A brief Overview of the ME Offshore Market
Time to invest?
Dubai 7 March 2012
Geir Sjurseth, Managing Director, DVB Bank SE
Page 2DVB Global Offshore Support Group
Introducing DVB
DVB Overview
• European Company (SE), listed on the Frankfurt Stock Exchange
• 95% owned by DZ Group (largest co-operative banking group in Germany)
• Over 500 professionals, all specialising in transport finance
• Over 500 clients worldwide, all active in the transport sector
Global Presence Through 13 Offices Market Approach
AviationShipping Land Transport
Structured Asset Financing
Advisory and M&A
Asset Management
Risk Distribution
Loan Participations
Asset & Market Research
EUR 1.16bn
Market Capitalisation
$ 27.3bn / EUR 20.7bn
Total Loan Book
EUR 84.6m / 98.0m
Net Profit Sep. 2011 / Sep. 2010
19.3%
Basel II Core Capital Ratio
A+
Long Term Debt (Standard & Poor’s)
A-1
Short Term Debt (Standard & Poor’s)
Key Facts
AMERICA EUROPE ASIA / PACIFIC
New York
Curaçao Singapore
Tokyo
HamburgFrankfurt/MainZurich
Bergen/Oslo
Piraeus
RotterdamCardiff London
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11 Offshore Support Group (AHTS, PSV, subsea, diving and heavy lift vessels, others)
DVB Shipping Finance Division - Seven Global Sector Groups
Crude Oil & LNG Tanker Group (crude oil and Liquefied Natural Gas tankers)33
Chemical, LPG and Product Tanker Group(chemical, specialist, Liquefied Petroleum Gas, product and asphalt/bitumen tankers)44
Dry Bulk Group(barges, dry cargo, combination and bulk carriers)55
22 Offshore Drilling and Production Group (jack-ups, drill ships, semi-subs, FPSO, FSO, FPU)
Container Business Group(container vessels, container boxes, car carriers, reefers)66
Cruise & Ferry Group (ferries, yachts, ocean/river cruise, RoRo’s)77
Page 4DVB Global Offshore Support Group
Overview of the Offshore Support Sector
Offshore Support Segments
Crew Accommodation
• Jack-up Platforms
• Semisubmersible Platforms
• Mono-hull Vessels
• Accommodation Barges
• Hybrids
Accommodation
Transport
• Float on / Float off (Flo / Flo)
• Lift on / Lift off (Lo / Lo)
• Roll on / Roll off (Ro / Ro)
• Semi-submersible Heavy Lift Barge
Heavy Lift
Seabed Installation
• Diving Support Vessel (DSV)
• Lay Support Vessel
• ROV Support Vessel
• Lay Barge
• Reel Lay Vessel
• Well Intervention Vessels
• Derrick Barge
• Pipe Carrier
Subsea & Construction
Hydrocarbon Exploration
• Seismic Survey Vessel (SSV)
• Electro Magnetic Survey Vessel
Seismic
Supply & Anchor Handling
Supply
• Anchor Handling Tug (AHT)
• Anchor Handling, Tug & Supply (AHTS)
• Platform Supply Vessel (PSV)
• Crew Boat
• Stand-by Vessel
• Emergency Response Rescue Vessel (ERRV)
• Utility Vessel
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Restructuring
Financing
Ability to finance Mexican and Brazilian flag vessels
S&P and Newbuild Finance
Sale & Leasebacks, Acquisition Finance and Mezzanine Finance
Advisory and M&A
Ship Sale & Purchase
Mergers & Acquisitions (M&A)
Debt & Equity Capital Raisings
Shipping / Offshore Investment Fund
Structured Equity and Mezzanine Finance
Equity Investments
Sale & Leasebacks
DVB’s Offshore Support Group
Offshore Support Group
Page 6DVB Global Offshore Support Group
Agenda
1 A Brief Overview of the OSV Market
2 Time to Invest?
Page 7DVB Global Offshore Support Group
215
273
349
454
395
467
544595
637
2005 2006 2007 2008 2009 2010 2011E 2012E 2013E
16%
9%7%
Global Offshore Market Overview
Oil Prices & Energy Demand
E&P Capex Rig Market OSV Demand
Crude Oil Prices Global E&P Capital Expenditure
OSV Market Demand Chain:
Key demand drivers remain in place ...
