Clarksons Report

www.clarksons.com www.clarksons.com www.clarksons.com www.clarksons.com

Global Offshore Overview June 2014

June 2014

Marine Money China Offshore Finance Forum By Piers Middleton

www.clarksons.com 2

AGENDA

June 2014

Offshore Market Developments

The Macro Picture

Newbuilding Overview

Supply, MDU and Subsea Overview

Potential Growth Areas

Summary and Conclusions

www.clarksons.com 3

Estimated E&P Spending

Data Source: Barclays E&P Survey/Various

E&P Spending Growth

Barclays December forecast of 6% now likely to be optimistic.

DNB recently projected 1% due to cutbacks by International Oil

Companies.

National Oil Companies in

developing economies still pushing

ahead with spending plans

One fifth of global energy needs met

by Offshore

June 2014

www.clarksons.com

Offshore Oil & Gas Production Forecast

Data Source: Clarkson Research Services

Long-Term Oil Production Long-Term Gas Production

June 2014

www.clarksons.com 5

Global Discoveries & Start ups

June 2014

www.clarksons.com 6

Offshore Discoveries Getting Deeper

June 2014

www.clarksons.com 7

Deeper Water, Further From Shore


June 2014

www.clarksons.com 8

World Offshore Oil Producing Regions (2013)

June 2014

North America

Offshore Production 3.5m bpd

Annual Growth -5.4%

South & Central America


Annual Growth 3.2%

Asia Pacific


Annual Growth 1.0%

Middle East & India


Annual Growth 5.1%

Mediterranean/Caspian


Annual Growth 7.2%

Europe


Annual Growth -11.6%

West Africa


Annual Growth 5.9% WORLD


Annual Growth 0.0%

www.clarksons.com 9

World Offshore Gas Producing Regions (2013)

North America

Off Prod (cu.ft/day) 6.3 bn

Annual Growth -1.3%

South & Central America


Annual Growth 4.0%

Asia Pacific


Annual Growth 2.9%

Middle East & India


Annual Growth 3.8%

Mediterranean/Caspian


Annual Growth 10.9%

Europe


Annual Growth -2.7%

West Africa


Annual Growth 3.4% WORLD


Annual Growth 2.7%

June 2014

www.clarksons.com 10

Newbuilding Overview

www.clarksons.com

Offshore & Marine Orderbook Value by Type

Offshore (US$186 billion)

Shipping (US$185 billion)

Source: World Shipyard

Monitor, Offshore Yard

Monitor (May 2014)

June 2014


Activity

Fleet

Nos.

Order

book OB %

Fleet

Value OB Value NB Orders

S+P Sales

(2013)

Tankers 5,817 747 13% $179bn $32bn 428 308

Bulkers 9,981 1,970 20% $238bn $59bn 1075 491

Containerships 5,095 477 9% $101bn $35bn 242 145

Gas 1,641 324 20% $77bn $32bn 151 65

Offshore 12,514 1,334 11% $500bn+1 $186bn 568 258

1. Illiquidity of many offshore S+P markets makes assessment of total fleet value outside the OSV/MDU markets subjective.

Key Fleet Indicators

June 2014


Activity

Fleet

Nos.

Order

book OB % OB Value NB Orders

S+P Sales

(2013)

Recorded

Fixtures (2013)

Survey 689 25 3.6% $2.7bn 10 6 121

MDUs 1,030 255 24.8% $101bn 116 63 376

Constrn/IRM 2,419 200 8.3% $20bn 86 64 589

MOPUs 330 50 15.2% $34bn 17 5 55

Logistics 815 37 4.5% $2.5bn 17 2 74

AHTS 2,873 185 6.4% $5.7bn 82 36 2,344

PSV 2,193 452 20.6% $15.8bn 184 62 1,752

Rescue 578 44 7.6% $1bn 14 2 92

Utility Supp. 1,587 86 5.4% $2.1bn 42 21 -

Offshore 12,514 1,334 11% $186bn 568 258 c6,000 1

Offshore Key Fleet Indicators

1. Reported Fixtures only: not comprehensive.

June 2014


Newbuild Activity: Contracting Totals


June 2014


Top Yards and Fabricators (by Orderbook Nos.)

