Leading Offshore owners, part of the previously booming market in the North Sea, are falling victim to overzealous valuations of the past. Due to the current Offshore market conditions, where asset values have suffered as in no other previous downturn, vessel financiers are knocking at the doors of owners due to concerns about the prospects of recouping money lent to finance now inactive Offshore fleets.
The market valuations (of vessels sub 15 years old) being given are more than likely breaking mortgage covenants, and the write downs that need to be taken are more significant due to the original generous valuations of these assets.
We estimate the value of a five year old large PSV today at USD 13.7 million, down almost 22% year to date from USD 17.5 million, and around 20% below suggestions from other valuations providers. According to our data, the value of a zero year old 5150 BHP AHTS has decreased by 50% since 2014.
The same can be said in the Subsea Construction sector, largely due to the negative impact of the Toisa court sales. We estimate the market value of Dive Support Vessel Toisa Pegasus (131 LOA, Apr 2009, IHC Merwede) at USD 40.2 million, compared to November's sale price of USD 38.95 million; the vessel has been idle since July 2017 and is overdue survey. Our estimate is around 30% lower than suggestions from other valuation providers, however is more in line with reality.
It is time for other independent valuers to take a more responsible approach. Values will certainly come back given time, but the question is – how long can banks and financiers wait?
The above figures are fair market values and do not extend to eight other vessels that are taken in on bareboat charter.
We take into account a number of different factors when determining the market value of an Offshore asset. This includes but is not limited to earning sentiment, yard of build, prominent features of the vessel (i.e. ice class, deck area, DP class etc.), confirmed sales in same sector and assuming good seafaring condition of the vessel.
We also provide different types of values and assumptions such as their discounted cash flow analysis. This type of analysis would result in a more favourable outlook given the current depressed state and potential upside of the offshore market.
Source: VesselsValue