35.8 49.9 55.7 67.9 58.3 70.2 77.3 84.7
-
30
60
90
120
150
2005 2006 2007 2008 2009 2010 2011 2012
US
D/b
arre
l
Oil companies' average oil price forecast Oil price
Page 8DVB Global Offshore Support Group
41
76
14
2
10
38
6 2
7 13
1 1
Bal.2011 2012 2013 2014
5 - 9,999 bhp 10 - 17,999 bhp > 18,000 bhp
Delivery Schedule
PSV Delivery Schedule (December 2011) AHTS Delivery Schedule (December 2011)
• The orderbook for PSVs represents 30% of the existing fleet in dwt term
• Most PSV orders are placed for vessels greater than 2,000 dwt (85%)
• Delivery of 26 PSVs >4,000 dwt of total 56 in 2011, compared to 14 of total 82 in 2010
• The orderbook for AHTS represents 13% of the existing fleet in bhp terms
• Particularly in the small size categories the orderbook seems too large
• Delivery of 23 AHTSs >10,000bhp of total 176 in 2011, compared to 17 of total 261 in 2010
… but recent deliveries and remaining orderbook will continue to put pressure on utilisation
4
26
9 13
48
22
5
17
58 57
12
Bal.2011 2012 2013 2014
< 1,999 dwt 2 - 3,999 dwt > 4,000 dwt
Page 9DVB Global Offshore Support Group
Source: DVB Research and Strategic Planning
Global Outlook 2012+
Prospects By Region and Vessel Type
PSV (dwt) AHTS (bhp)
< 2,000 2-2,999 3-3,999 4-4,999 >5,000 < 2,000 2-3,999 4-5,999 6-7,999 8-9,999 10-14,999 15-19,999 >20,0000
Asia Pacific Poor Average Average Good Good Poor Poor Low Low Average Good Good Good
South America Poor Poor Good High High Poor Poor Low Low Average Good High High
West Africa Poor Poor Good High High Poor Poor Low Low Average High High High
Middle East Low Average Good Low Low Poor Poor Average Average Good Good Low Low
Australasia Poor Low Good High High Poor Poor Low Low Average Good High High
NW Europe Poor Poor Average Good High Poor Poor Poor Poor Low Average Good Good
Med / Black Sea Poor Average Good Average Average Poor Poor Average Average Average Average Low Low
US GoM Poor Poor Average Good High Poor Poor Low Low Average Good High High
Mexico Poor Poor Good Good Good Poor Poor Average Average Average Good Good Good
Current market expectations favor sophisticated vessels
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Agenda
1 Brief Outlook & Why Sector is Attractive for Investors & Consolidation
2 Time to invest?
Page 11DVB Global Offshore Support Group
What we’re seeing in the BANK market
Operator/corporate - 2nd hand/NB contracting
KSs - On the road again PIs – PE/equity raise
• Strategic purchases of specialised vessels
• Rush to contract large PSV NBs – is next thing AHTSs again?
• Attractive yard terms with limited equity up front
• Many new OSV players popping up going for 5150 AHTS and mid sized PSVs
• Driven by perceived good investment returns, PSVs asset play
• In many cases no industry sponsor
• Look for 50-60% debt, good yard terms
• Clearly speculative – to the detriment of industry operators
• May not get financing
• Driven by perceived good investment returns – low point in cycle, no employment.
• Some time new entrants with colourful business plans
• Can document large NB haircuts v market..
• Look for post del fin and sometimes also LC for pre del.
• May not get financing
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Company cash flow/vessel mortgage capacity
Options and availability of funding to OSV owners
Bank debt
Capital markets
Private equity
ECAs
Chinese banks..
