Sector Overview

Opportunities in the offshore support vessel market

Teddy H Tsai Head of Research, Pacific Transportation Asia Pte Ltd.

October 24, 2008

Investment View

Investment drivers

Offshore oil & gas exploration moving to deep water High oil & gas prices makes
offshore development more cost effective. Average long-term oil price assumption by
E&P companies around US$55-65/bbl, lower than current levels.

E&P capex expected to grow substantially Expect deep water E&P capex of
US$20bn from 2006-2010. Although most of this would be for rigs, higher specification
supply vessels would also be required.

Favorable supply side dynamics Fleet is old for total offshore supply fleet. 45% of the
fleet is over 25 years old.

JV Partner or takeover To be determined

We require an experienced team with technical expertise operating in offshore services.

We aim for partners that have strong relationships with oil majors, or with national oil
companies in Asia and Mid-East.
Broad range of offshore supply vessel expertise. We aim to build a fleet of different
types of high specification multi-functional offshore vessels, including PSV, AHTS, DSV,
ROV, cable laying, etc.
We are evaluating possible take private transactions of listed shipyard/offshore
chartering companies. (e.g. Jaya Holdings)

Vessel Types

Anchor Handling Towing and Supply

(AHTS) vessels

Fitted for deep-water anchor handling and

towing operations, equipped with a winch
capable to lift a barge or other offshore
vessels anchors.

Main duty is to move rigs, tow barges, setting

anchors, and provide supply support.

Equipped with large cranes, winches, and

large open deck space. Winch and engine
capacity determines power. Higher
horsepower is used to handle heavier gear.

Vessel Types

Platform Supply Vessels (PSV)

Main purpose is to move cargoes and

supplies to/from offshore installations.
Flexible platform structure, enables multiplepurpose supply cargo carrying capacity
Standard Type UT755, a Rolls Royce
designed PSV, over 100 in operations

Diving Support Vessels (DSV)

Helipad
Diving support equipment
Large Cranes

May also be used as a standby/support

vessel, with fire fighting, rescue operations,
or oil recovery equipment.

Vessel Types

Remote Operating Vessels (ROV)

Support

Multi-Purpose Service Vessel (MPSV)

Multi-Purpose (MPP) use

Equipment for sub-sea service, large crane,
winches, and/or fire fighting equipment.

May have other equipment, such as ROV

support, diving support, etc.
Dynamic positioning systems

Support vessel for remote operating vessels

Often equipped with a moon pool, an
opening in the floor of the hull giving access
to the sea, to facilitate ROV launching.
ROVs are used for underwater activities,
equipped with cameras and arms for
underwater duties.

Vessel Types

Cable & Pipe Laying Vessels

Standby and Rescue Vessels

Photo is of a pipe laying vessel

Used to lay underwater pipes or cables.
Pipes and cables are pre-loaded on a spool
on the vessel, and conveyors and rollers
move the pipe downwards into the ocean.

Standby duties are where a vessel is waiting

near offshore installations in case of
emergencies, to pick up people.
Typically with helipad, fire fighting, rescue
operations, or oil recovery equipment.
Typically can accommodate up a large
number of passengers, up to 300 persons
Dynamic positioning (DP2) capabilities

Vessel Types

Seismic Survey Vessels

Fast Supply Intervention Vessels (FSIV)

Survey vessel with seismic prospecting

equipment, called seismic streamers.
Can be capable of a range of duties including
survey, patrolling, fishery protection,
emergency standby, pollution control, fire
fighting, salvage, towing, etc.

A type of crew boat that has high speeds

enabling fast delivery of personnel and cargo.
Fitted with fuel and water cargo capabilities.
Max speeds up to 30 knots.
Can have fire fighting capabilities.

Vessel Types

Well Stimulation Vessel

Well Intervention Vessel

Specialized vessel used to maximize oil

production by creating a more efficient
reservoir flow path.
Increases oil recovery with blending,
pumping, and storage systems.

Has specialized equipment that is used to

maintain and repair oil & gas wells, down to
depths of 600 meters for this (UT767) type.
Can deploy ROV for repair operations on the
seabed.

Key Markets / Routes

/Day

100,000

80,533

80,000
60,000
40,000
20,000

2006

2007

27,225

2008

AHTS Spot Rates

Ju
l
A
ug
Se
p
O
ct
N
ov
D
ec

Ja
n
Fe
b
M
ar
A
pr
M
ay
Ju
n

2005

Large PSV Spot Rates

45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-

North Sea spot rates have increased

significantly since our last update, following
the seasonality that we saw in 2006.
Strong rates due to tight utilization rates in
the North Sea market for larger AHTS
vessels.

