20140617-Maybank_KERPL-Offshore___Marine_Insights_from_key_OSV_players_16页_691kb

Offshore & Marine Sector Summary

Core Content

The offshore support vessel (OSV) sector is currently viewed with a NEUTRAL stance by analysts, despite optimism about long-term fundamentals. Key OSV operators and owners remain positive about the future of offshore oil and gas activities, driven by stable oil prices, structural energy demand growth, and an increase in rig counts. However, they are cautious about near-term challenges, such as oversupply in certain segments and transitory market conditions.

The industry is transitioning from exploration to development and production, which is expected to increase the demand for OSVs, especially newer and more sophisticated models. This shift is supported by the retirement of older vessels, with at least a quarter of the global OSV fleet exceeding 25 years of age. As a result, the replacement cycle is emerging as a key driver of demand.

Main Points

• Sector Outlook:

  • Long-term fundamentals are robust, supported by stable oil prices, structural energy demand, and increased rig counts.
  • Operators are optimistic about the future of offshore oil and gas activities, particularly in development and production phases.
  • Regional players, especially in Asia-Pacific, are more confident due to a healthier market and less volatile spending from national oil companies (NOCs).

• Demand Drivers:

  • Replacement demand for OSVs is expected to be strong due to the aging fleet.
  • Increased activities in the North Sea, Brazil, and Asia-Pacific are anticipated.
  • The market for AHTS (Anchor Handling Tug Supply) is showing improvement, while PSVs (Platform Supply Vessels) face oversupply concerns.

• Investment Trends:

  • Major OSV operators are investing in newbuilds and fleet upgrades.
  • Companies like Tidewater, Gulfmark, Perdana Petroleum, Pacific Radiance, and POSH are shifting from episodic investments to more steady and through-the-cycle building programs.
  • The demand for larger and more sophisticated vessels is increasing, especially in deepwater and harsh environments.

• Shipbuilders' Opportunities:

  • OSV shipbuilders like Vard and Nam Cheong are expected to benefit from increased order momentum.
  • Ezion and Mermaid Maritime are highlighted as potential buys due to their exposure to the OSV market and operational strengths.

Key Companies and Ratings

• Ezion (BUY, TP SGD2.70):
  • Strong liftboat opportunities in underpenetrated regions such as Asia-Pacific and the Middle East.
• Mermaid Maritime (BUY, TP SGD0.59):
  • Emerging oilfield services player with growth potential in Southeast Asia.
• Nam Cheong (BUY, TP SGD0.45):
  • Key beneficiary of the recovering OSV market, with a focus on the build-to-stock model.
• Vard (BUY, TP SGD1.27):
  • Classic recovery story due to its focus on high-end, sophisticated vessels.

Market Data and Trends

• OSV-to-Rig Ratio:
  • Has decreased from a peak of 4.83 in Jan 2011 to 4.36 in Feb 2014, indicating a tightening of OSV supply.
  • Expected to fall below 4.0x by 2015E due to increased rig deliveries.
• AHTS Market:
  • Orderbook-to-fleet ratio has dropped to 8%, from over 30% in 2008.
  • Medium to large AHTS vessels are in higher demand due to deepwater and remote operations.
• PSV Market:
  • Orderbook-to-fleet ratio is at 27%, suggesting potential oversupply.
  • Concerns are tempered by possible delivery slippage from Chinese shipyards.
• Subsea Vessels:
  • Demand remains robust due to increased construction and development activities.
  • High tendering activity and contract awards are driving backlog growth.

Regional Growth Prospects

• North Sea:
  • Expected to see a seasonal uptick in summer 2014.
• Brazil:
  • Strong growth prospects with increased E&P activities.
• Asia-Pacific:
  • A key growth area with a gradual shift towards better vessels.
• Emerging Markets:
  • West Africa and Mexico are emerging as key growth regions.

Analyst Note

• Analyst: Yeah Chee Keong, CFA
• Contact: (65) 6432 1460 | yeakcheeong@maybank-ke.com.sg
• Date: 17 Jun 2014

Conclusion

While the offshore and marine sector faces near-term challenges, the long-term outlook is positive. The replacement cycle and increased demand for newer, more sophisticated vessels are expected to drive growth. Companies involved in OSV operations and shipbuilding are well-positioned to benefit from these trends.