Asia's Offshore Support Vessel Firms Move to Grow Business
Asia’s offshore support vessel (OSV) sector has streamlined its operations recently to grow its businesses, particularly in the region. Expectations of higher capital expenditure (capex) for exploration and production (E&P) in the petroleum industry have triggered cautious optimism among regional industry players servicing the sector.
Global E&P capex for the petroleum industry had been estimated to reach $723 billion this year, or 6.1 percent above 2013’s $682 billion, with Asia’s share projected to increase to $124 billion, up 2.47 percent over the same period, Barclays Banks said in a Dec. 9, 2013 equity research report.
“In the offshore segment, the current oil price level [$101.94 a barrel for U.S. crude and $110.33 a barrel for Brent crude] is supportive of investments ... the strong drilling rig order book supports the ordering of offshore support vessels,” Finland’s Wartsila Corp., a power solutions provider for the energy industry, said in its April 24 market outlook.
Separately, Singapore-listed offshore solutions provider Ezra Holdings Ltd. noted in an April 11 investor presentation that the outlook for the OSV sector in Asia Pacific is positive. The company listed the following factors for its assessment:
- drilling activities in the region are more insensitive to swings in oil prices and capital budgets
- improvements in vessel-to-rig ratios underpinned by growing rig fleet size
- new OSV deliveries to drop significantly from 2013
Raising Funds through IPOs
Some firms have turned to or are looking at the regional equity markets to raise funds for their business, including PACC Offshore Services Holdings Ltd. (POSH) and Pacific Radiance Ltd. and Icon Offshore Berhad.
POSH, the offshore support services arm of the Malaysia’s Kuok Group – which is the commodities, property, media and shipping conglomerate of tycoon Robert Kuok – raised $298 million (SGD 374.8 million) from the firm’s initial public offering (IPO) on the Singapore Exchange (SGX) in April, with the proceeds used mainly for debt repayment.
“The IPO will reduce our debt to equity ratio down to 43.6 percent from 93.4 percent before the IPO … [as] most of the other offshore support companies gear themselves on a 1:1 ratio, … we are still under-leveraged with plenty of room to grow our fleet,” POSH Chief Financial Officer Geoffrey Yeoh was quoted in the April 28’s edition of The Edge Singapore.
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