly the other markets in the gulf of Guinea.

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5, SCOPE OF SERVICE

The SCOPE of service though not limited, will cover the following activities:

5.1, MARINE LOGISTICS :- Marine transportation, freight forwarding and

Supplies.

5.2, FACILITY ENGINEERING :- Civil, mechanical, construction and underwater

Engineering.

5.3, TECHNICAL PROCUREMENT :- Marine, safety ,technical and tool

Procurement.

5.4, OTHERS :- Hydrography, drilling ancillaries and environmental engineering.

The structure of the company will be designed to achieve within the afore mentioned

scope the vision outlined. While the following defined the envisioned system.

5.5, Local presence as well as liaison with alliance partners, selected providers of the

highest quality of services for our market.

5.6, A management structure that accommodates these impute.

5.7, An equipment acquisition program at the core of company planning to enable;

the development of exclusive singular capabilities.

5.8, The need to maintain adequate working capital and all session flow in

sustenance of growth program.

6, STRATEGY

The STRATEGY for achieving our objectives will evolve the deployments of a

combination of two major elements.

6.1, LOCAL RESOURCE : As in contract, knowledge of the market, influence and

technical / managerial expertise.

6.2, QUALITY : Use of high quality technology and equipments sourced from

International alliance to achieve competitive edge and innovation.

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7, ACTIVITY GROUPING

An outline of the activity grouping in the strategy is an follows.

7.1, BASE OFFICE : Set up a strategic physical presence in the country. An office

located in Port Harcourt is most preferred.

7.2, MANAGEMENT : Assemble over time a highly efficient local team made up of

seasoned and tested professionals to implement the company

programs.

7.3, CONTRACTS : Harness local resources outside the management for contracts

influence and build into a powerful penetrating force and tool.

7.4. TECHNICAL PARTNERS : Simultaneously identify and develop foreign

alliance within the service scope.

7.5, MARKETING : Initiate the process for aggressive delivery of quality service to

the market.

7.6, VESSELS : Source and initialize trading with suitable vessels etc, that matches

the market requirements. Our focus will be vessels in the class of

offshore supply vessels, crew boats and anchor handling vessels.

8, OFFSHORE SUPPORT VESSELS

A profitable area of investment in the oil and gas service providing sector. These

encompasses all vessels so designed to provide the needed logistics and supporting

services as required in the oil and gas offshore locations and some locations within the

inland waterways; services from Explorations, Drilling , Production and to the

Exportation of the BLACK GOLD.

These vessels are so designed to indicate the type of operations she will be engaged

in or she will be deployed for; these explains why their names differs from one vessel

to another, as names follows the peculiarity in their designs and operations.

These vessels are more of purpose built while some are converted to suit the

operational requirements.

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8.1, TYPES OF VESSELS :

The types of vessels deployed in the back-up services of oil industries include

among others the following.

Crew Boat

Fast Crew Supply Boat

Platform Supply Boat

Anchor Handling Tug & Supply Vessel

Survey Vessel

Platform Maintenance Vessel

Line Handling Vessel

Hose Handling Vessel

Utility Vessel

Diving Support Vessel

Jack up Barges

Jack up Rig

Semi Submersible Rig

Pipe Laying Barge

Offshore Maintenance Barge

Shallow draft- water or fuel barge

Floating Storage & Offloading

Floating Production, Storage & Offloading

Submersible Platform Transporter.

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9, CHARTER

In the oil and gas industry, the oil prospecting companies charter the various vessels

used in carrying out all the required logistics and support services.

The support vessels ( AHTS , PSV, CB and PMV ) are obviously chartered in the

greatest numbers, and different oil prospecting companies adopt different polices,

mainly to carry out the marine support operations at the best possible price. From

Explorations to Explorations.

Like in other parts of the world, the chartering business in transacted in USD, while

in the industry the preferred mode of payment scheduled is by direct credit into a

domicile account in a local bank or a foreign bank, or by a split payment by percentage

into a local and a foreign account. ( The percentage is as directed by the vessel owner )

Chartering are always in two distinguished forms as spelt out in the BIMCO or other

forms of customized charter party agreement.

