As the oil prices have gone down due to the troubled economy, the charter rates of the offshore support vessels have gone down at least by 50-60% in the last 6-8 months. Exploration is the first area of oil production to be affected by falling prices and demand due to high cost and risk involved.
Many oil companies, hence, have shelved riskier exploration projected in the second half of last year as the price of oil tumbled from an all-time high of $147 a barrel in July to around $33 in December. The companies are, therefore, not considering exploration as a viable option which has, in turn, hit the offshore industry.
?Due to the market condition, companies are not going in for exploration, due to which the offshore rates have gone down,? commented an analyst on conditions of anonymity. ?The offshore sector has different segments like rigs, OSVs, and others. However, on a wider term, the rates in offshore segment have gone down at least 50-60% in the last 6-8 months,? added the analyst.
As the offshore segment is directly related to the oil and gas sector, chances of offshore segment to bounce back are dim lest the oil and gas sector bounces back.
Moreover, demand for support vessels in the cyclical exploration sector has also been affected. According to analysts, the wider drilling contractor market is showing signs of weakness, especially within the jack-up and mid-water floater market.
However, more resilient to market uncertainty is the deepwater capable fleet, though a more challenging pricing environment is anticipated.
Meanwhile, some industry experts feel the downturn faced by the offshore segment is a temporary one. ?The offshore segment has come down, but it is not as badly hit like the other segments like dry bulk, tankers,? commented Arvind Mahajan, executive director, KPMG.
The shares of Great Offshore closed at Rs 540.90 on BSE, down by 0.92% on Tuesday. Similarly the shares of Aban Offshore were up by 0.02% closing at Rs 1529.45, and the shares of Garware Offshore closed at Rs 172.45, down by 0.03%.