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The Rising Tide

May 2019

1

Contact Details

Agenda

© Maritime Strategies International www.msiltd.com

3

Gregory Brown7Echoes from the Past

12The Shape of Things to Come

16Where Could it All Go Wrong

Underlying Drivers

Associate Director - Offshore

[email protected]

+44 (0) 20 7940 7190


Underlying Drivers

Moving in the right direction

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US Gulf of Mexico OSV Fleet

State of the Nation

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US Gulf of Mexico Drilling Fleet

US Gulf of Mexico OSV FleetUS Gulf of Mexico Drilling Fleet

0

5

10

15

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30

Dri

lls

hip

Ja

ck-u

p

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mi-

su

b

# of Rigs

In Service Laid-up

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AD

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Dri

llin

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No

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Pa

cif

ic D

rillin

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oc

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# of Rigs

Semi-sub Jackup Drillship

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AC

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GIS

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# of Vessels

PSV AHT(S)

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AH

T(S

)

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# of Vessels

In Service Laid-up


Offshore Contract Awards

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Offshore awards increased by

around 5% in 2018

Awards to market tracking more

than 30% higher y-o-y after robust

Q1 for subsea and LNG

Gulf of Mexico accounted for around

10% of incremental investment in

2018 – 15% y-t-d

If you’ve made it this far…

Offshore Project Awards

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45

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2014

2015

2016

2017

2018

2019

$ Bn

Middle East Europe Asia Pacific Americas Africa


Global Benchmarks

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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Employment Rate

PSV AHTS Jack-Up Floater


Echoes from the past

The 1980s reborn?

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A Throwback to the 80s

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Jack-Up Employment Floater Employment

35%

45%

55%

65%

75%

85%

95%

1 2 3 4 5 6 7 8

Employment Rate

Year

Jack-Up Employment 81-88

Jack-Up Employment 12-19

35%

45%

55%

65%

75%

85%

95%

1 2 3 4 5 6 7 8

Employment Rate

Year

Floater Employment 81-88

Floater Employment 12-19


A Throwback to the 80s

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1981-1988 2012-2019

0

100

200

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400

500

600

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81

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88

# Active Rigs

Floater Demand

Jack-Up Demand

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# Active Rigs

Floater Demand

Jack-Up Demand


After the Goldrush

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After the 1980s boom in drilling newbuilds,

the market entered a twenty year downturn

Rates were more solid…

A steady stream of retirements, and lower oil

volatility propped the market up, but there

was little to excite the market until…

Rig Fleet 1980-2008

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08

# of Rigs

Floater FleetJack-Up FleetDeliveries (RHA)Retirements (RHA)


After the Goldrush… The Harvest?

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We think it’s different this time round

Scrapping at record levels

Tomorrow’s drilling requires different rigs –

automation, high pressure drilling, winterised

etc

Increasing environmental pressure

But – recovery is bifurcated – Floaters far

more robust relative to Jack-Ups

Rig Fleet 2008-2030E

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# of Rigs

Floater FleetJack-Up FleetDeliveries (RHA)Retirements (RHA)


The Shape of Things to Come

The rising tide will not lift all boats

12


How to make offshore competitive

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The downturn has been sufficient in length to enact

real structural change

Technological innovations are changing the way

fields are developed

Next generation equipment is smaller, lighter and

features fewer component pieces

Fixed infrastructure moving towards unmanned

facilities

Floating platforms formed of modular equipment

from product catalogues – replica FPSOs to be

increasingly common

Drilling has a part to play – integrated drilling

contracts increasingly prominent

OSVs – difficult to integrate services on vessel,

but still supply chain integration

An Engineers Influence

Influ

ence

Exp

end

iture

Plan Select Define Engineer Procure Construct Commissioning

Major Influence Decreasing Influence Low Influence

Conceptual and FEED

Detailed

Engineering

Construction

Management

Project

Management


Implications for the Supply Chain

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0

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Contracted Units Indexed at 2014 = 100

Jack-up

Floater

PSV

AHTS


Implications for the Supply Chain

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

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08

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Employment Rate

Jack-Up Floater PSV AHTS


Closer to home

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In the Gulf of Mexico – expect more

consolidation

Energy transition – IOCs to focus on

greenfield investment, plenty of room

for independents

Supply chain has a role to play – but

volumes will not match prior cycles

End market evolution – growth of

renewables

Active Units – US & Canada

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2014=100

Jack-up Floater PSV AHTS


Where could it all go wrong?

Earnings, prices and positioning

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Jack-Up Drilling Rig Earnings

Earnings and Prices

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Floating Drilling Rig Earnings

OSV EarningsMSI View

If you’ve made it this far….