Rank Name Country Total Value

($bn) Development Production Supply Fixed

Hull Topside Jacket Topside

1 Fujian

Southeast China P.R. 58 1.9 3 0 0 55 0 0

2 Fujian Mawei China P.R. 52 2.1 4 0 0 48 0 0

3 Zhejiang S.B. China P.R. 42 1.5 6 0 0 36 0 0

4 Samsung H.I. South Korea 40 27.8 24 16 1 0 0 2

5 Keppel FELS Singapore 31 8.5 31 0 0 0 0 0

6 Daewoo South Korea 28 17.6 23 5 0 0 7 11

7 ABG S.Y. India 27 1.7 7 0 0 20 0 0

8 Hyundai H.I. South Korea 25 14.6 13 12 2 0 0 5

9 Dalian

Shipbuilding China P.R. 25 5.5 24 1 0 0 0 0

10 Dayang S.B. China P.R. 25 0.3 0 0 0 25 0 0

11-20 182 64 0 0 118 0 0

21-50 320 90 16 0 214 13 13

51+ 505 197 42 89 266 240 229

TOTAL 1,360 486 92 92 782 260 260

June 2014



Vessel market share (output) by region

June 2014



The number of Chinese yards taking Jack-Up drilling unit contracts has risen from two in 2004 to

32 in 2013 -accounting for 50% of global contracts.

Chinese yards have made significant progress in gaining market share in this sector.

10 Chinese yards took a Jack up contract in 2013. Dalian took 12 contracts in 2013 most consistent yard. Good track record of export orders.

Chinese global market share

June 2014

Chinese Yards Get A Jack-Up


Offshore Supply Vessels


AHTS Fleet Growth now slower, after a rapid period.

OSV: Fleet Size Growth

June 2014


Start Year


Global Fleet

The orderbook for the largest PSVs stands at 60% of the fleet. However, this is

partially the result of an upsizing trend:

vessels are being constructed to serve the

rigours of distant-from-shore, deepwater

supply duties which did not exist in

previous decades.

The AHTS orderbook as a % of the fleet is much smaller following more limited

ordering over the past three years.

However, previous deliveries produced a

level of fleet over-supply which the market

is in the process of absorbing.

Orderbook as a % of the fleet

June 2014

www.clarksons.com

Age Profile

Current Fleet and Scheduled Orderbook Delivery

June 2014


Asset Prices: Larger PSVs

June 2014


Asset prices fell sharply from previous heights in the aftermath of the global financial crisis.

Prices recovered somewhat over the course of 2010 and 2011 as E&P activity picked up again.

Asset Prices have remained relatively stable over the last couple of years. Signs of softening recently.

Note that the graph to the right shows benchmarks for European Designed vessels, although trends may be similar for vessels built in other regions.


Asset Prices: Large AHTS

June 2014


Asset prices fell sharply from previous heights in the aftermath of the global financial crisis.

Prices recovered somewhat over the course of 2010 and 2011 as E&P activity picked up again.

Asset Prices have remained relatively stable over the last couple of years. Early signs of softening recently.

Note that the graph to the right shows benchmarks for European Designed vessels, although trends may be similar for vessels built in other regions.


Asset Prices: Asian versus European Builders

June 2014


A divergence in pricing between Asian and European built OSVs (of European designs) has become evident.

Asian-built is cheaper, but may face issues in terms of build speed and potential chartering opportunities.

North Sea operators still prefer Norwegian built vessels, but slowly changing, but Norwegian designs definitely remain Best in Class.

Recently, Norwegian yards have concentrated on MSV orders, meaning PSV ordering has been more heavily weighted towards Asia.

Ice class premium


Demand Drivers

Number of Rig Moves by Type Number of Rig Moves by Region

*2014-Q2 only April and May *2014-Q1 only April and

May

June 2014


OSV Dayrate Evolution

PSV Global 12-month T/C AHTS Global 12-month T/C


June 2014


Mobile Drilling Units


Rig Fleet Growth

June 2014

Current strong drillship fleet growth is causing some rate softening.

Orderbook is now equivalent to 25% of total MDU fleet

Fleet growth is expected to accelerate for jack-ups from 2015. Potential short term softening for the jack-up market, but could be

positive for OSVs.

