Comment: Growing wave of North Sea activity during 2019

Data from maritime and offshore focused VesselsValue is revealing green shoots of growth, according to the firm’s chief commercial officer, Matthew Freeman.

VesselsValue highlights stalwart North Sea drilling rig Ocean Guardian, which was built for BP. Picture: contributed.
VesselsValue highlights stalwart North Sea drilling rig Ocean Guardian, which was built for BP. Picture: contributed.

Here at London-based VesselsValue, an independent shipping intelligence platform providing valuations, data and trade information, we have identified improved sentiment in the North Sea since the beginning of 2019.

Companies are relocating to Aberdeen and, in turn, creating jobs and employing more workers. Vessels that were previously out of work due to the oil price downturn are starting to win new contracts. We found that out of the current North Sea offshore fleet, only 16.4 per cent are currently not working, or “laid up”, compared to the global average of 26.6 per cent. Since 1 March this year, 16 vessels have been registered as out of layup.

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The earning rates in the North Sea are also above their two-year seasonal averages, meaning more money for each project. Many owners are keen to capitalise on this and are switching on the engines again.

We are able to monitor the utility of the world fleet daily via our mapping and tracking platform using recency of Automatic Identification System signal.

We deem a vessel that has not signalled in more than eight weeks to be likely laid up. Likewise, if a vessel suddenly signals after a long period of time, it is an indicator that it may potentially be under reactivation.

This technique can be applied to individual vessels, owners, or the fleet as a whole.

Interestingly, subsea vessels, which are involved in construction work on the sea floor, have the best utilisation rate out of all vessels currently operating in the area. These assets have suffered in value, however there remains a forward workbook of subsea projects and several new high-profile contracts have been awarded in the area since the beginning of 2019.

Earlier this year, Dutch subsea giant Boskalis moved into a purpose-built office in Westhill Business Park in Aberdeen, known as a hotbed for leading offshore owners. The company has taken a ten-year lease and now employs close to 100 people to support its expanding operations in the North Sea.

One major contract awarded in the area over the past six months is the cable and installation contract in the Hornsea 2 offshore windfarm that is worth more than €100 million (£92m).

The project workscope includes the preparation of the offshore export cable route (geophysical survey, boulder clearance and seabed levelling through dredging) and the installation and protection of the cables. Work is expected to extend through 2021.

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Boskalis is also supporting the global community by chartering in vessels to operate in the area and support a growing need for decommissioning work in the North Sea.

Recent examples include the 2011-built Dive Support Vessel Boka Da Vinci that mobilised recently from Freeport in the Bahamas, and is scheduled to remain in the North Sea through 2021. Likewise, Super Large Anchor Handler Go Pegasus has been taken in on long-term bareboat charter by Boskalis until 2022. According to VesselsValue, the Boka Da Vinci is worth $47.1m (£38.9m) and the Go Pegasus has a value in excess of $13m today.

Decommissioning old platforms and rigs is a growing trend in the North Sea. 2017 saw the establishment of Scotland’s first self-financed outfit Well-Safe Solutions, aided by secured funding from Scottish Enterprise, Scottish Investment Bank and a regional selective assistance grant. In March 2019, Well-Safe acquired its first asset, a stalwart North Sea drilling rig, Ocean Guardian. Built for BP as the Sea Explorer in 1985, it exists as one of the few Scottish-built rigs and was purchased by the company for a price reported to be between £10m and £15m. VesselsValue prices the rig today at $11m, however this price does not include an estimated $100m to be ploughed into conversion and upgrade work for a whole new dedicated well plug and abandon role commencing in early 2020.

“One might argue [offshore support vessel] values and rates have bottomed out for the time being,” says VesselsValue’s head of offshore, Robert Day.

“[Platform supply vessels] have suffered during the downturn but when traded on the spot market can experience very healthy returns. Once these earning stabilise, they will result in higher term rates, which will in turn cause asset values to rise.”