Singapore offshore support vessel sector bleeds more jobs

SINGAPORE - Three leading offshore support vessel owner-operators have downsized operations out of Singapore, in light of depressed contracting activity and charter day rates in South-east Asia.

The Business Times understands that Deep Sea Supply (DSS) and Tidewater have slashed their headcounts, and that GulfMark is looking to trim its fleet in South-east Asia.

DSS, the offshore support vessel (OSV)-focused business of Norwegian tycoon John Fredriksen's shipping empire, has halved its staff strength in Singapore in the last 18 months, said industry sources.

Likewise, drastic job cuts have been noted at the privately-owned subsidiary of troubled New York-listed OSV player, Tidewater. The market is monitoring job counts at Tidewater Singapore, even as its parent faces the risk of filing for Chapter 11 bankruptcy protection if it fails to secure waivers from debt or note holders.

Meanwhile, in an e-mail to BT, Houston-headquartered GulfMark dismissed rumours that more retrenchments were in the offing here and that it was planning to pull out of Singapore.

But it has embarked on a fleet-rationalisation exercise targeting older tonnage, which is understood to include certain vessels marketed from Singapore.

DSS, Tidewater and GulfMark are leading OSV players with global operating footprints. To a certain extent, the retrenchment and fleet rationalisation at their Singapore's regional headquarters are in sync with a global cost-cutting drive in the beleaguered offshore and marine (O&M) sub-sector.

A drastic slowdown in exploration and production activity may have adversely afflicted the entire O&M value chain, but the OSV sub-sector is widely considered the worst hit because of its large and developing supply glut.

Pareto Securities Pte Ltd chief executive David Palmer said: "Everyone and everything is in cost-cutting mode and OSV owners are forced to rationalise their geographies and their fleets.

"Owners are on a 'subsistence diet' in an environment where corporate and personal survival is a key focus."

There is no denying, however, that across all three OSV players, the larger South-east Asia or Asia-Pacific market serviced from their Singapore offices, does not match other regions in terms of revenue contribution, charter day rates or vessel utilisation.

GulfMark's Q2 results showed that its OSVs operating in South-east Asia attracted the lowest rate per day worked. Revenue from its South-east Asian operations more than halved to US$4.4 million as overall utilisation of its fleet in the region fell from 70.4 per cent to 41.4 per cent.

Tidewater had posted in the June quarter the lowest regional vessel day rates for its working fleet in the Asia-Pacific. Vessel utilisation in the Asia-Pacific was just 10.2 per cent, less than a quarter of that in the previous year.

Revenue for the region came to US$7.9 million, down from US$27.9 million.

DSS's Q2 results do not show any regional breakdown, but its presentation indicated that just two of its OSVs were working in the Asia-Pacific, and that about a dozen were laid up.

Charter day rates and utilisation may be lower in the Asia-Pacific, but one industry veteran told BT that all three named OSV players "see future potential in Asia".

The challenge however, is in how to trim costs and hunker down for the passing of a long and uncertain winter in the sector.

Mike Meade, chief executive officer of M3 Marine, offered this prediction after factoring in the cost rationalisation drives at the three OSV players: "As we come through this downturn, I see at the end of the tunnel a strengthened DSS (thanks to the Fredriksen factor), a slimmed-down- but-survivable GulfMark and a leaner (but not meaner) Tidewater."

This article was first published on September 22, 2016.
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