Island Offshore to lay up half of its fleet during winter

Norwegian shipping company Island Offshore has informed that the number of its vessels in winter lay-up may increase to 14 which makes half of the company’s fleet. 

Island Offshore fleet comprises 28 vessels within the vessel segments PSV, AHTS, well stimulation (WS), subsea construction (SCV), and light well intervention (LWI).

The company said on Wednesday in its 3Q 2016 report that, at present, 11 vessels are in lay-up whereof 5 are cold stacked. As both spot and term day rates have remained unsustainable, Island Offshore resolved to increase the number of vessels in lay-up during the winter months.

Accordingly, 5 vessels in lay-up will remain stacked through the winter pending start of firm contract work or resolution of tender processes. One additional vessel will go into winter lay-up due to planned drydocking and re-class programs. Two additional vessels are expected to complete the current work program by early December, and will go into lay-up upon completion of work.

The number of vessels in winter lay-up may therefore increase from 5 to 9 in coming months, leaving a total of 14 vessels in long- or short-term lay-up. This constitutes 50% of the Island Offshore fleet.

According to the company, the conventional PSV and AHTS markets continue to be depressed despite the number of vessels in lay-up increasing to approximately 130. Island Offshore said it does not expect this market to recover until it sees a more sustainable oil price inducing increased E&P thus rig activity. Short and long-term work across markets is extremely competitive in this segment, the company explained.

However, the company added, an earlier recovery is expected for the LWI and part of the subsea market.

Profit goes up, revenues down

Also on Wednesday, the company said that its profit before tax increased in the third quarter 2016 totaling NOK 96 million, including unrealized FX gain of NOK 61 mill related to conversion of ship mortgages in USD, compared to NOK 58 million in the prior year quarter.

However, the company’s revenues were down for the third quarter amounting to NOK 560 million, compared to NOK 711 million in the same quarter last year.

Island noted that cost cuts made in 2015 and 2016 are now making a significant contribution to earnings, especially vessel lay-ups and associated crew reductions, but also salary reductions, reduced administration expenses, and maintenance efficiency measures.

Fleet utilization during the quarter was 72% including vessels in lay-up and the fleet order backlog excluding charterer’s options totaled NOK 3.3 billion at September 30, 2016. Contract coverage for the remainder of 2016 is 53% based on contract days; 37% in 2017.

Offshore Energy Today Staff