Recovery is underway

Slow pace relative to history and unlikely to reach

peaks of last cycle

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k $/Day

UDW Drillship Dayrate Semi-Sub Dayrate

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Standard Jack-Up Dayrate

High-Spec Jack-Up Dayrate

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k $/Day

12-16 k BHP AHTS 3-4 k dwt PSV


Drillship Scenarios

Where could it all go wrong?

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MSI Oil Price Scenarios

Jack-Up ScenariosAHTS Scenarios

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$/bbl

Oil ($/bbl)Base Case ScenarioHigh Case ScenarioLow Case Scenario

209.9

68.9

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k $/Day$/bblOil Price HCOil Price LCHigh-Spec Jack-Up Dayrate HC (RHA)High-Spec Jack-Up Dayrate LC (RHA)

617.5

187.6

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k $/Day$/bbl

Oil Price HC

Oil Price LC

Ultra Deepwater Drillship Dayrate HC (RHA)

Ultra Deepwater Drillship Dayrate LC (RHA)

44.6

16.5

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k $/Day$/bbl

Oil Price HCOil Price LCDayrate - 9-11 k BHP AHTS - SE Asia - HC (RHA)Dayrate - 9-11 k BHP AHTS - SE Asia - LC (RHA)


MSI – FMV Online Service

20

• MSI Forecast Marine eValuator (FMV) is the first web-based tool to provide forecast and historical price

data covering virtually all of the deepsea shipping fleet.

• Data includes forecasts of newbuilding, second-hand prices, 1 year timecharter rates and operating costs

for specific vessels.

• MSI FMV draws on MSI’s proven, proprietary models and a consistent cross-sectional view across all

principal shipping sectors. It puts asset values in the context of the near term market to enable reliable

benchmarking with outputs based on annual averages.

Crude Oil Tanker

Product Oil Tanker

Dry Bulk Carrier

Chemical Tanker

LPG Carrier

LNG Carrier

Multi Purpose

Containership

PCC/PCTC

AHTS PSVJack-Up - NEW


Thank you

The Rising Tide

21


MSI Offshore Team

James Frew

Director of Consultancy

+44 (207) 940 7194

[email protected]

James has more than ten years experience

of analysing maritime markets, and takes

overall responsibility for MSI’s analysis of

the container shipping and offshore oil and

gas markets. In addition, James takes a

lead role in larger bespoke consultancy and

research projects across shipping sectors.

James holds an M.Sc. in International

Trade, Finance and Development from the

Barcelona Graduate School of Economics, a

Graduate Diploma in Economics from

Birkbeck College, London and an M.A. in

Modern History from the University of

Oxford. He is a member of the Baltic

Exchange.

Gregory Brown

Associate Director - Offshore

+44 (207) 940 7190

[email protected]

Gregory leads the development of MSI’s Oil

and Gas Project Tracker, as well as

delivering market consultancy, analysis and

commercial modelling to MSI’s offshore

client base of contractors, operators and the

financial community.

Gregory received his degree in 2008 from

the University of Surrey’s School of

Management where he read Business

Management. Gregory is also an Authorised

Person with Part 4A permission under

section 31 of the FSMA, 2000 and was

admitted to the Association of Surrey with

Distinction. He is a member of the Society of

Petroleum Engineers.

Dr. Ferenc Pasztor

Senior Offshore Analyst

+44 (207) 940 7196

[email protected]

Ferenc is responsible for analysing the

offshore oil & gas industry and related

vessel markets as well as developing MSI's

offshore support vessel and drilling rig

market forecast models. He is involved in

bespoke research and consultancy projects

and provides valuations for specialised

offshore vessels.

Before taking this role at MSI, Ferenc

worked as a post-doctoral researcher at the

Commission of Atomic and Alternative

Energy (CEA) in France. He has a Ph.D. in

Natural Resources from BOKU, Vienna.

22

For over 30 years, MSI has developed integrated relationships with a diverse client base of financial

institutions, ship owners, shipyards, brokers, investors, insurers and equipment and service providers.

MSI’s expertise covers a broad range of shipping sectors, providing clients with a combination of sector

reports, forecasting models, vessel valuations and bespoke consultancy services.

MSI’s team is comprised of professionals with extensive academic credentials, deep industry knowledge

and many years experience of delivering successful client projects.

MSI balances analytical power with service flexibility, offering a comprehensive support structure and a

sound foundation on which to build investment strategies and monitor/assess exposure to market risks.

While this document has been prepared, and is presented, in good faith, MSI assumes no responsibility

for errors of fact, opinion or market changes, and cannot be held responsible for any losses incurred or

action arising as a result of information contained in this document.

The copyright and other intellectual property rights in data, information or advice contained in this

document are and will at all times remain the property of MSI.

MSI Background & Disclaimer

© Maritime Strategies International www.msiltd.com23

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