TIME OR PERMANENT CHARTER

VOYAGE OR SPOT CHARTER.

9.1, TIME OR PERMANENT CHARTER

This form of charter usually last between 1 – 5 years, in which case the vessel is

chartered or employed for a definite period of time.

Under this type of charter agreements the charter rate are fixed. However the

charter party agreement is subject to a review and renewal at the expiration of the

agreements stated time frames, but negotiable on terms profitable and mutually

agreeable to both parties.

The vessels usually chartered on this type of agreements are :

Platform maintenance vessels

Diving support vessels

Line handling vessels

Hose handling vessels

Crew boats

Anchor handling tugs & supply vessels

Supply vessels.

Drilling Rigs

Semi submersible Rigs.

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This type of charters are by mostly the major oil prospecting companies, who runs

extensive drilling programs together with numbers of platforms and production

activities. i.e. Shell, Exxon Mobil, Chevron, Agip and Elf.

9.2, VOYAGE OR SPOT CHARTER

This the common and second most popular forms of charter in the oil and gas

vessel sector. Under this charter a vessel is chartered for a voyage or specified number

of voyages, The charter rates are very competitive and quit higher than the rates in the

Time or permanent charter.

Vessels commonly chartered under this agreements are :

Anchor handling tug and supply vessels

Crew boats

Fast crew boats

Utility boats

Jack up Barges

Survey vessels, and the other range of vessels used in the industry.

Table 9.4 indicates the daily charter rates as applicable to the oil and gas industry.

And other factors that also contribute to attract a higher day rate are the level of

outstanding technological innovations in the design and operations of the vessel.

In Nigeria oil and gas sector, the offshore vessel utilization rate remain under the

transportation support services sector, and has been on a high rise since 2004, through

absorbing new tonnages and more second hand tonnages with an impressive daily

charter rates. In the best case, the spot and term rates still remain at the same average

level till mid 2005, which increased at the last quarter of the year.

9.3, MARKET OUTLOOK

The market of offshore support vessels is a relative static market. A few global

players of any significance are determining the marke. While a few regional companies

with similar services and quality is present in the West Africa market.

The definition of the primary markets is based on the demand openness of the

regional markets and the range of other competitors and market players.

The primary market is Nigeria, while other market opportunities are in Gabon,

Angola, Equatorial Guinea and Cameroon will be exploited.

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9.4, DAILY CHARTER RATE ( in USD / day ) as at May 2006.

s /no

TYPE OF VESSEL

B H P

NATURE OF

OPERATIONS

Day rate

Time

charter

Day rate

Spot

charter

Day

rate

Spot

charter

Day rate

Spot charter

1 Anchor Handling Tug and

supply vessels

AHTS 6000 - 12000 Anchor running, rig

positioning, rig moves /

barge towing and supply

operations.

6,000 – 12,000 12,000 -

25,000

12,000 -

25,000

12,000 - 25,000

2 Platform supply vessels PSV 3000 - 5000 Supply of heavy drilling

pipes, drilling fluids,

Drilling bulks and other

drilling materials.

5,000 – 8,000 6,000 – 12,000 6,000 –

12,000

6,000 – 12,000

3 Platform maintenance

vessels

PMV 3500 - 7000 Repairs and maintenance

of offshore sub sea

Installations and

platforms.

5,000 – 12,000 8,000 – 15,000 8,000 –

15,000

8,000 – 15,000

4 Crew boat CB 1500 - 2000 Crew / field runs and

supply of light weight

Offshore locations

materials.

2,500 – 4,500 5,000 – 7,000 5,000 –

7,000

5,000 – 7,000

5 Fast crew supply boat FCSB 2500 - 3500 Fast crew / field runs of

light weight cargos

And equipment on tine

basis.

4,500 – 6,000 6,000 – 8,000 6,000 –

8,000

6,000 – 8,000

6 Diving support vessels DSV 3500 - 4500 Diving for underwater

installation , and well

Head maintenance and

SBM maintenance.

