ShippingWatch

Siem CEO expects two years' fight for survival

Opportunities always arise when there is blood on the streets, CEO of the offshore carrier Siem, Idar Hillersøy, tells ShippingWatch. He anticipates a market which will be a fight for survival far into 2017, and where Siem may be forced to send three newbuildings straight to lay-up.

Photo: Siem Offshore

Times will be tough for Norwegian offshore carrier Siem, just as for the industry as a whole, projects Idar Hillersøy, CEO of Siem Offshore, in an interview with ShippingWatch. He explains that the oil price is a driving force for the offshore sector and that Siem, along with its many competitors in the market, is directly affected by how many rigs are being idled under the current oil price of around USD 30.

"What will characterize our industry in 2016 is that everyone will fight to survive, also into 2017," he says, adding that the near future will bring restructuring, consolidations, sales and negotiations with lenders for solutions to the massive debt problems that many offshore carriers are struggling with these days.

When asked point black, he flat out rejects that Siem itself is - or will be - in danger of collapsing because of the crisis. The carrier's owner, major Norwegian investor Kristian Siem, attempted in September 2015 to prepare Siem Offshore for an oil price as low as USD 10 per barrel by generating USD 100 million in new private equity through a share issue.

Major investor preparing for ten dollar oil price 

That Kristian Siem, since September when the oil price was at USD 50 per barrel, has now come closer to his dark prophecy of a rock-bottom price near just USD 10 per barrel is not a fact that Idar Hillersøy would describe as an advantage for the carrier - no matter how well it may be prepared to handle the storm. However, he does acknowledge the good opportunities which may arise.

"Definitely. With blood on the streets there are always opportunities and we are open to looking into everything which may turn up," he says, although rejecting that Siem has specific plans to exploit this type of opportunity.

"Our strategy for 2016 is to secure the best possible employment for the vessels we have. This also means running a little faster than the competition, but that is not always easy," he says.

Idled vessels

From the outside it looks like Siem Offshore has plenty on its hand keeping the current fleet employed. According to broker,Westshore Shipbrokers, five out of Siem's 11 AHTS (Anchor Handling Tug Supply) vessels are idled, and Siem will take delivery of seven newbuildings during 2016. Four of these are secured employment through long-term contracts while the last three - special eco-friendly supply ships (PSV) which can sail on LNG - face a doubtful future.

"This is something which we are currently working hard on. It's a tough market for all vessel types, nothing is simple," says Idar Hillersøy.

Do the three PSV newbuildings risk sailing straight to lay-up?

"It is a little early to say right now, because they will not be delivered until the summer and the fall. But of course, if the market at that time is as negative as today, then that is a possibility, yes."

And if the market turns out how Idar Hillersøy predicts, the lay-up area could be the first destination for the three PSV newbuildings. The Siem CEO considers himself more optimistic than many others - the oil decline came faster than expected, so the recovery could do the same, is the logic - but he refrains from making any guesses as to when the market will bounce back.

"We think that it will be hard for all of 2016, and it might also take up all of 2017," he says and adds that from the oil price returning to a higher level, some time will pass before the rigs are sent to the water and there is once again need for the offshore vessels.

Apart from the North Sea, Siem is currently present in Canada, Brazil, Asia and off the coast of West Africa. Which geographical location Idar Hillersøy views as the one with the most potential is too strategic for him to share with the press, and if he does see certain bright spots on the map, he will probably keep this fact to himself.

"I think that it will be difficult everywhere. There is no safe haven," he says.

The hope for 2016 is clear however. The best case scenario for Siem Offshore in 2016 would be that the carrier, through more vessels and more activity, achieves an improved position higher up in the value chain to get a larger portion of what Idar Hillersøy describes as the high-end segment. And the high-end segment is also where he thinks Siem's three PSV newbuildings have justification.

Maersk Supply Service expects more idled vessels in 2016 

"In a way, this is the tonnage of the future, because the focus on the environment is only getting bigger and bigger," he says.

Siem's annual report for 2015 will be released on the 25th of February 2016.

132 supply ships could lose contracts in Brazil

Farstad sells offshore vessel at USD 5.6 million loss 

Siem delivers another quarter deficit in squeezed market 

Deep Sea Supply: Offshore market getting worse 

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