The news continues to be ominous for rig and boat operators in the Gulf oil patch. Oil prices hit a six-year low today with WTI falling below $44 bbl. for the first time since 2009. There is plenty of oil out there and U.S. production reportedly continued to increase last week.
As most workboat industry veterans know, the OSV and rig markets and oil prices are cyclical. Sure the market has soured recently and prices are expected to remain depressed for another 12 to 24 months, but the good news is that the industry is now better prepared for it. Most have learned from past boom cycles not to get too high or too low.
Despite this ominous atmosphere, yesterday’s Offshore Marine Service Association meeting in New Orleans was well attended. And while the crowd was bombarded with a lot of bad news over the course of the day, the mood wasn’t as bad as I expected. I believe part of the reason is that this is one tough bunch and the current down cycle isn’t their first rodeo.
During his presentation to OMSA members, marine analyst Richard Sanchez of IHS-Petrodata delivered plenty of bad news, but he did offer a glimmer or two of hope for OSV operators in the crowd. First, while he predicted the downturn will last two to three years, it will not be as bad as 2010. Also, the deepwater and ultradeepwater market will actually grow in 2015 and the big deepwater projects will continue to move forward.
Still, Sanchez delivered much of the same gloomy news that we have been reporting and the operators have already heard. The majors are under pressure to cut spending, which means they want discounts and day rate relief. Also, it may be argued that the PSV market is now oversupplied with about 18-20 new PSVs scheduled for delivery in 2015.
Still, believe it or not it could be worse.