Source: Clarkson Research Services

www.clarksons.com

Rig Orderbook

Contract Status of the Rig Orderbook

June 2014


Jack-Ups

Rig Asset Values & Sales


0

50

100

150

200

250

300

Ja

n-0

5

Ju

l-05

Ja

n-0

6

Ju

l-06

Ja

n-0

7

Ju

l-07

Ja

n-0

8

Ju

l-08

Ja

n-0

9

Ju

l-09

Ja

n-1

0

Ju

l-10

Ja

n-1

1

Ju

l-11

Ja

n-1

2

Ju

l-12

Ja

n-1

3

Ju

l-13

Ja

n-1

4

$m

NB High Spec Jack-Up SH High Spec Jack-Up

SH Standard Jack-Up

0

100

200

300

400

500

600

700

800

900

Ja

n-0

5

Ju

l-05

Ja

n-0

6

Ju

l-06

Ja

n-0

7

Ju

l-07

Ja

n-0

8

Ju

l-08

Ja

n-0

9

Ju

l-09

Ja

n-1

0

Ju

l-10

Ja

n-1

1

Ju

l-11

Ja

n-1

2

Ju

l-12

Ja

n-1

3

Ju

l-13

Ja

n-1

4

$m

NB Ultra-Deep Semi-Sub

NB Ultra-Deep Drillship

SH Ultra Deep Floater

Floaters

June 2014


Jack-Up Rates

Dayrate Evolution


Floater Rates

Averaged dayrate

June 2014


OSV and Drilling Unit Supply/Demand Index

OSV Supply/Demand Global MODU Demand

June 2014


Subsea Support Vessels


Subsea Tree Installations

0

50

100

150

200

250

300

350

400

19

59

19

64

19

69

19

74

19

79

19

84

19

89

19

94

19

99

20

04

20

09

20

14

20

19

Nu

mb

er

of

Su

bse

a S

tru

ctu

res

Historical Start-ups

Trees Under Construction

Potential Future Requirements

June 2014


Subsea installation demand is becoming an ever

more important driver for support vessels.

Graph shows units under construction and

announced future requirements: actual installations

are likely to be higher than shown for more distant

years.


Subsea Vessel Age Profile

Current Fleet and Scheduled Orderbook Delivery Schedule

This year is expected to see particular growth in the 150-250t fleet.

After a dearth of new

contracting in 2H 2013, there are signs that owners are thinking of further orders.

MSVs/Subsea construction is a newbuild market still dominated by Norwegian

yards, but could be an area in which Asian yards can attempt to build market share.

June 2014

www.clarksons.com

MSV Contracting

Current Fleet and Scheduled Orderbook Delivery Schedule


Subsea Rates & Prices

IRM (100t) NB Contract Prices IRM (100t ) and ROV Support (


Potential Growth Areas

June 2014


Boosting requirement for large BHP/ large DWT OSVs from NW Europe

Growth Areas: Barents Sea/Arctic

June 2014


Hammerfest

Murmansk

Yamal

Peninsula

Dikson

Novaya

Zemlya

Kara Sea : Exxon-Rosneft campaign 2014/15.

Will absorb 10% of high-spec North Sea AHTS fleet???

Risks: Heavy Ice. Russian Nuclear Waste. Polar bears!


PROREFAM III: 146 vessels 2008-17, 75%

local content

Growth Areas: Brazil (1)

June 2014


Petrobrass PROREFAM III programme for acquiring newbuild vessels on eight year timecharters has reached Round 7, which was launched in mid-March 2014.

Local content provisions apply: the focus is on Brazilian-built, however seeing some Govt softening on this stance for more technically advanced Vessels.

Round 5 contracts were signed at the same time. Round 6 contracts were signed in early May, delayed by Round 5s over-run.

110 newbuild vessels were ordered in connection with Rounds 1-6. Only 15 of a planned 64 AHTS orders signed so far.

Contracting activity is ongoing for AHTS vessels in all three categories, for PSVs of 4,500 and 5,000 DWT, and for oil spill response vessels. Petrobras is confident it will sign deals for the remaining 36 units this year, though others are doubtful.


Estimated Vessel Supply : South America

Growth Areas: Brazil (2)

June 2014


In addition to newbuild vessels, other OSVs have gradually been brought into the

region from other areas, notably the North

Sea. In general, these vessels are larger

units.

There is not much of a spot market in Brazil: perhaps no more than 5-7% of vessels

in the region. Spot fixtures do occur (e.g.

when a rig move is needed and the intended

OSV suffers problems). However, most

vessels coming off timecharters either fix

another term charter, or mobilise out of the

region.

The declaration of non-commerciality for several of OGXs fields leaves the future of

OSV chartering in Brazil even more in the

hands of Petrobras.


PSVs 3-4,000 dwt, Current Deployment

Growth Areas: West Africa

June 2014



According to the annual Barclays E&P

Survey, spending on E&P in Asia Pacific is

expected to be up by 3% in 2014.

