Offshore supply vessel (OSV) firm Tidewater Inc. expects the global OSV market to remain weak until at least the second half of 2016 as customers delay or defer offshore drilling work due to the weak oil commodity market and oversupply in the global OSV market.
Tidewater’s revenues declined by 16 percent from its December quarter to March quarter due to lower utilization rates and reduced average day rates as a number of its customers terminated offshore drilling rig contracts early and are deferring other offshore work.
“While lower exploration and development activity has most directly impacted overall demand for offshore support vessels, continued growth in the offshore vessel fleet also has suppressed vessel day rates and utilization,” said President and CEO Jeff Platt said in a May 27 conference call.
Platt reiterated the company’s outlook that a “meaningful” industry recovery may not occur until the later part of 2016 or even into 2017. The near 25 percent rise in oil prices that has been seen with the ending of Tidewater’s March quarter has caused speculation that the oil and gas industry has seen the bottom in oil prices for this cycle.
“We certainly hope this is the case, but in our view, it is premature to believe that we have experienced the worst of the cycle’s downturn in terms of commodity pricing,” Platt commented.
Tidewater’s read of market trends and its clients contracting strategies suggest that the industry should be prepared for an extended downturn, Platt said.
“If oil prices continue to recover, then we could look for a better 2016, but the reality is that 2015 will be a very difficult year for oil and gas operators and their equipment and service providers.”
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