WorkBoat Show: A return to ‘rational’ day rates needed, OSV operator says

The market for modern platform supply vessels could tighten in 2019 and give the industry a chance to start raising rates to cover costs and long-deferred maintenance, a Gulf of Mexico offshore operator said at Thursday’s International WorkBoat Show.

With a significant portion of the 4,000-­­dtw PSV fleet stacked or now in international work, day rates that had been $10,000 or less have crept back to $15,000 now, said Matthew Rigdon, executive vice president and chief operating officer of Jackson Offshore Operators LLC, New Orleans.

Generally, at that level, “pricing power returns to the owners and we’ve seen that,” said Rigdon, the featured speaker at the IWBS offshore program. With 29 of those larger vessels due for drydocking in 2019, the industry could get into a position to climb out of its long-underpriced rut with discipline.

Matt Ridden, executive Vice President and chief operating officer at Jackson Offshore Services.

Matthew Rigdon, executive vice president and chief operating officer at Jackson Offshore Operators.

With the cost of intermediate drydocking around $750,000 and special drydocking twice that, operators need to raise rates to get their assets back on better maintenance tracks, said Rigdon.

In Rigdon’s analysis, “recovery of drydock costs over two or three years is just not possible for owners at $15,000 a day.” The industry would need to get back over $30,000 a day to finance a newbuild phase, so in the near-term, owners need prices upward just to meet drydock needs, he said.

After the oil market collapse some companies had been operating below cost for several years just to maintain position, he noted.

“If rationality can continue to prevail, we will see more vessels due for drydock go to stack,” Rigdon added. “It will be the decrease that will drive utilization to 80% … this assumes that we as an industry can act rationally.”

In 2016-2017 day rates went as low as $7,000 to $8,000, a far fall from 2008 “when it was probably full utilization of the marketed fleet,” said Richard Sanchez, a senior marine analyst with IHS Markit, Houston.

In the deepwater market, “it’s really a soft recovery,” said Sanchez. The large newest PSVs can get $15,000 to $17,000 a day but 3,000-dtw vessels still hover around $5,000 to $6,000, he said.

“Five thousand for these boats is not going to pay your debt costs, and probably not your drydock costs,” said Sanchez, adding the situation is “not sustainable yet, but it’s definitely upward.”

Meanwhile some big boats have gone south.

“Guyana’s got at least eight or nine boats down there,” he said. “If you can get a boat down to Guyana, you’ll probably be looking at $18,000 to $20,000.”

 

About the author

Kirk Moore

Associate Editor Kirk Moore was a reporter for the Asbury Park Press for over 30 years before joining WorkBoat in 2015. He wrote several award-winning stories on marine, environmental, coastal and military issues that helped drive federal and state government policy changes. He has also been a field editor for WorkBoat’s sister publication, National Fisherman, for almost 25 years. Moore was awarded the Online News Association 2011 Knight Award for Public Service for the “Barnegat Bay Under Stress,” 2010 series that led to the New Jersey state government’s restoration plan. He lives in West Creek, N.J.

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