Monthly Sector Report on - RocSearch · Monthly Sector Report on Subsea Oﬀshore Oil & Gas Construc on and Maintenance Services Execu ve Summary New Industry Developments/Ini a ve

Monthly Sector Report on Subsea Offshore Oil & Gas Construc�on and Maintenance Services

Execu�ve Summary

New Industry Developments/Ini�a�ve

M&A IntelligenceCorporate Merger• Solstad Offshore, Farstad Shipping and Deep Sea Supply

Market Overview• WTI: $53.4/bbl ( X% MoM)• Brent: $56.2/bbl ( X% MoM)Rig Count• North Sea: 30 ( 6 MoM)• Gulf of Mexico: 30 ( 3 MoM)

XX Feb: Snake-arm robotic inspection system

XX Feb

X Feb

XX Feb: Snake-like underwater robot

X Feb: New North Sea subsea development guidelines

Hybrid underwater vehicles

Asset Buyout• Fugro and Solstad Offshore• DOF Group and Olympic Shipping

Monthly Sector Report

Crude Oil Price($/bbl, Oct’XX–Feb’XX)

Rig Count – by Select Offshore Regions(Number, Dec’XX–Feb’XX)a

16 13 13

2220 17

Source: Baker Hughes

Average monthly WTI crude oil spot prices marked a MoM increase of XX% to $53.4/bbl, while UK Brent rose XX% to $56.2/bbl in Feb’XX.

Crude oil gained throughout February on account of OPEC’s impressive XX% compliance with the commited output cuts and expecta�ons of subsequent supply cuts1. Earlier in the month, concerns regarding the new round of US sanc�ons on Iran (following the la�er’s ballis�c missile test) led to specula�ons on restricted Iranian oil exports2. However, a substan�al increase in the rig ac�vity in the US helped check the price rise. During the four weeks to XX Feb, the US drillers added 36 oil rigs to touch 602 rigs, the highest since Oct’XX.

Short-term Price OutlookHigh oil inventories and significant increase in the US drilling ac�vi�es are expected to weigh on the crude prices in the short term. According to Baker Hughes, the US drillers added 29 rigs to reach a new high of 631 rigs during the three weeks to XX Mar.

“It seems that the oil supply recovery is gathering momentum in the world oil market, s�mulated by gradually rising prices as well as improvements in drilling efficiency and well produc�vity in North America. In fact, it won’t be surprising if Brent crude drops to $47 a barrel in the near term, as it has shi�ed gears to downside a�er the prolonged consolida�on phase.” – OPEC, Monthly Oil Market Report (Mar’XX)3

a Rigs in the offshore Mexico are taken as a proxy for rig count related to the Mexican part of the Gulf of Mexico

Market Overview

XX XX XX

XXXX XX

XXXX XX

Dec'XX Jan'XX Feb'XX

North Sea

US Gulf of Mexico

Mexico

Source: Baker Hughes

New Industry Developments/ Ini�a�ves

Innova�ons

Snake-arm robo�c inspec�on system (XX Feb)4

At the ITF Technology Showcase at Aberdeen, UK, OC Robo�cs, a Bri�sh robo�cs firm, showcased a snake-arm robo�c system capable of performing offshore inspec�ons. The first trial of the robo�c system will be conducted at one of Chevron’s North Sea assets.

“Our project is innova�ve in the deployment of robo�c technology in harsh environments, such as the North Sea. There is real poten�al to improve inspec�on outputs and extend asset life by characterising vessels and assessing fitness for service without human entry into dangerous and confined spaces.” – Rebecca Smith, Project Manager, OC Robo�cs (Feb’XX)

XX

XX XX

40424446485052545658

Oct'XX Nov'XX Dec'XX Jan'XX Feb'XX

WTI

Brent

2© RocSearch Limited. All rights reserved

Sample – Disguised and Abridged


Guidelines to Develop “small pool” fields in North Sea (XX Feb)8

Oil & Gas UK issued new guidelines aimed at simplifying subsea developments at the underdeveloped “small pools” in the North Sea. The research (backing the guidelines) suggests that implementa�on of the guidelines could theore�cally save companies up to XX% of the development cost.

“The Subsea Standardisa�on Project demonstrates how adop�ng a more simplified approach can make subsea development far more affordable. This project is a shining example of what can be achieved when industry experts are given the license to innovate, share knowledge, and tackle project delivery with fresh eyes. ‘Collabora�on’ is a word banded about a lot, but this is it in ac�on. We hope that by taking on board these guidelines, companies will be able to unlock new reserves and in doing so help the UK con�nental shelf reach its full poten�al.” – Stephen Jones, Business Excellence Director, Oil & Gas UK (Feb’XX)

Snake-like underwater robot (16 Feb)5Norwegian underwater robo�cs company, Eelume built a snake-like underwater robot equipped to carry out inspec�on and light interven�on jobs on subsea installa�ons. These robots can be permanently installed on the seabed for conduc�ng planned and on-demand inspec�ons and interven�ons, drama�cally reducing the costs of using surface vessels.