5,000 – 7,000 7,000 – 9,000 7,000 –

9,000

7,000 – 9,000

7 Mooring / Hose handling

vessel

- 4500 - 6500 Berthing and unberthing

of crude oil export

Tanker. 5,000 – 6,500 6,500 – 8,000 6,500 –

8,000

6,500 – 8,000

8 Survey vessels - 2500 - 3500 Rout and environmental

survey operations

4,500 – 6,000 6,000 – 8,000 6,000 –

8,000

6,000 – 8,000

9 Jack up Barges - 5000 – 10000

grt

Offshore platform

maintenance and repairs.

35,000 45,000 –

60,000

45,000 –

60,000

45,000 – 60,000

10 Offshore Crane Barge - 5000 – 10000

grt

Maintenance and repair of

offshore units

25,000 35,000 –

45,000

35,000 –

45,000

35,000 – 45,000

11 Pipe Laying Barge - 5000 – 10000

grt

Pipe laying, platform and

jacket installations

45,000 60,000 –

80,000

60,000 –

80,000

60,000 – 80,000

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10, COMMERCIAL AND ECONOMIC

VIABILITY.

The specific decision to invest in a maritime asset, such as a VESSEL in the oil and

gas industries, is dictated by factors other than prestige and share pursuit of social

goals. The main objectives among others is the profit motives ( PM factor ).

In view of justifying the huge financial investment on such an equipment, the

maximizations, and optimizations of performances, efficiency and profitability is the

ultimate goal of the business.

The financial goal or the target of optimizing profitability is predicated on the

company wide long-term and short team strategic objectives.

In view of the financial feasibility of the investment, I will use accurate and reliable

data’s put together on three specific cost items as follows. And based on several

assumptions and estimates, projections are established for a period of 5 years.

1, Cost of vessel

2, Average daily charter rate of vessel

3, Average monthly operational cost ( OPEX ).

This data’s are presented in net profit and estimated over 5 years period, as the

payback period of the initial capital invested.

We shall consider for an example the purchase, operations and maintenance of the

following vessel: ( Second hand tonnage ).

1, Anchor Handling Tug and supply Vessel. ( AHTS )

Each investment items shall be looked into by using a FINANCIAL MANAGEMENT

METHOD- to analyze the parameters and to find Valuation and the Investors rate of

returns spread over 1.5 year and asset value; by using a COST AND BENEFIT

ANALYSIS. ( As in the BLUE PAGES )

For the purpose of this Proposal, I will use VALUE as the observed value of the

asset in the market place. The value which is freely determined by the supply and

demand forces in the market place, where buyers and sellers negotiate a mutually

acceptable price for an asset. The market value of the asset will help us determine the

value of the asset: through VALUATION process. Which is the process of assigning a

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value to an asset by calculating the present value of its expected future cash flow using

the investors required rate of return as the discount rate.

The basic security valuation model can be defined by use of a mathematical equation

as follows.

n Ct

V = sum up -------------------

t=1 ( 1 + R )t

Ct = Cash flow to be received in year t .

t = Number of years to final maturity.

V = The intrinsic value or present value of an asset producing expected

Future cash flows, Ct, in year 1 through n.

Sum up = Sum up the present value of the asset.

R = The investors required rate of returns.

R - The investor’s required rate of return, which is the minimum rate of return

necessary to attract an investor to purchase or hold a security; considers the investors

opportunity cost of making an investment, i.e. if an investment is made the, investor

must forgo the return available from the next best investment. This forgone returns is

an opportunity cost of undertaking the investment and consequently is the investors

rate of return.

We invest with le intentions of achieving a rate of return sufficient enough to

warrant making the investment.

The investors rate of return ( R ) is determined by the level of the risk premium that

the investors think is necessary to compensate for the risks assumed in owing the

asset. This is expressed in the equation bellow.

R = Rf + RP, where:

R = The investors required rate of return.

Rf = The risk free return.

RP = The risk premium.

The risk – free rate of return rewards us for deferring consumption, and not for

assuming risk, that is, it reflects the basic fact that we invest today to be able to make

more on the investment latter. The risk – free rate is used only as the required rate of

return or discount rate, for risk less investments. The risk premium ( RP ),is the

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additional return we must expect to receive for assuming risk. As the risk level

increase, so will be additional expected returns.

