Everyone loves a comfortable hotel room, with clean sheets, soft towels, a buffet breakfast and reliable wifi. Offshore crew also crave a good bed and a hot shower after platform commissioning or floating production shut down maintenance.
This is where floating accommodation players like Prosafe, Floatel International and Telford Offshore come in, along with a handful of smaller players focused on specific markets, including Nortrans, Gran Energia in Brazil, Cotemar in Mexico. and POSH.
These operators own the dynamically positioned (DP) floating accommodation units that oil companies charter to house their workforce offshore when deepwater or harsh environment offshore facilities are either not ready, or are shut down for maintenance, or simply when platforms do not have enough bedspace to accommodate the staff needed for a scope of work.
Their semi-submersible units for use in rougher weather areas, or DP barges in benign waters, can house up to 800 passengers (Edda Fortis), crew and hotel staff, connected to the offshore work site by means of an active heave compensated gangway, whereas smaller units typically have 200 or more accommodation capacity (such as Belait CSS1 recently bareboated by Nortrans Offshore).
The 500-passenger Arendahl Spirit (video) managed by Nortrans is a rare example of a Sevan Marine-design cylindrical accommodation unit.
Norwegian tanker magnate John Fredriksen entered the sector through the acquisition of the 2023 Korean-built DP3 unit Edda Fortis, which had been abandoned at the yard and which now appears to be warm-stacked in Malta after an expensive repositioning from Singapore.
Unfortunately, investment in the sector has not been as comfortable for investors who have spent the last decade weathering crisis. Ambitious newbuild ordering in the last boom has seem persistent overcapacity in the sector and relatively low utilisation, especially as floating accommodation is typically a requirement late in the offshore investment cycle.
These DP accommodation units are used to commission new facilities, which were few and far between in the downturn, or to maintain older facilities, maintenance of which is often deferred or minimised when the oil price is low.
Whereas jackup rig owners have reported utilisation of around 90 per cent since the Russian invasion of Ukraine in 2022, and that of deepwater rigs has hit around 80 per cent, floating accommodation players have often had only 50 or 60 per cent of their fleet working as they waited for new floating production facilities to be delivered, and new projects confirmed.
In 2024, global fleet utilisation for DP semi-sub floatels hit 65 per cent, but several of these units were working in Mexico, where Pemex has not been able to pay its vendors.
Half the global fleet of DP accommodation semi-subs are employed in Brazil, where Petrobras charters eight such units and other operators, including Equinor, three.
In response to weak demand and financial pressure, Prosafe and Floatel both announced that they were scrapping or retiring units this year.
In fact, the decision to retire the 2005-built Safe Concordia in February and to scrap its only moored semi-sub unit Safe Scandinavia (built in 1984, upgraded 2016) last month means that since 2016, Prosafe has sold ten units from its fleet.
Upon completion of the two transactions announced, the company will operate only five floating accommodation units, plus two suspended newbuilds at Cosco in China, Safe Nova and Safe Vega. These 500-bed units are preservation stacked ready for delivery. They will require twelve months notice of readiness to mobilise for work, the company says.
In March Prosafe reported monthly fleet utilisation of 52 per cent, down from a full year 2024 figure of 57 per cent, excluding the new builds. For last year, Prosafe reported a net loss of US$42 million, including a US$11 million loss in the final quarter.
Last month, Floatel International announced the sale of the cold-stacked 500-bed semi-sub Floatel Reliance (built 2010), leaving it with only four accommodation platforms. The vessel has been in lay-up since April 2016 and will require millions of dollars and eight to ten months for re-activation before resuming operations.
Floatel’s board considered the reactivation cost as, “too high to create shareholder value for Floatel International’s shareholders.” The company took a US$15 million impairment on the unit when the sale was declared.
On April 30, the company will release its 2024 annual report. It also reported 52 per cent utilisation for full year 2024 and lost US$33 million over those twelve months, and US$13 million in the fourth quarter.
In 2019, Prosafe and Floatel International had tried to merge, but the UK and Norwegian competition authorities blocked the move in early 2020, leaving each to try to restructure separately. It has been an ugly and painful process, and after depreciation and financing, most players are reporting losses even as they generate some cash.
But now there is light at the end of the tunnel. Maybe.
Both companies have laboured under too much debt. Floatel International owed US$826 million of debt in 2021, as each of its semi-subs had cost over US$300 million to build at Keppel FELS in Singapore. So, the company undertook a restructuring that saw its 49.9 per cent shareholder Keppel write off a shareholder loan of US$242 million to Floatel in order to retain its just under half stake in the company.
For reasons I don’t understand, the management of Floatel managed to negotiate a ten per cent shareholding in the restructuring.
Last year, in March, Floatel International successfully placed a new senior secured bond issue of US$350 million to refinance all its existing outstanding bonds and for general corporate purposes. It added another US$15 million in debt recently.
With brokers valuing each in-service unit at over US$100 million, and only US$30 million of debt due to be paid down annually until 2029, when US$245 million is due, the company can breathe for the next four years.
On Thursday, Prosafe announced its second restructuring in five years. The first, at the end of 2021, saw the company restructuring its US$1.6 billion facilities and a NOK2.5 billion bond debt (then worth US$278 million).
