The WorkBoat Composite Index, our list of workboat-related stocks, jumped 225 points, or 14.5%, in 2016. The Index lost 10% last year. The Index closed out a strong 2016 by rising 24 points in December, or 1.4%. For the month, winners topped losers 20-9.
Oil service operators were hard hit in 2015, losing 25%. The Operators Index bounced back in 2016, posting an increase of 11.6%. The Philadelphia Oil Service Index also rebounded, gaining 16.5% after losing a whopping 25% in 2015.
In December, several oil service operators posted double-digit increases including Tidewater, Hornbeck Offshore, Seacor Holdings, Gulfmark Offshore and Transocean.
Despite the improvement in December and all of 2016, the oil service market is still suffering. During Gulfmark’s November earnings call with analysts, Quintin Kneen, the offshore service vessel operator’s president and CEO, said the market is currently “unsustainable.”
“It continues to be an extremely difficult time for those of us in the offshore vessel industry, for us in particular and most likely for the other large global fleet operators,” Kneen told analysts. “Overall utilization is stabilizing, but quarterly average day rates are still coming down and as a result, for us and for the industry as a whole, the business is an unsustainable state.”
Kneen said that the company believes that this unsustainable period is going to be measured in years not quarters. Each major oil and gas region around the world has an oversupply of vessels, he said.
In the U.S. Gulf, day rates continue to fall. Gulf OSV operators did not reduce day rates earlier in the downturn as quickly as North Sea owners did. As a result, in the U.S., day rates are just now coming down to daily cash operating costs, Kneen said.