The above are presented below thus:

10.1, ANCHOR HANDLING TUG & SUPPLY VESSEL – AHTS

* Cost of vessel - USD 2mn

* Average daily charter rate - USD 12,000

* Average monthly operational cost - USD 29,700

Charter rate - Daily Monthly Annually

$ 12,000 $ 305,000 $ 3,660,000

OPERATING COST

Crew / labour cost $ 12,000 $ 144,000

Insurance / survey - $ 85,000

Maintenance / repair cost $ 10,000 $ 120,000

Fuel cost -

Water cost -

Berthing cost -

Victual ling cost $ 2,000 $ 24,000

Overhead cost $ 3,500 $ 42,000

Miscellaneous cost $ 2,200 $ 26,400

Total $ 29,700 $ 441,400

11, VIABILITY CHART (COST ANALYSIS)

11.1, COST FACTOR

Cost factors are the basis for the financial calculation. This section will highlight

all the typical cost items attached to the vessel.

Prior to the purchase of the vessel a better understanding of the investments cost

item (vessel), is required in relations to the under listed factors; upon which the subject

could be calculated to the nearest possible cost. Of interest shall be but not limited to

the followings:

1, Vessels fuel consumptions / speed

2, Docking history and records

3, Maintenance records and procedures

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4, Reputations of the last owners

5, State of the shipboard equipments

6, Class and insurance status.

For the purpose of this calculation, we shall use an ANCHOR HANDLING TUG &

SUPPLY VESSEL.

Vessel Spec :-

BHP : 8000

BP : 100 T Plus

Cost of vessel : USD 2.0 m

Average Daily charter rate : USD 12,000.( lowest possible rate )

Projected productivity / utilization days : 305 days.

Projected idle days : 60 days

Period in formants : monthly & annually.

In reference to the pointers in page 34, indicating the factors used for the analysis of

the investments prospects; as :

1, The constant use of the HIGHEST possible cost parameters of items, e.g. Vessel and operating cost.

2, The use of the AVERAGE / LOWEST daily charter rate.

3, The assumptions that the company will be operating in the most hostile and competitive disadvantage

Environment.

The financial feasibility of the investment items and as well as the developments

scenarios of the vessel will be assessed. Based on several assumptions and estimations

of the under listed factors, projections are established for a period of 1 year, spread

over 5 years.

First, a short overview is given of the investment cost which will be followed by

estimated revenues. Finally the financial framework will be discussed as a basis for the

financial analysis. This will conclude whether the project is financially feasible. Also

pf note is the detailed overview regarding the operational expense ( OPEX ) and capital

expense ( CAPEX ).

11.2, RUNNING COST

1, Crew Salaries / PPE / Medical / Feeding

2, Maintenance / Repair / Spare parts

3, Insurance / Survey

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4, Office administrative expense

5, Overhead expense

6, Miscellaneous expense.

**CREW SALARY:

The vessel when on charter runs for 24/7, ( in port or at sea ). The wages estimate for crew and staffs

presented bellow represents the present level of salaries as applicable to the sector, in addition to the

salaries are operational incentives for the vessel personnel; ( rates are not fixed and is differs from

company to company and also based on managements discretions ).

Captain ( Local ) 1 320,000

Ch / mate ,, 1 150,000

Ch / engineer ,, 1 250,000

2nd

engineer ,, 1 120,000

Oiler ,, 1 45,000

Bosun ,, 1 60,000

AB ,, 2 45,000 ( 90,000 )

Cook ,, 1 45,000

Steward. ,, 1 30,000

Total - 1,110.000 ( @ 135 to 1 USD ) = USD 8,222.

** PPE / MEDICAL :

The standard practice in the industry; are, all shipboard personnel are provided with PPE ( personal

protective equipments ): 1 – pair of safety shoes or safety boots

2,- pairs of coveralls

1 - hard hat

1 – eye goggle

1 – Hand gloves

Note : the hand gloves and the eye goggles are supplied on wear and tear basis.