This is down from figures in the teens in recent years, as spending on Gorgon in

Australia tapers off. Likely to increase into

the medium term as other Australian gas

projects move forward.

Around half of spending in Asia-Pacific is by Chinese state-owned companies.

Currently, state-owned service companies

take the lions share of this, but this market

is expected to open up more over the next

decade.

Estimated E&P Spending- Asia/Pacific

June 2014

Data Source: Barclays E&P Survey

Asia Pacific Investment

* Barclays projection as of start-2014. Could prove optimistic given recent negative sentiment over E&P growth.


Cabotage Spurring Fleet Growth

Growth Areas: South East Asia (1)

June 2014

Data Source: Clarkson Research Services/ SKK Migas

Indonesia is phasing in a cabotage law of 51%

domestically owned, plus Indonesian flagged & crewed.

Hence, foreign companies now need minority-stake JVs to work in Indonesia.

Supply/Demand imbalance means some dayrates have been 20% up on other SE Asian countries.

Type Deadline

AHTS >5k BHP DP Start 2013

PSV Start 2013

DSV Start 2013

MSV/Pipe/Cable Start 2014

Seismic/Geo Start 2014

MDUs Start 2016

Indonesia Cabotage Phase-in


Malaysian Investment

Growth Areas: South East Asia (2)

June 2014


Malaysian NOC Petronas has increased

investment levels substantially to arrest

decline in oil and gas output.

Deepwater projects, Enhanced Oil Recovery, marginal field tie-in projects are all

ongoing. Use of Risk Service Contracts

This has soaked up a large amount of the domestic-owned fleet.

Additional requirements have helped to create further demand for non-Malaysian flag

vessels.

Most recently, Petronas boss has been warning about domestic OSV oversupply &

short-term rates downside.


PEMEX Capital Expenditure

Growth Areas: Mexico

June 2014


The end of 75 years of PEMEXs monopoly in Mexico over Christmas poses the possibility that private investment will begin to gain a foothold in Mexican waters.

PEMEX was already planning to grow CAPEX strongly (see left).

This is generating existing rig requirements, which will need support.

PEMEXs tendering activity for OSVs has already been increasing.


Summary

4 June 2014


Offshore Sector Summary

June 2014

Recent newbuild ordering has focused on Jack-ups and PSVs. New speculative investors evident in Jack-ups in particular.

Rigs : Jack-up rig rates steady for the moment but caution remains over size of orderbook; softness evident in floater rates and concerns building.

OSVs : AHTS and PSV timecharter rates improved year-on-year in 2013. Outlook

seems more stable and sentiment is cautiously positive, particularly as jack-up fleet

expansion next year increases demand.

Other more niche sectors such as accommodation and some areas of subsea construction may offer potential with the right partners.

View on E&P spending growth has turned more negative in early 2014 though this is restricted to IOCs. National Oil Companies are still spending.

Positive long-term view on offshore oil and gas production; gas production growth is

forecast to be stronger than oil. Move to deeper, more distant fields increasing

requirement for complex units.


June 2014

Disclaimer

The information supplied herewith is believed to be correct but the accuracy thereof is not guaranteed and the

Company and its employees cannot accept liability for loss suffered in consequence of reliance on the

information provided. Provision of this data does not obviate the need to make further appropriate enquiries

and inspections. The information is for the use of the recipient only and is not to be used in any document for

the purposes of raising finance without the written permission of Clarkson Research Services Limited.

The statistical and graphical information contained herein is drawn from the Clarkson Research Services

Limited ("CRSL") database and other sources. CRSL has advised that: (i) some information in CRSL's

database is derived from estimates or subjective judgments; and (ii) the information in the databases of other

maritime data collection agencies may differ from the information in CRSL's database; and (iii) whilst CRSL

has taken reasonable care in the compilation of the statistical and graphical information and believes it to be

accurate and correct, data compilation is subject to limited audit and validation procedures and may

accordingly contain errors; and (iv) CRSL, its agents, officers and employees do not accept liability for any loss

suffered in consequence of reliance on such information or in any other manner; and (v) the provision of such

information does not obviate any need to make appropriate further enquiries; (vi) the provision of such

information is not an endorsement of any commercial policies and/or any conclusions by CRSL; and (vii)

shipping is a variable and cyclical business and any forecasting concerning it cannot be very accurate.

Documents

Clarksons Report