Last week, we did a two-part deep dive into the strategy of floundering oil major BP. This week, we look at the latest deals in the offshore industry, many of which are focused on the burgeoning interest in defence contracts and technologies with both military and civilian use.
Sorry if you were hoping for an analysis of the news that three rich and unnamed shipping investors have finally bought 11 ostensibly 200-ton anchor handlers from private equity company Hayfin, whilst Hayfin has also sold its share of the management company United Offshore Support for the ships to Evangelos Marinakis’ Capital Group. Without more information on the pricing of the 16- and 17-year old vessels, which Hayfin previously tried but failed to sell in 2023, there’s not much value for me to add.
Geopolitics are once again causing chaos in the oil markets that drive the offshore business, but they are also providing opportunities for many companies with technology originally developed for offshore applications.
Once again, the oil price is all over the place. I mean volatile. Brent crude prices have dropped more than 33 per cent since their peak in March, when the Israelis and Americans attacked Iran. The strikes on February 28 provoked a crisis that US President Donald Trump has claimed to have solved at least forty times, but which is now into its fifth month. Dozens of ships have been attacked, and more than 20 seafarers have perished, killed by both sides, including three Indian seafarers killed on the Palau-flagged tanker Settebello when US forced fired missiles into the vessel’s engine room last month.
This weekend, Iran declared the Strait of Hormuz closed “until further notice” and once again began attacking shipping and American facilities in neighbouring countries, whilst Israel stepped up its attacks on Lebanon and America launched strikes on Iranian bases and targets, including missile sites and bases and infrastructure.
As a result, for the first time since the Cold War, maritime warfare is again at the heart of military technological development, which threatens to make the old paradigm of sea-going power projection through surface warships, and especially aircraft carriers, obsolete. Naval power now hangs as much on the ability to attack and defend subsea data and electricity cables, to protect or harm merchant marine vessels cheaply, and to open or close maritime chokepoints, as it does on flag-flying navies with large, crewed surface ships. In the Black Sea, the Russian Navy has largely been defeated by Ukraine, a country that famously had next to no navy when the Russians attacked in 2022.
Now, everyone wants a piece of a growing and lucrative naval technology pie, and large defence contractors are paying big bucks to acquire companies that offer uncrewed vessels, subsea equipment, and survey hardware.
In the UK, I would not be surprised to see either SRT Marine or Ocean Infinity on the receiving end of takeover interest, given their track records and technologies.
Two bloody conflicts have demonstrated the importance of technological development in military weapons at sea.
Firstly, there is the devastating success of Ukraine against Russia. Last Friday, Russia suspended shipping through the Don-Azov canal, which connects with a Russian river network and the Caspian Sea. This came a few days after Reuters reported that Ukrainian drones had attacked a dozen small tankers that were delivering fuel to Crimea, the Russian-occupied peninsula. The BBC reported that the Governor of Russia's Rostov region, Yuri Slyusar, had confirmed that two empty tankers were attacked last Wednesday in Taganrog Bay in the north-east of the Sea of Azov, and that they were still burning on Thursday.
Ukraine's military said they had struck ten tankers each with a deadweight of around 7,000 in the Sea of Azov on Tuesday of last week, and two more vessels were hit later in the week, as Kyiv seeks to cut off supplies to the peninsula where fuel stocks were already critically low and where the Ukrainians have also attacked electricity infrastructure. A passenger ferry called SKS One and a bulk carrier also came under attack in Kerch Port. Russia’s Black Sea Fleet is now effectively shut in at Novorossiysk to prevent further humiliating losses.
In the Gulf and the Strait of Hormuz, entirely innocent seafarers on vessels flagged to completely neutral states to the conflict and operated by non-combatants have again found themselves under fire, this time from the Iranians.
The Cyprus-flagged, 7,000TEU container vessel GFS Galaxy was set ablaze after being hit by Iranian projectiles while transiting the Strait of Hormuz close to the coast of Oman. The ship suffered engine room damage on Sunday, July 12. Ten Indian crewmembers abandoned the drifting vessel in a lifeboat and were rescued, but an eleventh Indian crewman is missing and is presumed dead.