While provisions for Medical services, are on retainership basis with an approved medical centre.

PPE x 10 crew = USD 421 annually

Medical = USD 1,778 annually.

** FEEDING :

There are only two cost scenarios ( vessel on charter and vessel off hire ).

Feeding cost when vessel is on charter is approx - USD 10 per man per day.

Feeding cost when vessel is off- hire is approx - USD 8 pre man per day

Feeding per month when vessel is on charter for 10 crew will be : USD 3,000 monthly

USD 36,000 annually

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In case charterers personnel are carried onboard ( as passengers ). The charterers are charged for

boarding and lodging at minimum USD 55 , on each passenger.

** MAINTENANCE / REPAIR / SPARES :

The cost on these subjects varies from vessel to vessel, and is based on the status of the shipboard

equipment / machineries. Associated items are more of consumables, except in a breakdown repair

situation. Preventive maintenance are subject to the requirements and provisions of the company and

vessel plan maintenance schedule.

For the purpose of this calculation ( in extreme cases ), standards used when if no detail cost are

available, are to set aside about 5% of the value of the investment items, as annual maintenance cost.

= USD 10,000 monthly

= USD 120,000 annually

** INSURANCE / SURVEY :

For P & I, Hull and Machinery insurance, classification society and flag state surveys ( annual,

intermediate, special and docking survey ), an estimated annual cost projected are :

= USD 7083 monthly

= USD 85,000 annually.

** OFFICE ADMIN / OVERHEAD / MISCELLANOUSE EXPENSE :

An estimate annual / monthly projection cost are:

= USD 7,700 monthly

= USD 92,400 annually

11.3, REVENUES ( @ CHARTERERS EXPENSE ).

This gives us a brief overview of the expected turnover of the vessel when she is

operating at maximum output.

1, Vessel charter daily rate

2, Fuel

3, Lubrication oil

4, Water ( fresh water )

5, Berthing charges

6, Feeding ( for charterers personnel, ‘if’ carried onboard ).

**DAILY CHARTER RATE:

Given the present market situation and the current market price of the vessel, assuming a daily

charter rate of USD 8000 ( being the lowest average market rate now ).

Estimated annual turnover : = USD 12,000 x 305

= USD 3,660,000 annually

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** Additional source of revenues :

A, BOARDING AND LODGING :- In case the vessel is meant to carry some charterers personnel

onboard as passengers. A rate of between 30 % to 45 % mark up is charged on each passenger carried.

B, FUEL, LUB OIL AND FRESH WATER :- If the ship owners are to supply Fuel / Lub oil and

Fresh water for the operation of the vessel, the charterers are charged a mark-up rate of 15 %.

C, AGENCY FEE :- A 25 % handling charges, are charged by the ships owner for any agency

duties carried out.

11.4, PROFIT ANALYSIS ( projected ).

The profit and loss account is used to compute the net income or deficit during the entire durations

of the project. It associates the revenues with the direct cost that are needed to achieve these revenues.

** REVENUE :

** Sales Revenue = USD 12,000 / day

= USD 305,000 / month

** Total annual Rv / 365 days = USD 3,660,000

** Operational Expense ( annual ):

. Salaries / PPE / Medical / Feeding = USD 46,421

. Maintenance / Repairs / Spares = USD 120,000

. Insurance / Survey = USD 85,000

. Admin / Overhead = USD 92,400

. Contingency = USD 97,579

** Total Expenditure ( annual ) = USD 441,400

** Net Profit Before Tax = USD 3,218,600

**Bank Loan Repayment, (annual) = USD 1,633,332

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**Profit After Tax = USD 1,585,268

**Corporate Income Tax @ 30% = USD 475,580

** Net Profit After Tax = USD 1,109,688

11.5, PAY BACK TIME :

This is the simplest financial decision for making investment project decisions. ( go-or-no-go

decision).

The Payback Time calculates the period of time in which the initial investment is recouped by the

next revenue as generated by the project. Usually one can distinguish 2 types of payback time system, i.e.

the simple payback time and the discounted payback time. The later takes into account the present value

of tomorrows revenues, based on the discount rate and therefore considered the realistic of the two.

