Interview: Global offshore rig fleet worth $56.6 billion
VesselsValue, a website providing intel on offshore and shipping world including the valuations of the various kinds of vessels, has now expanded its coverage to offshore drilling rigs.
Offshore Energy Today has interviewed VV’s Head of Offshore Miles Cole to learn more about the service, how they come up with value estimates for rigs, what is the most expensive rig, who is the target audience etc.
Dear Mr. Cole, thank you very much for accepting the interview, your second with Offshore Energy Today. We’ve interviewed you when VV introduced the offshore vessels coverage, and in that interview, we asked about the potential coverage of offshore rigs. And here we are today talking about the VV’s MODU service.
Q: When did you decide to introduce the coverage of mobile offshore drilling units, and why?
Providing valuations for MODUs were always part of the Offshore plan. The OSV market came first due to the higher number of transactions and took about a year and a half to build the model producing daily values for around 7,500 OSV vessels. MODU valuations took around 8 months to create, with a database of 1,017 vessels.
Q: How does the VV MODU work? Can you provide a brief overview of what the users can find there and how?
Our MODU values work in the same manner as all the daily online valuations at VesselsValue. We use an algorithm which tracks a large sales database along with all features of the vessels size, age, builder yard, DP Class, Drilling Depth, Blow out preventer capacity etc. Our algorithm will also adjust to the state of the market based on time-charter, spot markets and daily oil price to adjust values in the absence of a meaningful volume of sales & purchase transactions. Our system uses the latest inputs to revalue the world fleet every night.
Q: I presume there is not a single rig out there that’s had its value increased since the oil prices went down in mid-2014?
The entire offshore drilling rig industry has continued to suffer after a failure to reach any agreement on production curbs in 2014. The sector has seen huge cut backs, especially in exploration. Values have continued to fall since then, although OPECs agreement to limit production has had a positive effect on oil price since November 2016.
Q: While the VV database is quite useful for us journalists and data freaks, I presume we are not your main target audience?
We already have a huge number of people contacting us from the offshore industry for our daily valuations as the sector as a whole has become exceptionally opaque. Originally, we decided to go into Offshore because of the high demand from our banking and investment clients – people need a data driven methodology that takes the whole market into account during low levels of transactions.
Our mapping service [email protected], which overlays real time vessel positions on top of full GIS offshore infrastructure mapping, has attracted a wide range of ship owners, managers and charterers. They are interested in looking at what particular vessels have been doing in particular blocks, looking for new developments or new wells based on rig positions.
Q: Does your coverage include all the offshore rigs out there? How many are there, and, if you have this info, what is the total value of the offshore drilling rigs globally?
In the VV database are 874 live MODU vessels valued at $56.6 bn today. This includes 119 Drillships worth $18.6 bn, 577 JackUps at $25.2 bn and 178 semi-subs worth $12.8 bn.
Q: Can we talk about the individual valuations? If you say that a semi-sub is now worth $30 million, what does that mean? Is this a price for which the rig can be sold?
VesselsValue provides fair market values which mean this is what you could expect to buy or sell that specific vessel for, with a willing buyer and a willing seller, based on where the markets are now (second-hand sales, newbuilding orders, oil price $/barrel and spot and charter markets.
As well as providing values based on an individual vessel (taking into account its exact age, builder, size, features, etc.) we do provide generic values. These are ‘paper’ ships built into the system that does not carry a premium or discount based on features but is subject to the same daily market movements for that ship type, size bracket, and age. For example, a generic 5-year-old Semi-sub is worth $97.55 million today.
The generic values act as a guideline for what your vessels could be worth and allow our clients track trends and market movements since 1st January 2007.
Q: How do you come up with the value of a rig? What parameters do you use?
We have to take into account all features of the vessel, which includes around 80-100 different aspects of each rig. These can be grouped into the size, age, type, features (builder yard and country, accommodation size, design, handing, mud pumps, etc.) and the earnings of any given asset. The offshore valuation model differs from conventional shipping in that it also takes into account the effect of oil prices on a unit’s earnings, which help move the daily valuations.
Q: Have you heard from the owners already? How do they feel about those numbers?
Owners are understandably worried about the offshore industry with oil prices having taken such a tumble and huge overcapacity in the OSV sector. For instance, there are 238 PSV vessels scheduled for delivery this year. Of course, if they all make it onto the water this year is another matter.
We have met with some push back, but we faced this when we originally launched bulkers and tankers in 2011. But by opening up the full fleet list, transaction database and real-time mapping, we are helping owners make money. By creating a more transparent industry, people can make better business decisions and prepare for when the markets recover.
Q: What is the most expensive rig in your database right now?
The most expensive rig right now is the Atwood Archer, an ultra-deepwater drillship, valued at $888.16 million USD, but is currently scheduled for delivery in June 2020.
The most expensive live vessel is the Maersk Invincible, a Jack Up built at Daewoo, valued at $426.8 million. Even though it only just went live in Jan 2017, the vessel was originally bought for $650 million on the 25th September 2013.
Q: VV, apart from providing values, is also covering charter deals. As we speak (January 23) VV’s database shows four offshore rigs have received contracts on the same day? Is this real time info, and where do you get such information?
We have a comprehensive network of brokers, charterers, owners and other industry sources such as classification societies, yards, flag states and the owners themselves, who all provide information to our database.
The tricky part of compiling a database is not getting your hands on the data, but verifying if all the information is correct. We regularly hear 4 or 5 similar stories relating to the same vessel, but it’s our team of 40 analysts who sit in our Research Office on the Isle of Wight who triple check the information before entering it into the system.
As VV relies on data, the statistics rules garbage in equals garbage out applies to our models. In order to keep our accuracy levels as high as they are (85% of all recorded sales have been concluded within 10% of our estimates, the majority of which have been far closer) we have to make sure we have the most accurate data as possible.
Offshore Energy Today Staff