Hybrid underwater vehicle (XX Feb)6

Company H, a UK-based offshore vessel provider, completed the tes�ng of a hybrid unmanned underwater vehicle featuring underwa-ter vehicles (AUV) and remotely operated vehicles (ROV) capabili�es, to perform underwater surveys and inspec�ons.

“Our ongoing investments into subsea vehicle development, disrup�ve innova�on and opera�ng processes will ensure our customers can benefit from a differen�ated approach to survey, inspec�on and interven�on, providing cost effec�ve, high quality performance.” – Jake Tompkins, MD, Modus Seabed Interven�on (Feb’XX)

Snake-like underwater robot (XX Feb)5

Snake-like underwater robot (16 Feb)5Norway-based Nortek and US-based Strategic Robo�c Systems, have launched a jointly developed hybrid underwater vehicle combining AUV and ROV capabili�es with diver naviga�on and propulsion technologies.

Hybrid underwater vehicle (XX Feb)7

New Subsea Development Guidelines

Fugro–Solstad Offshore: Fugro is increasing its focus on the interna�onal subsea projects.

DOF Group-Olympic Shipping: DOF Group’s low-cost asset expansion to boost its subsea construc�on service capability.

Solstad Offshore-Farstad Shipping-Deep Sea Supply: Solstad Offshore is strengthening its por�olio of OSVb through strategic mergers; the increased fleet of CSVc in Norway is expected to give the company a compe��ve edge.

M&A Intelligence

b Offshore Service Vessels c Construc�on Service Vessels



Sources: Bloomberg, MergerMarket, Offshore Energy Today, Your Subsea News, World Oil, Company Websites

Date Acquirer Seller Target M&A Type Deal Ra�onaleValue(£ mn)

XX Feb’XX Fugro(Norway)

SolstadOffshore(Norway)

REM E�ve(a CSV)

Asset Buyout

• REM E�ve will enable Fugro to support execu�on of various mul�-year subsea inspec�on, repair and maintenance (IRM) contracts in Asia Pacific9.

• Further, Fugro plans to leverage the vessel to win more subsea IRM contracts in the region.

• Solstad Offshore (previous owner) plans to deliver REM E�ve to Fugro in Q2 2017, post comple�on of an exis�ng charter agreement in late May’XX.

• The deal will provide Solstad Offshore a profit of £1.6mn and a net cash flow of £4.4mn, a�er repayment of the vessel debt.

NAd

XX Feb’XX DOF Group(Norway)

Olympic Shipping(Norway)

Olympic Commander(a subsea CSV) and Olympic Hera (an anchor-handling

tug supply and

offshore construc�on

vessel)

Asset Buyout

• DOF Group has acquired an op�on to purchase two OSVs of Norway-based Olympic Shipping at a price equivalent ~XX–XX% of historical build cost, as a part of a contract that was signed for the management and opera�on of the pair.- Olympic Commander (to be renamed as Skandi Darwin) will

be used by DOF on the Shell Prelude IMR contract in Asia Pacific.

- Olympic Hera (to be renamed as Skandi Hera) will be used for offshore projects, except Brazil10.

NA

XX Feb’XX SolstadOffshore(Norway)

Not Applicable

FarstadShipping (Norway)

Deep Sea Supply

(Norway)

Corporate Merger

• Norway-based Solstad Offshore, Farstad Shipping and Deep Sea Supply announced that they have entered into a merger agreement, wherein the three would consolidate under the banner of Solstad Offshore as the parent organisa�on11.

• The merger is expected to provide the Solstad Offshore an edge over compe��on in the highly fragmented Norwegian OSV market, at a �me when the sector is witnessing a downturn.- PE firms such as Aker Capital and Hemen Holding have also

announced their support to the merged en�ty• Once the deal concludes, Solstad Offshore’s fleet will have 154

vessels, comprising 66 pla�orm supply vessels (PSV), 55 anchor handling tug supply vessels (AHTS) and 33 CSVs.

NA


Compe�tor Intelligence

Organic Growth

Compe�tor 1

24 Feb’1712 : Statoil signed framework agreements with Technip Norge and Subsea 7 Norway to perform manned underwater opera�ons as well as provide emergency repair response for underwater installa�ons and pipelines in 2017. Compe�tor 1 will use Deep Arc�c (a diving support vehicle), Compe�tor 1 Seahunter (a light diving cra�) and DSV Deep Explorer to perform the opera�ons.

