Norwegian offshore supply shipping company, Farstad Shipping, posted a deeper net loss for 4Q 2016 as it wrote down over NOK 1.8 billion in vessel values amid challenging market situation.
The shipping company on Tuesday reported a net loss of NOK 2.38 billion ($284.4M) compared to NOK 1.3 billion ($155.3M) loss in the corresponding quarter of 2015.
Due to the negative development in the brokers’ market values of the fleet, the prevailing market prospects, as well as uncertainty related to vessels future earnings, NOK 1.82 billion related to impairments of vessels, goodwill and other assets was recognized in the fourth quarter 2016. Total impairment of assets in 2016 was NOK 2.68 billion.
Farstad Shipping achieved an operating income of NOK 524.3 million for the 4th quarter, compared to NOK 939.9 million for the same period in 2015. The shipping company explained that the reduced operating income was a result of the challenging market situation.
The operating costs for the period were NOK 487.5 million, versus NOK 609.5 million in the year-before period. The company has implemented an extensive cost-saving program, and the reduction in operating costs is a result of this. Twenty of the group’s vessels were in lay-up, fully or partly, during the 4th quarter.
No positive change in offshore activity in near future
According to Farstad, utilization and rate levels in the North Sea market for AHTS and PSV tonnage have further weakened during the last quarter of 2016. The market conditions are projected to reach a low point over the winter season. The pressure on rate levels seen in the North Sea corresponds to the development in other regions of the Offshore Supply Vessel market. Worldwide, the number of vessels in lay-up is growing.
The market, however, continues to be out of balance due to substantial excess vessel capacity still trading in the markets. The short-term outlook for the subsea segment is adversely affected by oversupply of tonnage, and rates are consequently affected accordingly, said the company.
The positive change in the oil-price development has not materialized an increase in the offshore activity in general, and is not yet noticeable or expected in the near future, Farstad concluded.
The company recently agreed with Solstad Offshore and Deep Sea Supply to create a new OSV player in Norway with a fleet of 154 vessels.
Offshore Energy Today Staff