Interview: Maersk Supply growing in Aberdeen despite expected company sale

Market coming back, but to what extent?

OET: I will get back to the Stingray. I would like to pick your brains on the outlook for the industry.

Maersk Supply Service in late 2017 said it expected the market outlook for the industry to remain subdued in the near-term and the midterm with OSV market challenge due to the low activity in the offshore industry. Since you’re responsible for the UK part of the operations I’d like to hear your thoughts, on the UK outlook.

Also worth noting, OGUK said recently capital investments were returning to the UKCS. A dozen of projects up for sanction expected this year; new players, there’s been a talk of the North Sea renaissance. Can you see this translating into more work for Maersk Supply Service, increase in revenues, and if yes, and how soon?

Harris: In the short term, for the next two quarters in the North Sea, we foresee “heating up” a bit. In the market generally, there’s a number of vessels that could potentially be available but a lot of them are cold stacked and the costs to take these out of stack are quite prohibitive, and none of the operators particularly want a vessel that’s been non-operational for a number of months.

There is a possibility that the market could get quite overheated but – during the summer in the sector and the anchor handling, but we expect that to die down toward the end of the good weather window in Q3-Q4 in the North Sea and will probably subdue again when the rigs come back off station.

In the longer term, the sanctioning of projects is looking to pick up particularly in Norway, you see a lot of announcements from Tier1 contractors and Subsea 7 and Technip. There are some opportunities for some of the smaller companies like Maersk Supply Service to support them and some of their operations, and we welcome that as good news. The UK, in general, tends to follow a wee bit behind Norway.

As for revenues, you understand yourself that when you see a project being sanctioned then there’s usually a 12-18 months design phase and then a procurement phase as well. While a project can be sanctioned in 2018, the offshore part of work may not happen until 2019, or 2020 so we are still a bit cautious.

Yes, we see signs of the market coming back but to what extent? But, every piece of news that you get with a contract award and another project sanction is welcomed.

ROV earning more than OSV?

OET: Dayrates? Any improvement, with the oil prices rising? What has the company been doing to increase the margins?

Harris: The oversupply in the market is affecting the dayrates quite significantly. It’s worrying when you can see a vessel going out with an ROV on it, and you can get 3x as much for the ROV as you can for the vessel. There’s something clearly not right in the market.

As long as the oversupply continues, there’s very little we can do to leverage the rates upwardly. It’s only going to be a factor of basic economics of supply and demand. If all the rig moves happen at the same time, then demand increases, and the rates go up. We focus very hard on trying to reduce costs to maintain profitability, and that has been a struggle in the past.

In 2016, there was a large redundancy program, and Maersk Supply Service was among the first to announce a fleet divestment program, and we have actively been the market leaders in reducing our older tonnage and reducing the oversupply in the market.

I personally feel there still needs to be more of that going on before the rates will return to anything that’s significant.

I don’t think they’ll ever return to where they were in 2014 at the peak of the market. If they do it’s kind of an indication that the market is back to a position where it’s out of control and projects, then go back to into that cycle of being uneconomic and operators just putting the breaks on and stopping the sanctions again.

We have to be mindful of the maturity of the basin we’re operating in. Not to make an uncompetitive environment or a place where it’s difficult for our customers to do business. We need to make sure that we can maintain our sales pipeline and back to our costumes, to ensure that their projects can come to fruition.

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