2005

Ju
l
A
ug
Se
p
O
ct
N
ov
D
ec

Large AHTS Spot Rates

120,000

Ja
n
Fe
b
M
ar
A
pr
M
ay
Ju
n

/Day

2006

2007

2008

PSV Spot Rates

North Sea spot rates have increased

significantly since our last update, but not as
well as AHTS vessels.
A higher % of PSV are on term contracts,
hence the lesser volatility compared to AHTS
vessels.

Market Rate Indicators

10

Source: Pareto Securities

Technical Specifications / Definitions

11

Dynamic Positioning - System that enables a vessel to stay in position without the use of cables, mooring,
anchoring, or arms. There are three classes (DP, DP2, DP3), based on levels of failsafe.
BHP Brake Horse Power, measure of power for AHTS vessels
BP Bollard Pull, indicator of a tugs power to pull or push
Fi-Fi Fire Fighting Equipment
Asset prices vary quite significantly according to cost, type, and age, ranging from <US$10mn to close
to US$600mn.

Demand Environment

Demand Drivers

13

High oil prices will result in more offshore development

Offshore support vessels are driven by increasing capex on offshore oil

exploration.

Approximately 25% of US oil & natural gas production comes from offshore areas, and
likely to increase. Internationally, the North Sea in Europe, and oil fields in SE Asia, are
key areas of offshore development.

There is a trend towards more offshore development, especially in deep waters. Infield
systems forecasts deepwater capex to exceed US$20bn from 2006-2010.

Daily offshore oil & gas production, currently standing at around 43 million barrels of oil
equivalent (boe), is forecast to grow to 53 million boe in 2010 and drive industry annual
expenditure from $193 billion in 2006 to $248 billion by 2010, according to Energy
Business Reports.

Commodity Prices
mbpd

120

88

Crude Oil Prices (1984-2008)

100

86

USD/barrel

84
82
80
78
76

80
60
40
20

74

70
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07
OPEC Supply

14

OPEC Demand

1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008 YTD

72

OPEC surplus capacity is minimal

Sustained upward pressures on price encourages investment in projects previously

considered uneconomic.

World Oil Supply

Annual Change in Global Oil Production
Million barrels per
day

Y-o-Y% growth

90

0.12

80

0.09

8.21%

70

0.06

3.58%

60

1.92%

50

0.03

40

0
0.51%

30
20

-4.76%

10

-4.70%

-0.06

-0.09
1965

1970

1975

1980

Total W orld Oil Production

15

-0.03

1985

1990

1995

2000

2005

Y-o-Y % growth

World oil supply is slowing, with the incremental growth coming from offshore areas.

Underlying Demand Growth

World Oil Demand Vs Crude Oil Prices

16

USD/barrel

2008 YTD

2007

2006

2005

2004

2003

2002

0
2001

60
2000

20

1999

65

1998

40

1997

70

1996

60

1995

75

1994

80

1993

80

1992

100

World Oil Demand

120

85

1991

Million barrels/day

90

Crude Oil Prices

World Oil Demand has been growing steadily, despite the increase in crude oil prices.

Ship Demand Growth

1950

# of Rigs

1900
1877

1850
1800
1750
1700
1650

US Rig Count

1600
1550
14-Jul06

17

14-Oct06

14-Jan- 14-Apr07
07

14-Jul07

14-Oct- 14-Jan- 14-Apr07

08
08

US offshore rig fleet is growing, this will increase demand for AHTS, PSV, and other
support vessels to operate in the US Gulf as well. We see a similar trend here in Asia,
with more offshore developments, and required # of support vessels.

Supply / Demand Outlook

Global Fleet Summary

Stratification by Type (# of Ships )
Exis ting Orde rbook
AHTS
1562
472
PSV
488
196
Supply
669
46
AHT
528
30
MSV
139
76
Standby/Resc.
327
43
Crew Boat
263
18
Seis. Survey
184
25
C,U & FP Lay
41
5
Misc Offshore
40
0
Hvy Dk Cargo
47
2
Utility
184
9
Well Stimul.
16
4
Pipe Layer
14
5
Diving Spt
67
8
ROV/Sub Spt
9
8
Maintenance
47
11

19

OB as a
% of Fle e t
30%
40%
7%
6%
55%
13%
7%
14%
12%
0%
4%
5%
25%
36%
12%
89%
23%

Across all types, 45% of the fleet is

older than 25 years, versus 21% of the
existing fleet on order.