XX Feb’XX13 : Genesis (Compe�tor 1’s subsidiary) bagged a contract from Reliance Industries, India to undertake the Front End Engineering Design (FEED) for deepwater devel-opment of block KG-DWN-98/3 at MJ field in the Bay of Bengal. This project will u�lise two subsea drill centres, which will be �ed back to a floa�ng produc�on, storage and offloading (FPSO) pla�orm.

d NA refers to not available

M&A Snapshot



Monthly Sector Report - February 2017

“Compe�tor 1, even more so a�er its recent merger, is a global leader in oil and gas engineering design and contrac�ng. Their know-how, exper�se and quality standards in deep water and FPSO projects will all assist in delivering the most efficient and environmentally sensi�ve development of these projects. We are sure that the combina�on of Energean and Compe�tor 1’s skills and resources can contribute to the onward development of Israel’s broader upstream industry, its technology and human capital. We look forward to a long-term and mutually beneficial partnership together.” – Mathios Rigas, Chairman and CEO of Energean Oil & Gas (Feb XX)

XX Feb’XX14 : Energean Oil & Gas, a Greece-based E&P company, appointed Compe�tor 1 as concept and FEED contractor to develop two offshore fields, namely Karish and Tanin, in Israel. The project includes developing a FPSO vessel and a subsea pipeline to bring the gas to Israel.

XX Feb’XX15 : BP awarded Genesis a global contract covering conceptual, pre-FEED, and FEED stage engineering at the former’s onshore, offshore and subsea projects.

Inorganic Growth Subcontrac�ng

XX Feb’XX16 : Compe�tor 1 announced to acquire Kanfa, an offshore topside engineering company, by buying XX% stake in the la�er from Sevan Marine. Compe�tor 1 had earlier acquired XX% stake in the target in 20XX.

XX Feb’XX17: Comapny A, part of Compe�tor 1 Australia, contracted DOF Subsea (part of DOF Group) for a mul�-purpose support vessel (MSV), namely Geoholm. The vessel will be u�lised for ROV and light construc�on support services at the Shell’s Prelude floa�ng liquefied natural gas (FLNG) project in Australia.

Compe�tor 2

Management Changes

Organic Growth

XX Feb’XX18 : XX, the firm’s serving President, will succeed XX to hold the addi�onal responsibility as the company’s CEO; he will assume office immediately following the company’s annual mee�ng scheduled on XX May’XX.In addi�on, he is also expected to join Compe�tor 2’s board along with his appointment

XX Feb’XX19 : Compe�tor 2 entered into a long-term agreement with Mærsk Supply Service to provide eight work-class remotely operated vehicles (ROV) along with surveys, subsea tooling, engineering, communica�on and data solu�ons. ROVs will be installed on Maersk’s two s�ngray-class subsea interven�on vessels and four starfish-class anchor handling tug supply vessels.

“Company B is commi�ed to maximising the value of offshore project opera�ons for customers. Through this strong partnership with Compe�tor 2 we are able to simplify the planning and procurement process for clients by offering mul�ple services in one agreement. This coopera�on is a prime example of how our new Integrated Solu�ons business area is dedicated to providing a smoother sourcing and execu�on process for our customers worldwide.” – Olivier Trouve, Head of Integrated Solu�ons, Company B Supply Service (Feb’XX)

Compe�tor 3

Organic Growth

XX Feb’XX20 : Compe�tor 3 bagged a contract from Comapny C to develop the Sole gas field (located in the eastern part of the Gippsland Basin off Australia) involving Compe�tor 3 �e-back of the Sole well to the Orbost Gas Plant, including the fabrica�on and installa�on of 64km of pipeline, spool and manifold, along with installa�on of a 64km umbilical and the commissioning of the system.

“We are delighted to have been awarded this key project from Company C . This award draws upon Compe�tor 3’s substan�al experience of delivering projects in the Company D over the last XX years. We look forward to leveraging this established and proven record in pipeline fabrica�on and offshore installa�on to help Comapnay C as it develops its offshore gas resources.” – Andy Woolgar, MD (Australia and New Zealand), Compe�tor 3 (Feb’XX)



“Seven Arc�c delivers an important step change in our comapny construc�on capability, par�cularly in ultra-deep water fields which pose increasingly technical challenges, whilst Seven Kestrel reinforces our leading diving capabili�es.” – John Evans, COO, Compe�tor 3 (Feb’XX)

XX Feb’XX24 : Compe�tor 4 contracted Kvaerner (Norwegian engineering and construc�on services firm) for dismantling and recycling a pla�orm in North Sea for a contract value of ~£17.6mn

XX Feb’XX23 : Compe�tor 3 added two vessels, Seven Arc�c (a heavy construc�on flex-lay vessel) and Seven Kestrel (dive support vessel), thereby comple�ng the fleet investment program under which it had added six newbuild vessels to its fleet since XX.


