UK offshore outlook bleak

Broker Westshore says owners face drop of between 20% and 44% in number of rigs operating this year.

Broker Westshore has revealed gloomy prospects for a beleaguered offshore shipping sector as the number of operational rigs drops further.

It said it is almost certain that 2016 will see a reduction in platforms on hire, with the UK market looking the most vulnerable.

The company said the worst-case scenario for the UK - where no new contracts are awarded and no options are taken up - would mean a 44% fall in working rigs.

Even if options are declared and new tenders awarded, the figure would be 20%.

“Looking at the contracts in more detail this will affect jackups particularly, although there are a handful of semis that could come off contract and wind up in layup,” it added.

These include Taqa/IOG’s John Shaw, Premier’s Ocean Valiant and the Paragon MSS1, owned by Nexen.

Westshore believes most of the damage has already been done in terms of Norwegian rigs, with about 20% fewer platforms likely to be in operation by the end of 2016 - if no options are declared and no new deals emerge.

In other North Sea sectors, it said a worst-case scenario would see a 66% reduction. The most optimistic forecast is a 25.6% drop.

PSV earnings "bleak"

Data from the broker showed offshore shipowners were struggling for most of 2015 with rates well under break-even, despite brief spikes in the summer and in December.

It said the earnings picture for platform supply vessels (PSVs) was “pretty bleak.”

“The tail end of the year picking up as this elusive market balance seems to return but while the AHTS rates reached more acceptable levels (from owners' perspective at least) the PSV rates failed to impress and still languish below break even,” it added.

“Few predicted 2015 would turn out to be as bad as it did, records reached for number of vessels in layup, all time lows in rates etc”.