The projected payback time in this project in review is approx 1.5 years.

19

Quarterly Sheet

-3000000

-2000000

-1000000

0

1000000

2000000

3000000

Q1 Q2 Q3 Q4 Q5 Q6

Quarterly Sheet

12, S W O T ANALYSIS

In highlighting the strategic marketing conception of the

provision of offshore support vessels, the demand side takes a prominent place, and the

approach will entails the followings:

1, We must have a customers- focus,

2, We must also have to focus on defendable competitive advantage of our product.

3, We have to ensure that the basis of these advantages are aimed on the long term

Interests of the our customers.

In the SWOT analysis, we shall be using a number of strategic possibilities to

formulate the future of the company. These are as follows:

S - Strength

W - Weakness

O - Opportunities

20

T - Threats

12.1, OPPORTUNITIES AND THREATS:

This which is the conclusion from the from the external factors that will be

affecting the company is outlined as in the table below

Table 14.1.1.

s/no

FACTORS FROM

EXTERNAL ENVIR-T

OPPORTUNINTIES

THREATS

1 Customers Sufficient market, and extensive secondary Protectionism, erratic

Market opportunities. Demand.

2 Vessel features Favor for local company -

3 Perception vessels Proven vessels -

4 Competition Cabotage ( old tonnage – indigenous comp) New tonnage ( Inter

Comp )

5 Economy Strong growth – economy and oil / gas comp Economy – depending

On oil product price /

Fluctuation in prices.

6 Technology One of its kind ( multi purpose ) -

7 Demographic - Communities

8 Government Local content policy Weak governmental

Regulations.

9 Size of market Interesting market in and outside Nig Regulatory cost of

(Continuously growing). Going –in / out of Nig.

10 Potential competence Seasoned professional management Protected markets

11 Substitute products Cheap local vessels

12 Intensity of compete-n Competitive day rates -

12.2, STRENGHT AND WEAKNESS

A defendable competitive advantages is based on the strength of the products

features and the structure if the company.

Using the value chain it enables us to determine the strength and the weakness of

the company. In the value chain , 2 types of value adding activities can be determined.

1, The PRIMARY ACTIVITIES: - Which are the activities involve in the

Production process and sales.

2, The SECONDARY ACTIVITIES: - Which are the supporting activities.

Primary Processes:

Internal logistics

Operational Processes

External logistics

Marketing & sales

Services.

Supporting Activities:

Infrastructure of the organization

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Human resources management

Technology and

Purchases.

Using the value chain, a checklist can be produced to determine the possible

STRENGHT and WEAKNESS of the company and its operations. Table 12..2.1.

s/no

FACTORS RFOM THE

EXTERNAL ENVIRONM-T

STRENGHT

WEAKNESS

1 Innovations New types of vessels in the -

Market.

2 Production Low cost man-power. Low industrial environment.

Comparatively. Low technical knowledge.

3 Access to capital - No local access to against

Good conditions. ( Banks on

Recapitalization).

4 Management Seasoned professional -

Management.

5 Marketing Direct sales / marketing. Sales network opportunities

In the sport market.

6 Product - Aged vessels.

7 Market Huge investment in exploration -

By oil companies.

12.3, S W O T MATRIX

In analyzing SWOT further we shall plot the potential factors in strength /

weakness as against the factors in opportunities / threats.

Table 12.3.1

S W O T Analysis

STRENGHT

WEAKNESS

OPPORTUNITIES Growth Improves

THREATS Defense Problems

The strategies from the cell combinations of Opportunities and Strengths, will

contain a defendable competitive advantage.

This combinations have to be exploited as much as possible. For each of the

combinations in this way strategies can be defined. Improvement strategies for

opportunities and weakness, Defense strategies for threats and problems when

weakness and threats are combined.