India's External Affairs Department once again condemned the attack, as it had following previous attacks on shipping in the Persian Gulf and the Strait of Hormuz, but without offering any concrete measures to protect the safety of Indian seafarers. The Indian statement says that freedom of navigation through international waterways, in line with international law, “must be restored at the earliest”. We’d all like that, but given the endless spiral of ceasefires and attacks, this seems like wishful thinking for now.
The Qatari LNG carrier Al Rekayyat was struck in the early hours of last Tuesday after transiting the Strait. The Nakilat-owned LNG carrier was damaged in the strike and the crew abandoned ship, but fortunately none were injured, Qatari media reported. The vessel is believed to be under tow by a salvage tug to Fujairah to discharge its cargo. Bloomberg reported that a Saudi crude oil tanker was also damaged while leaving Hormuz the same day.
The oil price responded with a modest rise to close at over US$75 by Sunday night, suggesting that the markets are confident that the ayatollahs, the Israelis and the White House will be able to cobble together another ceasefire soon, without another hit to oil, gas and fertiliser supplies, despite the latest attacks sharply curtailing traffic through the Strait again. Let us hope peace is soon and permanently restored.
Whilst the Iranians have been attacking ships, interest in maritime defence stocks only increases, with three major deals in the last month, all focused on maritime technology and priced at high multiples of future earnings.
Last week, Europe’s biggest defence contractor Thales agreed to acquire a 35.5 per cent controlling stake in French sea-drone maker Exail Technologies from the Gorgé family, and Thales said it would launch a €3.9 billion (US$4.44 billion) bid for the entire company. Thales made its move after its French rival, the military jet engine maker Safran, pulled out of takeover negotiations for Exail.
Groupe Gorgé was founded in 1990 and is a diversified industrial group specialising in high-technology sectors such as defense, nuclear safety, robotics, and 3D printing.
In its most recent presentation, Exail had told investors the following:
“Exail… enters fiscal year 2026 on a very favourable trajectory, in structurally growing markets. Recent geopolitical developments in the Middle East have reinforced global awareness of the challenges related to mine warfare, the vulnerability of GPS positioning systems and the rise of hybrid threats, all of which are at the heart of the group’s technological positioning.”
The Exail bid came after Thales had lost an attempt to acquire Ultra Maritime, a company that offered, “next-gen undersea warfare solutions [that] provide situational awareness, offensive and defensive Anti Submarine Warfare capabilities.”
Ultra was eventually bought by Lockheed Martin for US$3.45 billion. Its technologies include sonar devices and arrays, radars and torpedo countermeasures. The flip was not unexpected as Ultra Maritime was owned by private equity firm Advent, after it had bought UK engineering company Cobham for around US$5 billion in 2019. Advent is a company never knowingly slow to flip a hot asset in a fast growing sector.
The Financial Times reported that Advent had invested US$170 million into the company’s product development and manufacturing over the past three years, with revenues at Ultra rising 17 per cent annually over that timeframe. Ultra’s revenues are on track to jump to about US$784 million in 2026, up from US$494 million in 2023, the newspaper claimed.
Not to be left out, Italy’s naval shipbuilding powerhouse Fincantieri, which also owns offshore vessel builder Vard and its associated cluster of offshore equipment providers, has invested around €600 million (US$683 million) to buy four underwater defence companies: Next Geosolutions, WSense, Graal Tech and Defcomm.
According to Fincantieri, the companies are Italian high‑tech scale-ups that specialise in underwater communications, the "Internet of Underwater Things", autonomous underwater vehicles (AUVs) and autonomous surface vehicles.
Fincantieri, through its subsidiary Ingegneria dei Sistemi, had already signed an agreement with Next Geosolutions to develop AUVs together in 2025. NextGeo was part of the Marnavi Group and had been separately listed in Milan. Earlier this year, it acquired control of the Rana Diving Group. The company is likely to be well known to many readers for its fleet of high-specification multi-purpose vessels: the subsea vessel NG Worker (which Marvani acquired as part of the liquidation of ill-fated survey company Swire Seabed), the geotechnical drilling vessel NG Driller, and the multi-purpose vessels NG Surveyor and NG Explorer.