Fleet Replacement Profile (Total)

5000

4707

4000
3000

2141

2000

993

1000
0
Existing

Orderbook

>25

All All_Offshore_Supply

Orderbook delivery schedule (# of

ships)
(Total)
500 444
400
309
300
177
200
s
62
100
1
0
0
2008 2009 2010 2011 2012 2013
All All_Offshore_Supply

Fleet Growth
Historical Fleet Growth -AHT/Supply (# of Ships)

Fleet

6.0%

% Growth

1800

2.0%
500

2000

2002

2004

2006

4.0%

800

3.0%

600

Average fleet growth of 2.6% per annum.

Currently at the high end with 4.8% YoY
growth in 2008 expected.

2.0%
1.0%

0.0%
1996

2008

For AHTS vessels

20

1998

1000

200

0.0%
1996

5.0%

1200

400

1.0%

# of Ships

1000

% Growth

# of Ships

3.0%

6.0%

1400

4.0%
1500

7.0%

% Grow th

1600

5.0%

2000

Fle e t

% Growth

2500

His torical Fle e t Grow th -PSV/Supply (# of Ships )

1998

2000

2002

2004

2006

2008

For PSV vessels

Average fleet growth of 3.8% per annum. 2008

growth is quite reasonable at 3.9%.

Fleet Growth (Cont.)

Historical Fleet Growth -Crew/Workboat (# of Ships)

Fleet

6.0%

% Growth

1800

450

250

3.0%

200
2.0%

150
100

1000

2.0%

800

1.5%

600

1.0%

2000

2002

2004

2006

2008

For Crew boats

21

1998

Average fleet growth of 2.6% per annum.

Growth in 2008 expected to be 2.1%.

0.5%

200

0.0%
1996

1.0%

400

50
0

2.5%

1200
# of Ships

4.0%

300

3.0%

1400
% Growth

# of Ships

350

3.5%

% Growth

1600

5.0%

400

Fleet

% Growth

500

Historical Fleet Growth -Other Offshore (# of Ships)

0.0%
1996

1998

2000

2002

2004

2006

2008

For other offshore vessels

Average fleet growth of 1.9% per annum. 2008

growth is at 2.5% YoY growth.

Age & Fleet Size Profile

2500

2141

Agewise tonnage (Total)

Fleet age profile (Total)

2000

3.0
2.2

1500
1000

1.5

865

675

500

621
174

1.0

1.0

197

0.4

34

0.3

0.1

0.0

>25 21-25 16-20 11-15 6-10

All All_Offshore_Supply

1-5

<1

>25

21-25 16-20 11-15

6-10

1-5

<1

All All_Offshore_Supply

Over 45% of the fleet is over 25 years of age, or 2.2 million dwt. This would require
additional growth in fleet for replacement, as well as to fulfill growth from new demand.

As exploration moves to deeper waters, we see greater demand for larger, more
complex, more powerful support vessels.

22

2.0

2.0

This is measures in terms of brake horse power (BHP) of the engines, winches, etc.
Also requirements for multi-functional equipment, such as fire fighting, diving support, etc.

Orderbook vs. % of existing fleet

2500

Fleet

Historical Fleet Growth -PSV/Supply (# of Ships)

30.0%

OB as a % of Fleet

15.0%
1000
10.0%
500

5.0%

0.0%
1996

23

1998

2000

2002

2004

2006

Orderbook at 25% of existing fleet is quite low

compared to other vessel types.

Fleet

18.0%

OB as a % of Fleet

1600

16.0%

1400

14.0%

1200

12.0%

1000

10.0%

800

8.0%

600

6.0%

400

4.0%

200

2.0%

2008

For AHTS vessels

# of Ships

# of Ships

20.0%
1500

OB as a % of Fleet

25.0%

2000

1800

0.0%
1996

OB as a % of Fleet

Historical Fleet Growth -AHT/Supply (# of Ships)

1998

2000

2002

2004

2006

2008

For PSV vessels

Orderbook at 15.6% of existing fleet is very

low compared to other vessel types.

Orderbook vs. % of existing fleet

Historical Fleet Growth -Crew/Workboat (# of Ships)

Fleet

6.0%

OB as a % of Fleet

1800

450

300
250

3.0%

200
2.0%

150
100

1.0%

2000

2002

2004

2006

Orderbook at 5.6% of existing fleet is similar

to 1998 peak levels. Yet, this may not be
enough, especially for fast intervention type
vessels.

800

6.0%

600

4.0%
2.0%

2008

For Crew Boats

24

1998

8.0%

200

0.0%
1996

1000

400

50
0

10.0%

1200
# of Ships

4.0%

12.0%

1400
OB as a % of Fleet

# of Ships

350

14.0%

OB as a % of Fleet

1600

5.0%

400

Fleet

OB as a % of Fleet

500

Historical Fleet Growth -Other Offshore (# of Ships)

0.0%
1996

1998

2000

2002

2004

2006

2008

For other offshore vessels

Orderbook at 12.4% of existing fleet is at

historical high levels. This may be a bit
misleading, considering that there are many
specialized types of offshore vessels.