Table 12.3.2

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O - OPPORTUNITIES

T - THREATS

1 Market potentials 1 Strong market players present

2 Investment in oil and gas 2 Erratic demand

3 Positive economic outlook 3 Quality workforce

4 Vessel known in the market 4 Weak government, corruption

5 Competitive prices 5 Communities

6 Favors local companies 6 Market protectionism

1 Low cost man power 1 No technical knowledge

2 New type vessels 2 No industrial environment

3 Seasoned professional management 3 No committed workforce

4 Financial banking system

5 Sport market focused

6 Aged vessels

S - STRENGHT

W - WEAKNESS

12.4, SUMMARY OF S W O T ANALYSIS

1, GROWTH strategies :

O 1, 2, 4. S 1, 2, 3. - Price / quality focused marketing strategies.

O 2 S 3 - Compete in regional market intensely.

2, IMPROVEMENT strategies :

O 1 W 5 - Exploit the home market.

O 4 W 5 - Use relations and expand home market.

O 6 W 3, 4 - Focus on training of local workforce.

O 1 W 6 - Expend the sale market.

3, DEFENSE strategies :

S 1, 2, 3 T 3 - Price competition with regional players.

S 3 T 5 - Enter niche market; security.

S 2 T 2 - Use surplus of capital for period of slow growth.

S 2 T 6 - Try to enter protected market, and protect your market.

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13, ORGANISATION

13.1, ORGANISATIONAL CHART

MANAGING

DIRECTOR

CAPTAIN OPERATIONS

OFFICER

SECRETARY

OPERATIONS

MANAGER

CHIEF MATE CHIEF

ENGINEER

ENGINE ROOM

TEAM

DECK

HANDS

COOK, STEWARD

ROOM BOY.

DRIVER CLEANER /

MESSENGER

SECURITY /

GATEMEN

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13.2, MANPOWER PLAN

The company manpower requirements to effectively manage the operations of the

company’s fleet, ( shipboard management and shore base management ) shall include

but not limited to the following:

13.2.1, MANPOWER REQUIREMENT – VESSEL

Vessels on charter to various oil companies in the oil and gas sector, runs for 24

hrs of the day; either in the port or at the oil field locations. The personnel

requirements necessary to carry out such task varies from vessels to vessels, this in a

large extent takes its bearing from the type of vessel and from the nature of operations

she is deployed to.

Quality crew and quality ships are functions of quality management, as it is on the

managements that the onus to provide quality crew and ships falls.

In line with the requirements of any vessels flag state, which stipulates the

minimum number of crew the vessel should be operated with; there are however some

operational requirements which makes provision for the numbers of crews to be

increased with respect to the safety requirements of the vessel. ( This gives the vessel

adequate hands to deal with any emergency situation that may arise in the course of

her operation offshore.)

13.2.2, CREW CERTIFICATION

All crew documents shall be to the standards as provided by IMO in STCW 95 and

shall be so relevant to the operations and the capacity of the vessel the crew will be

deployed to. Shall also be from a recognized institution or organizations and as

suitable and acceptable for operations off the cost of West Africa and near continental

or unlimited sea areas.

13.2.3, EXPERIENCE

Crew shall have a considerable numbers of years of experience in the operations of

offshore service vessels.

13.2.4, LOCAL CREW :

Presently Nigeria have qualified offshore oil and gas service vessels crew, available

and relatively cheaper when compared to the foreign crew.

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13.2.5, FOREIGN CREW

The requirements for foreign crew is gradually becoming unpopular, this is as a

result of the availability of experienced qualified local crew, high rates of wages

coupled with the cost of flying them in / out and the high cost of maintaining them

here in Nigeria.

The crew requirements in line with our proposed vessel or vessels, shall be as listed

below. It will be on the interest of the company to commence operations with standard

crew, capable of swapping from one vessel to another , i.e. capable of undertaking the

different types and nature of operations of all the vessels in the company fleet.

Anchor Handling Tug & Supply Vessel :

Captain 1

Chief mate 1

Chief Engineer 1

2nd

Engineer 1

Oiler 1

Bosun 1

Ab 2

Cook 1

Steward 1

13.2.6, CREW SALARIES AND INCENTIVES :

The wages below represents the present average salaries for merchant marine

seamen onboard oil and gas support service vessels in Nigeria. These are relatively

cheap when compared to what is been paid to foreign seamen.