XX Feb’XX21 : Compe�tor 3 Norway signed a framework agreement with Company D to perform manned underwater opera�ons, including tsks related to the repair of corrosion damage to caissons at Oseberg Sør (an oil field in North Sea) and various other opera�onal and project ac�vi�es that are currently not defined; the former will u�lise four vessels, namely DSV Seven Falcon, DSV Seven Atlan�c, DSV Pelican and the LDC Seven Spray.

XX Feb’XX22 : Upstream Online reported that the partnership of Compe�tor 3 and Company E (part of Schlumberger) is in a lead posi�on, ahead of the rival Compe�tor 1, to win Compe�tor 3 umbilicals, risers and flowlines, and Compe�tor 3 produc�on systems contracts for Company F development in the deep-water US Gulf of Mexico. The results are expected to be finalised by March end.

Compe�tor 4

Subcontrac�ng

Fleet Expansion

Financing

XX Feb’XX25 : Company G entered into a seven-year mul�-currency financing facility of £1.1bn with a consor�um of Malaysian, regional and interna�onal banks. The funds raised will be used to refinance exis�ng borrowings and to support its global opera�ons.

Compe�tor 5

Valua�ons

Sources: Bloomberg, Company Filings

Comparable Shapshot (FY16–FY17)e, h

Compe�torsMarket

Capitalisa�on(£ mn )

EV / EBITDA EV / Sales PE ra�oSales

(£ mn)EBITDA margin

(%)

FYXX(a) FYXX(a) FYXX (f) FYXX (a) FYXX (f) FYXX (a) FYXX (f) FYXX (a) FYXX (f) FYXX (a) FYXX (f)

Compe�tor 4 86,494.9 49.9 15.9 4.6 3.9 147.2 44.5 20,598.9 23,124.4 9.2 24.4

Compe�tor 1 12,877.9 9.8 6.7 1 0.8 23.3 23.5 10,179.1 11,332.8 11.2 11.3

Compe�tor 2 4,431.8 37.4 6 0.9 0.6 13.4 21.3 8,173.3 7,956.1 -9.9 10.5

Compe�tor 3 3,144.7 2.9 5.7 0.8 1 6.1 27.9 2,645.2 2,726.2 24.8 18.2

Compe�tor 5 3,515.8 6.3 8.6 1.6 1.8 14.8 22.9 2,127.1 1,967.1 25.1 20.2



Sources: Bloomberg, Company Filings

EV / EBITDA – Historical Trend (FYXX–FYXX)e, f, g


6705/7-1 well drilling (XX Feb)26 : Company H received drilling permit from the Norwegian Petroleum Directorate for the 6705/7-1 well (about 330km west of Bodø, Norway) in the North Sea.

Connec�ng Oda field to Ula field (XX Feb)27 : Company G received approval from Norway’s Petroleum Safety Authority to connect Oda field (located at the southern part of Norwegian sector of the North Sea and operated by Centrica Resources) with Ula field (operated by Company G). Ula field is to be developed as a subsea facility.

Valemon West Gas Discovery (XX Feb)28 : Company C discovered gas on the Valemon West field, 160km north-west of Bergen. Discovery’s reserves have been es�mated between 20 and 50 mmboe.

Poten�al Opportunity for the Client

Few O&G projects client could explore for a poten�al opportunity related to subsea construc�on work:

e All currency conversions are at GBP 1 = NOK 11.325, USD 1.350 and EUR 1.221 (annual average of daily closing price for 20XX)f Financial year ended in December, except in the case of Compe�tor 3 for which it was November between FYXX and FYXXg Value as of XX Dec across the financial yearsh The forecast data is extracted on XX Mar’XX

0

10

20

30

40

50

FYXX FYXX FYXX FYXX FYXX FYXX FYXX FYXX FYXX FYXXCompe�tor 4 Compe�tor 1 Compe�tor 2 Compe�tor 3 Compe�tor 7

~XX% rise in EV, despite ~XX% YoY decline in EBITDA, indica�ng high investor confidence

Primarily driven by ~XX% YoY fall in EBITDA



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Monthly Sector Report on - RocSearch · Monthly Sector Report on Subsea Oﬀshore Oil & Gas Construc on and Maintenance Services Execu ve Summary New Industry Developments/Ini a ve