The Italian financial press reported that Fincantieri had reached a binding agreement to acquire the 52.60 per cent stake held by Marnavi in the company, and that it was, “at an advanced stage of negotiations,” with the senior management, who will have the right to sell part of their shares and will undertake to reinvest.
The sale and purchase agreement values 100 per cent of NextGeo at €780 million (US$889 million). Once it has acquired a majority stake from Marnavi, Fincantieri will launch a takeover bid for the remaining share capital of NextGeo.
Fincantieri stressed that all four purchases have dual-use nature focused on both the needs of defence and commercial offshore markets. It said that it saw, “sector evolution towards increasingly integrated and interconnected models, spanning from the protection of critical subsea infrastructure to maritime security and offshore services.”
Offshore vessels, offshore assets, and offshore technology are increasingly on the front line. Let’s hope offshore seafarers are not in the line of fire.
Meanwhile, German defence companies TKMS and Rheinmetall are also battling to buy German Naval Yards Kiel.
Naval technology has never been the focus of more investment, even as life for seafarers becomes ever more unsafe as attacks on civilian ships increase, and the international community does little more than wring its hands.
Last week, we were lamenting BP’s poor record of developing new projects, with a limited pipeline of future production opportunities, many of which are incremental step-outs from existing production in the Gulf of Mexico, Trinidad and Azerbaijan. We didn’t mention Canada, where the company was a 37 per cent partner in Equinor’s Bay du Nord project in the Atlantic. This is a US$10 billion investment, harsh environment floating production project, in about 1,100 metres of water depth in wild and frigid seas, prone to iceberg incursions, about 500 kilometres northeast of St. John’s, Newfoundland.
The field was discovered in 2013 by the Norwegian energy company, but the remote location and many physical challenges to bring the estimated 160,000 barrels per day of oil production online via an ice-classed floating production, storage and offloading vessel (FPSO) meant that the greenlight to go ahead was stalled.
However, the Russian invasion of Ukraine in 2022 and now the Strait of Hormuz crisis have revived the oil price, increased interest in diversification of energy supply, and renewed interest in proceeding to approve the development. The final investment decision is now expected to be granted next year.
Bay du Nord is Canada’s only new large offshore project. If anyone has the experience to deliver the project it is Equinor, which operates the Johan Castberg FPSO in the similarly brutal Barents Sea, around 240 kilometres northwest of Hammerfest in northern Norway.
But BP will no longer be a partner. It has sold its stake in the licences and the field to Equinor for an undisclosed amount. Equinor now says that it is looking a new partner to replace BP. Local champion, Calgary-headquartered Cenovus Energy, is an obviously possible contender to take a share.
Cenovus was formed as a spin-out of Encana and bought Husky Energy and its offshore interests in Canada and overseas in 2021. The company is the operator of the White Rose field offshore east coast Canada via the SeaRose FPSO.
Cenovus is also a joint venture partner in the Terra Nova field offshore Newfoundland. Terra Nova is operated by Suncor, which is another potential partner for Equinor.
Gordon Birrell, BP’s Executive Vice President for Upstream, said in a company statement that BP, “is exercising strict capital discipline, allocating it to the opportunities that create the most value.”
Oil majors buy and sell acreage and positions all the time, but with BP’s slump in production and reserves in the last decade, I would have thought that Bay du Nord would provide the ailing major with quality production underwritten by a technically strong partner. BP needs to create some value by increasing its production and its profits; otherwise, it will cease to exist in a decade.
The “simplification” excuse would ring more true if BP had an exciting pipeline of higher volume, lower cost projects, which appears not to be the case. I get it that a remote location, harsh environment, high-cost Canadian project is risky if there are cost overruns, but by creating infrastructure in a new basin, Bay du Nord will provide a route for commercialisation for more than just the 16 wells that will be producing in its first phase.
For Canada it will be a game changer, and for Equinor, a company with limited operatorship outside Norway and Brazil, it will also be a step change to prove and demonstrate new offshore Arctic technologies.
Let’s see if BP’s simplification can deliver growth, or whether it is simply camouflage for a death spiral of cost-cutting, capacity reduction, and shrinkage of a once proud business.