A year ago in our annual offshore cover story in WorkBoat, we sounded a word of caution in our annual offshore energy report that most of the majors would likely reduce capital expenditures. Analyst Allen Brooks said we were entering a “new era of austerity.”

But many viewed the growing sluggishness offshore as merely a bump in the road rather than a major slowdown. They cited the continued strong interest in the deepwater market. That is no longer the case. Even the deepwater market is now feeling pressure from low oil prices. Everyone agrees that we are now officially in the midst of a major offshore downturn.

Brooks, who spoke earlier this month at our OSV summit held in Houston, predicts that another downturn will follow this one, and it is already in the works. He said that we might need to fundamentally restructure the offshore energy industry.

Most OSV operators are blaming low oil prices for the market downturn. But there is another factor that some operators were warning about over two years ago — overbuilding.

Several boat operators say that there are just too many OSVs in the Gulf market. And with over 30 high-specification OSVs under construction, the problem will only magnify.

On the shelf, the smaller OSVs and crewboats are seeing utilization rates in the 40% to 55% range. Small vessels have also seen rates erode to below $3,000 a day, which is close to break even for some operators.

But the atmosphere is not all gloom and doom. While the outlook is less-than-rosy, many industry pundits say that companies should not overreact. This is a cyclical industry where many long-timers have learned not to get too high or too low. 

David Krapf has been editor of WorkBoat, the nation’s leading trade magazine for the inland and coastal waterways industry, since 1999. He is responsible for overseeing the editorial direction of the publication. Krapf has been in the publishing industry since 1987, beginning as a reporter and editor with daily and weekly newspapers in the Houston area. He also was the editor of a transportation industry daily in New Orleans before joining WorkBoat as a contributing editor in 1992. He has been covering the transportation industry since 1989, and has a degree in business administration from the State University of New York at Oswego, and also studied journalism at the University of Houston.