Norwegian Shipowners Face Cash Crunch
Access to capital for cash-hungry Norwegian offshore shipowners is expected to tighten further as lower activity and falling profits continue in 2016, the Norwegian Shipowners' Association said in its yearly outlook report on Tuesday.
Since mid-2014, the price of crude has tumbled 66 percent, leading oil firms to cut investments to preserve cash and hence rent fewer drilling rigs, supply vessels, seismic ships and other equipment used in the search for oil and gas. In 2016, only 15 percent of the firms questioned by the association consider the access to capital as good, compared to 25 percent of questioned firms last year and 50 percent in 2014.
One out of every third company now considers the access to capital to be very tight, against less than 10 percent last year, the report said. "Expectations are negative with regards to developments in the capital markets throughout 2016," said the report. "Hardly any shipowner expects improvements, and 55 percent of them expects an additional weakening," the report said, adding that offshore service firms were especially pessimistic.
Earlier this month, Nordic Trustee, a key Norwegian market facilitator told Reuters that debt restructuring efforts among Norwegian oil service firms had risen sharply.
"We expect that about half of the Norwegian rig fleet and every sixth Norwegian-controlled offshore vessel will not be employed as we approach summer this year. This is a serious situation," the CEO of the Norwegian Shipowners' Association, Sturla Henriksen, told Reuters.
He added that industry consolidation was likely to happen soon. "We are going to see a restructuring in ownership because we cannot expect that every shipowner will be capable to contribute with new capital," he said.
Several of Norway's biggest offshore supply vessel owners have lately said that a remaining glut of vessels and weak markets will trigger restructurings on the industry.
Tuesday's report also said that Norwegian offshore service shipowners expect revenues to fall by eight percent in 2016 compared to 2015, the first time in 13 years shipowners expect a declining turnover.
Some 111 offshore supply vessels and 23 oil rigs are expected to be taken out of operation by the end of June, an increase of 10 vessels and 7 rigs respectively compared with February, the report said.
(Reuters Editing by Gwladys Fouche)