Weak market drives Deep Sea Supply to continue vessel lay-up trend

Image: Deep Sea Supply
Image: Deep Sea Supply

Offshore vessel operator Deep Sea Supply will continue to lay-up vessels that do not have any fixed activity in the next months as a consequence of the weak market. 

Deep Sea Supply has per May 2016 laid up in total 16 vessels, of which 11 are platform supply vessels (PSVs) and 5 anchor handling tug and supply vessels (AHTS).

Deep Sea Supply said in its first quarter 2016 report on Tuesday that, in addition to laying up vessels to reduce cost, the company is working to further reduce operating expenses for the vessels in operation.

According to the company, during the first quarter of 2016 the oil price has increased somewhat, but there are still no signs of improvement of the fundamentals of the global OSV markets. The company said it expects no improvement of the difficult market situation for OSVs in the short to medium term.

Deep Sea Supply has 37 vessels in total, 12 AHTS vessels and 25 PSVs. Of these vessels, 16 are 100% owned by the company, and 21 vessels are owned 50% through a joint venture with BTG.

In Brazil, the situation remains challenging, and Deep Sea Supply now has only 9 vessels left in Brazil. The North Sea spot market is also challenging with unsustainable rate levels and low utilization for PSVs. Following the sale of two AHTS vessels in February 2016, the company only has one vessel (PSV) in the North Sea spot market.

Deep Sea Supply says it is not satisfied with the contract coverage for 2016 that amounts to 17 %, firm period, and 30%, including option period. The company is currently in advanced contract negotiations for some term opportunities, however the competition is fierce and rate levels are low, the vessel owner noted.

The company stated that BTG is still in a challenging financial position with a significantly reduced contract backlog following the expiry of many term charters. The cash position is unsatisfactory low, and the company is dependent on adjustments of its financial obligations going forward. The financing of DESS BTG is non-recourse to Deep Sea Supply, the company said.

Deep Sea Supply on Tuesday posted a net loss of $25.47 million for the first quarter of 2016, compared to a profit of $3.9 million in the same period last year. The company’s operating revenue was $16.49 million, a significant drop compared to $40.31 million in the year-ago quarter over lower utilization due to vessels coming off long-term charters not being replaced by new contracts, and sale of vessels.

Offshore Energy Today Staff

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