As expected, Gulf of Mexico offshore service vessel demand is softening. Demand for deepwater platform service vessels has been slipping for the last three months, but not as precipitously as shallow water OSV demand. The shallow water market is down to three jackups and a bunch of platforms.
Shallow water operators cut back fast, and small PSVs (500 dwt-2,999 dwt) are getting sent inshore to Louisiana shipyards. I’m seeing very little availability for shallow water tonnage, with lots of stacking. The spot market for big boats has also tightened up. We’ve seen some 4,800-dwt PSVs laid up as well. The backlog of drilling programs is also getting whittled down, or pushed to the right. We’re definitely feeling the spending cuts in the oil patch. At IHS, we are seeing more scrapping and some vessels getting repurposed for work outside of oil and gas. Several good quality PSVs (2,500 dwt) have been bought for as low as $1.5 million from the banks — 15-to-20-year-old boats.
The offshore industry has been double punched in the gut. We’re still reeling from the 2014 downturn. Hornbeck is now in the middle of a bankruptcy. OSV and rig demand are still above the low levels of activity seen in 2017 and 2018, but I believe that means there is more room for offshore activity to shrink in the next six months as the backlog of drilling projects unwinds.
New day rates are currently hard to judge. There are so few new fixtures and hardly anybody is talking. Tidewater recently reported that U.S. day rates were up 4% in the first quarter, and that jives with my sources. PSV rates were heading up before Covid-19 shut everything down. A few sources have told me that day rates are unchanged.
Operators are bucking for rate reductions, but vessel owners have none to offer as their backs are already up against the wall. I’m sure some great deals are out there for prompt tonnage in Port Fourchon, La.