Supply Outlook Fleet Replacement Profile (Table)

25

Fle e t Re place m e nt Profile (# of Ships )

Offs hore SupplyOffs hore SupplyOffs hore SupplyOffs hore SupplyOffs hore SupplyTotal
0-1999
2000-3999
4000-5999
6000-7999
8000-9999
4633
808
213
43
16
Exis ting
388
368
176
24
8
Ne w buildings
2590
82
18
4
3
>25
55.9%
10.1%
8.5%
9.3%
18.8%
>25 as a % of Exis ting
8.4%
45.5%
82.6%
55.8%
50.0%
NB as a % of Exis ting

5713
964
2697
47.2%
16.9%

Fle e t Re place m e nt Profile (m ln Dw t)

Offs hore SupplyOffs hore SupplyOffs hore SupplyOffs hore SupplyOffs hore SupplyTotal
0-1999
2000-3999
4000-5999
6000-7999
8000-9999
3.1
2.2
1.0
0.3
0.1
Exis ting
0.4
1.0
0.8
0.2
0.1
Ne w buildings
1.5
0.2
0.1
0.0
0.0
>25
49.8%
9.2%
8.7%
9.2%
18.1%
>25 as a % of Exis ting
13.1%
46.4%
82.0%
51.5%
49.9%
NB as a % of Exis ting

6.7
2.5
1.9
27.9%
36.7%

Smallest size is most attractive in terms of fleet retirement. However, demand is

focused on the larger sizes.

Fairly small orderbook provides opportunities if we can obtain the assets.

Top Players
Top 50 owners as a % of Total
Top 50 Others Total
614
1581
AHTS
967
64
502
PSV
438
512
1082
Supply
570
233
528
AHT
295
33
142
MSV
109
75
330
Standby/Resc.
255
40
188
Crew Boat
148
51
210
Seis. Survey
159

Top 50
% of Fleet
61%
87%
53%
56%
77%
77%
79%
76%

Average
Age
17
8
21
20
15
27
23
25

The offshore support vessel fleet is

quite concentrated.

PSV young fleet, others segments

are quite old.

AHTS
Ships
PSV
Ships
Supply
Ships
STANDBY
Ships
CREW BOAT
Ships
Tidewater Marine
179
Edison Chouest
49
Tidewater Marine
150
Vroon B.V.
42
Tidewater Marine
15
Swire Group
52
Tidewater Marine
44
Trico Marine
38
Seacor Holdings Inc. 29
Miclyn Express Off.
9
Seacor Holdings Inc. 51
Bourbon
31
Seacor Holdings Inc.
35
Craig Group
27
Norsul Offshore
9
CNOOC
50
GulfMark Offshore
28
Hornbeck Offshore
29
A.P. Moller
19
Arabian Gulf Mech.
7
A.P. Moller
47
Farstad Shipping
23
Abdon Callais
24
Nomis Shipping Ltd.
13
Seacor Holdings Inc.
6
Bourbon
34
Hornbeck Offshore
19
Edison Chouest
21
Mokster Shipping
10
Kaspmornefteflot
5
Indian Govt.
31
Rigdon Marine
17
Zamil Operations
13
Al-Mojil Group
9
Lamnalco Ltd.
5
Farstad Shipping
26
DOF Management
16
ESNAAD
11 Emas Laut Sdn. Bhd.
8
Apsheron Oil Fleet
4
Kaspmornefteflot
23
Seacor Holdings Inc. 14
Aries Marine Corp.
10
CNOOC
8
Modest Maritime Serv
4
Whitesea Shpg.
22
Marine Management 12 L & M Bo-Truc Rental
9
Ocean Mainport
7
Baruna Raya Logistic
4
Maridive & Oil Serv
22
Trico Marine
11
Bumi Armada Nav.
9
Halul Offshore
6
Syarikat Borcos Shpg
4
GulfMark Offshore
21
Siem Offshore
10
NIOC
9
Thor Ltd.
5
A.A. Turki Corp
4
Edison Chouest
18
A.P. Moller
8
Odyssea Marine
9
Ajang Shipping
5
Bourbon
3
Zamil Operations
18 Island Offshore Mngt
8
TMM Grupo
8
ENI S.p.A.
4
Bambini Srl
3
Pertamina
16
Havila Shipping
8
Baruna Raya Logistic
8
Topaz Energy
4
Offshore Oil Serv.
3

26