Means of CAPEX Outlook Comment
Applies only to a few
Very selective
Under utilised but peak is passed
If local content
Still under pressure
Still under pressure
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Oslo Stock Exchange Indicators
Indexes Since 2006 – the trough is behind us but..
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
02.01.06 14.08.06 20.03.07 29.10.07 12.06.08 20.01.09 31.08.09 12.04.10 16.11.10 29.06.11 31.01.12
OBX Energy Equipment & Services Marine
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Some regional companies
C.S. Offshore DMC
Conventional & local/regional
Specialised ®ional/ global
Page 15DVB Global Offshore Support Group
The Middle East OSV industry
Key headlines or headaches?
World wide oversupply still a problem – more than 430 OSV NBs to be delivered by 2015
Middle East - 314 AHTSs and very few AHTS NB orders (5-7000bhp)
74 vessels >30 years, the world’s 2nd largest old vintage fraction..
Still downward pressure on utilisation and rates – contrary to rest of world
IRAN – a big headache Many players and no
consolidation Recourse and vessel
employment is critical to banks
# Utilisation
RIGs 120 84%
AHTSs 396 72%
PSVs 133 68%IHS/Maersk Jan 2012
Page 16DVB Global Offshore Support Group
Consolidation Prospects
Fragmented OSV Universe
OSV Growth Private EquityInterest &
Pricing
• NBs & resales only
• Sales of older vessels at profits
• Relatively & surprisingly few M&A deals to spur scale
• Growing number of investors attracted to an energy sustainable industry
• But are they prepared?
• >150 companies - 25% listed – Market Cap of [$30m - $2.5bn]
• Many are controlled by founding families
• CAPEX needs, positive energy market outlook
• US companies’ interest in high tech Norwegian companies
• Driven by cash flow multiple pricing in rising markets
• Attractive returns are achievable
Growth New Markets Scale Bargaining Power
• Access to employment in cabotage markets
• Reduced OPEX / Crew costs though operational mobility
• Reduced cost of funds
• Access to right tonnage • Impact on rates
Offshore Support Industry Characteristics
Traditional Consolidation Drivers
Unlikely
Page 17DVB Global Offshore Support Group
Some Response to Consolidation Drivers...
Drivers Examples Prospects
Fleet Growth / New Tonnage
Strengthen Regional Position
Enter Offshore
Private Equity
• Fleet acquisitions or newbuilds often a cleaner way to grow
than corporate acquisitions. Acquisition to get access to
new/young fleet
• Jones Act /modern fleet
Restis Group
• Makes sense in regions with regulatory barriers such as
Brazil
• Also a way of acquiring people in target regions
• Increasingly seen as a good diversification from
conventional shipping sectors which are experiencing tough
times
• Typically do not like asset heavy companies
• Liquid assets with contracts / listable companies are of
interest
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And further fragmentation of the OSV industry
New kids on the block ...
Winning contracts with oil majors
• 10+ new OSV players entered the market during
2011, most with limited or no track record
• Long term contracts with oil majors such as
Petrobras
Lack of Barriers to Entry
• Little age limitation on vessels imposed by charterers
• Oil majors encouraging more competition by awarding contract to new entrants
• Is industry, or part of, getting commoditized?
Newbuild over Acquisition
• Owners prefer newbuildings over corporate
acquisitions
Ignore Benefits of Consolidation
• How will next downturn impact the
industry?
Page 19DVB Global Offshore Support Group
Summary
MARKET - While the cycle trough is behind us – it’s a fragile recovery
STRATEGY - ME seems to be for the ME – less prone to regionalisation/globalisation
OPERATORS – many and fragmented, easy rate target for the charterers
RISK – vulnerable to weaker prospects
Local industry needs equity to secure current operations and CAPEX
More “dynamic” strategy/consolidation discussions need to take place
ME owners need to find ways to better integrate, take advantage of the greater market
Recovery is on – timing is now!
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