In previous newsletters I have extensively covered the challenges our industry faces in renewing the deepwater OSV fleet and the particular challenges for the US Jones Act fleet. The costs of new construction along with challenges in securing financing and favorable contract terms present serious challenges to all vessel owners. In the near future, the need for new boats by demanding clients will allow for the alignment of more favorable contracts terms that can secure financing to build new vessels.

In recent weeks, there has been significantly more chatter by energy companies operating in the deepwater Gulf of Mexico around sustained and increased activity in the years to come. It’s well recognized that the fleet of existing deepwater OSVs is aging. However, there is simply not enough existing supply to support any meaningful increase in activity, particularly incremental exploratory and development drilling campaigns. This has prompted informal inquiries about plans for new OSV construction and timelines to deliver new vessels. Though informal, the questions are trending towards a focus on the need for new OSVs as opposed to strictly the costs of new vessels. This not nearly enough to prompt any strong beliefs that a formal Request for Proposal (RFP) for new OSVs is imminent, however, the timeline to see an RFP issued to the market is likely still moving forward. While there may be an initial sticker shock at the charter rates for any new build OSVs, it’s nothing compared to the consequences if there are no commitments made to new vessels in the next several quarters. Even then, given the timelines to deliver a new vessel once contracted, the demand for the newest and most capable vessels will remain very high.

The current market conditions remain very favorable to vessel owners, particularly those with the newest and most capable vessels.