* Captain 320,000

* Chief mate 150,000

* Chief engineer 250,000

* 2nd

engineer 120,000

* Electrician 75,000

* Oiler 45,000

* Bosun 60,000

* Ab 45,000

* Cook 45,000

* Steward 30,000

All in Naira.

INCENTIVES- (a):- ( Subject to the management discretions ), Though some soft

packages are provided for those vessel that are engaged in the most difficult task and

operations, i.e. Those on Anchor Handling vessels , are given some monetary

incentives for operations like:- Anchor running , Rig moves, and Towing operations.

( b ) : Foreign operation or voyages :- For any voyage outside the territorial waters

of Nigeria, the crews are always given some allowance, payable at the end of the

26

voyage, or if the operations is for a longer period, the personnel get paid onboard at the

end of every month.

13.2.7, CREW CHANGES

Crew rotations ( Rota ) or changes have over the year been a subject of concern to

the oil prospecting companies. Each company have adopted a procedure they deemed

suitable to their individual working environments and needs. Except otherwise when

been prompted to comply by the applicable requirements of the host oil clients; all

vessels operating company operate under different types of crew change systems.

However due consideration shall is always given to the company’s financial status

and the numbers of vessels in the company fleet.

The under listed are the commonly used system as at present:

3 months on 1 month off

2 months on 1 month off

6 weeks on 3 weeks off

4 weeks on 2 weeks off

2 weeks on 2 weeks off.

In our case we shall adopt the 3months on and 1 month off system, pending when the company is

buoyant enough to accommodate any other system.

13.3, MANPOWER REQUIREMENT - OFFICE.

As earlier mentioned that the onus of providing a quality ship / crew lies on quality

management; the requirements for base operation management personnel shall be

limited to a minimum numbers of resource personnel in the management of offshore

oil field support vessels operations will be in key positions to keep the system running

at a minimum cost in attempt to achieve maximum profit with less overhead.

With reference to the organizational charts, the following personnel shall be require

to handle the day to day running of the company from inception.

Base Operation Manpower : Total - 6

Operations manager 1

Operations Officer 1

Account officer 1

Secretary 1

Driver 1

Cleaner / Messenger 1

Security / Gate man ( If required ) 2

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The requirements for additional personnel will be subject to the increase in the

numbers of vessels.

13.3.1, WAGES / INCENTIVES :

Base personnel remunerations shall be relative to and subject to the level of

education and class of certificates / competency and years of experience.

Incentives are subject to managements discretions.

Operations Manger To be discussed

Operations officer 50,000

Account officer 35,000

Secretary 25,000

Driver 15,000

Cleaner / Messenger 10,000

Security / Gate man 15,000 ( optional ).

13.4, BASE OFFICE INFRASTRUCTURE

To enhance the vessels operation and the provisions of the logistics supports for the

company’s vessel operation offshore, a reasonably furnished complex, presentable and

good enough to accommodate the operations managements personnel will be of an

added value.

Also to complement the above are the followings:

Good furniture’s and office fittings

Generator set

Vehicle for operations movements.

13.5, REGISTRATION

Whatever legal entity to be chosen, the company will be registered by the following:

Corporate affairs commission

DPR ( NNPC ) Special category

NMA ( Cabotage compliant permit )

NPA. Waterways operational permits.

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14, CONCLUSION

With the Nigerian government vision / commitments to promote local indigenous

company by signing the LOCAL CONTENT POLICY and THE CABOTAGE BILL

into law, there has been no better times for indigenous enterprise in the oil and gas

sector. The projected acquisition is obviously feasible in the sense that Nigeria and the

rest of the Africa offshore oil and gas sector is at its peak period.

The tight market being currently experienced in the sector’s shipping services is as a

result of the increasing offshore activities, which has necessitated the increase in the

demand for offshore support vessels.

A minimum of 40% profitability margin in projects, guarantees very competitive

returns on investment globally. Thus a project of this nature recommends itself, to

investors in the medium and long term basis.

29

Intended Vessel for Purchase