At Marine Money’s big annual conference in New York last week, capital restructuring in the offshore energy sector was the subject of a panel that featured bankers and lawyers that have been working overtime to fix broken deals.
Moderator Jim Dolphin from AMA Capital Partners, a boutique merchant bank focused on the maritime industry, said that the advent of shale oil has brought about “a regulator on oil prices,” with a lower marginal production cost per barrel that has “placed even established companies in dire straits.” The bottom line, Dolphin said, is that “major offshore players are now facing significant debt service obligations, including rigs, PSVs, OSVs and FPSOs.” Dolphin and other panel members pointed that there are virtually no bids on offshore assets, with no buying interest in acquiring assets at any price, following 2013’s height in spending on offshore assets.
Much of the discussion centered on bankruptcies, mainly referring to rig operators, the demand drivers for PSVs and OSVs. Dolphin pointed to Chapter 11 bankruptcies at companies including Paragon Offshore, Hercules Offshore and Vantage Drilling International.
There are signs of life, however. The sole broker on the panel, Lars Buin, partner and managing director, Pareto Offshore AS, pointed to positive signs in the jackup market, based on scrapping of older units. From his experience, he said, “jackups are always the first to react” as markets are poised to make a move. He said that buyers are now expressing interest, and that “you will see some transactions” in the next few weeks.
