Olympic Shipping chairman Stig Remoy has said a long-term charter signed with Reach Subsea is profitable and has many more committed days of work than some brokers have guessed.
“It is a great contract for us, actually. The more the market grows, the more benefit we get out it,” Remoy told TradeWinds, deflecting questions over an implied trigger mechanism on rates.
Oslo-listed subsea contractor Reach announced the two-year charter for the Norwegian private owner’s 106-metre light construction vessel, the Olympic Challenger (built 2008), this week.
The contractor announced few details, telling investors the charter was “structured in a way that enables Reach to offer a competitive subsea service to our clients”.
As Remoy confirmed for TradeWinds, brokers had correctly interpreted that statement to mean the deal was a “pay as you go” contract.
Under such contracts, only a limited number of days in each year of a charter are firm commitments. Several small subsea contractors have disappeared in the downturn, but nimble Reach has used the model to great effect, keeping bids to clients low.
One broker said: “The days of ‘pay as you go’ will come to an end but we are not there yet.
“It is interesting to me that owners are still willing to go down this route of giving charterers a bit of faith that they will end up using the ship. But we are seeing more owners who just want firm commitments.”
The broker added that perhaps Reach had “only four months of commitments each year” under the 24-month deal, which works out to about 32% of the term.
Remoy rejected that estimate, telling TradeWinds that it was “much more”, but he refused to be drawn on the number of firm days, or day-rate levels.
“We are very comfortable with the day rates. Based on the agreements we have now with banks, it is more than interest and instalments,” he said.
Remoy also pointed to the charter of the 93-metre Olympic Delta (built 2015) as a “pay as you go” deal with Reach’s Swedish co-operation partner MMT.
That ship is believed to have been guaranteed for about 160 days in 2017.
But Remoy said: “MMT kept it running the whole year [in 2017].” He added the minimum number of contracted days for the vessel had been increased for 2018.
Reach’s other main long-term commitments are for one ship each from Ostensjo Rederi, Havila Shipping and SolstadFarstad. It reported unaudited numbers that it sold 588 vessel days of work to its end-clients in 2017.
