A sloppy offshore market

My desk has been overrun lately with spending and activity predictions for the global offshore energy market. It’s been a mixed bag.  

You could take to heart the first sentence of a Research and Markets OSV report: “The offshore support vessel market is expected to reach $91.2 billion by 2018 with an anticipated firm annualized growth rate of 5.7% from 2013 to 2018. The U.S. Gulf of Mexico, with its thriving economies and rapidly expanding manufacturing base, is expected to experience the highest revenue growth during the next five years.” Or you can go with another report titled, “It’s Official – Oil Industry Enters the New Era of Austerity” from G. Allen Brooks of PPHB

If you have done your homework, you would discover that Brooks’ report is the most commonly held view lately. Namely, that the offshore market, and with it the OSV market, is set to soften because of reduced capital expenditure budgets among a number of the major oil and gas operators.

In fact, ExxonMobil, BP, Shell, Chevron, Statoil, Total and others have indicated that they will revise strategic plans and cut expenditures. For the most part, these moves are in response to flagging performance from the companies’ large shale investments, due largely to a rapid increase in finding and production costs and to lower-than-desired oil prices that would help moderate the cost increases.  

But does this point to a pending meltdown in the market? Not even close. Claus Hemmingsen, CEO of Maersk Drilling, told Reuters, “I would rather call it a short-term softness than anything dramatic.” Other drilling companies have chimed in. Transocean predicts it might take 18 to 24 months for demand to recover. Seadrill, the biggest market cap driller, warns of a two-year slowdown. 

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