Under that restructuring plan, Prosafe’s lenders swapped US$1.1 billion of debt for 99 per cent of Prosafe’s equity, wiping out the former shareholders, whilst reinstating a US$250 million credit facility and US$93 million of a smaller facility.
“All other remaining debt maturities are set to be extended to December 2025,” as the company’s lawyers reminded us via the press release in December 2021.
Guess what? We are now in 2025, the clock is ticking, and the company is once again all but obliterating its shareholders and once again seeking to refinance.
This second restructuring involves another debt for equity swap. The lenders have proposed, the board has recommended, and 54 per cent of shareholders have agreed that US$193 million of debt will be cancelled in return for those lenders receiving 90 per cent of the shares in Prosafe.
Existing shareholders will initially hold just five per cent of the shares in the company and will be offered an additional per cent of shares in the form of penny warrants (i.e., one euro cent per share).
The deal also sees Prosafe take on new and amended debt of US$150 million, which will mature at the end of December 2029, plus a US$5 million fee to the lenders. Total gross debt after the transaction will be approximately US$306 million, including US$ 75.5 million owed to Cosco as a seller’s credit for the floatel Safe Eurus.
The shareholders didn’t face much choice (just as their predecessors didn’t in 2021) as the company was staring into a wall, again, facing a need to raise around US$400 million in 2025 to cover US$343 million in debt maturities and additional liquidity to support floatel reactivations and capex, but likely to generate only US$70 million in operating cash flow this year.
Benign water operator Telford meanwhile labours under US$200 million of long term debt and bond debt as per its fourth quarter report. The company operates five of its own benign water DP accommodation barges built between 2007 and 2011, each with between 339 and 480 berths, which are working in Angola, Ivory Coast, Saudi Arabia and Qatar.
Telford recently took delivery of a sixth unit under a long term bareboat from a Chinese financing house, the 684-bed ex-Guo Hai An Hong, which was delivered in 2021 but was originally ordered by Bourbon as African Provider in 2014. Telford has renamed the unit Telford 33 and it is preparing for service in Qatar at the time of writing.
Telford was founded in 2018 after acquiring four DP3 accommodation and construction vessels from the Sea Trucks Group, after Sea Trucks was liquidated following default. In 2019, it acquired Telford 30 following a legal settlement between the Sea Trucks Group and West African Ventures of Nigeria.
Telford was acquired in 2023 by Merced Capital of Minnesota, for an undisclosed amount. At the end of last year, Telford borrowed US$194 million and promptly paid Merced US$213 million as a dividend, a classic private equity ploy much used by water companies in the UK.
Given the dividend recap (as the strategy of borrowing money to paid out dividends is known), Telford has some of the strangest accounting of any of the three companies.
In the third quarter, it reported operating costs of just US$2.4 million for its five barges, which equates to around US$5,200 per day per vessel, less than Tidewater reports that it costs to operate a supply vessel with a crew of 15 people.
It goes without saying that one would expect a 110-metre long barge with a large crane, DP3 and a telescopic gangway would cost multiples more to operate than a 70-metre long supply vessel.
The operating costs reported by Telford in the third quarter of last year are highly implausible given the complex nature of the business, and I am surprised that such an incredibly low number should not be subject to more explanation in the presentation, especially coming just before a major bond issue by the company.
Then, in the fourth quarter, Telford reported that its opex had more than quadrupled (surprise!) from the prior period to US13.4 million, being US$29,500 per barge per day.
Unfortunately, the company did not publish its previous quarterly costs to establish how much of an anomaly the July to September 2024 period was. Meanwhile, its general and administration costs were also fluctuating wildly between the third and fourth quarters, halving from US$4.2 million to US$2.1 million.
Telford also had uncollected bills from its customers to the tune of over US$56 million at the end of last year, nearly as much revenue as it billed its entire customer base in the July to December 2024 period (US$59.9 million).
Again, that doesn’t seem in line with industry practice, although one barge (Telford 28) was working in Mexico earlier in the year, which might explain some of the late payment issues. Pemex bloody Pemex, as U2 might sing.
Curiously, the mobilisation of the 2007-built barge out of Mexico to West Africa was described as capital expenditure in a note at the bottom of page two of the Q3 report, which seems very odd, as the unit is not new, and no publicly listed rig owners or shipowners appear to capitalise movements of their vessels after initial delivery mobilisation.
Now that the investments triggered by the higher oil prices of 2022 are coming onstream, the DP floating accommodation companies are looking forward to stronger day rates and higher utilisation in the years ahead. This might explain why John Fredriksen spent a reported US$120 million on Edda Fortis, which has barely worked in a year.
Whilst Telford seems to have fixed several of its barges into Qatar “long and low” with rates reported less than US$80,000 per barge for two years, Prosafe, POSH, Gran Energia and Floatel International are looking forward to much higher demand in Brazil.
The Latin American powerhouse is estimated to install 26 new floating production units between start 2025 and end 2030, all of which will require floatels for commissioning.
This is in addition to the existing Brazilian FPSO fleet of 65 units already in country, which will also require maintenance. Nortrans recently mobilised its 84-metre long compact semi-sub Temis to work for Equinor there.
By 2027, Prosafe anticipates that the Brazilian fleet of high-specification accommodation semi-subs will grow from 11 units today to 17. The company reported that Petrobras has a tender for up to five units for four-year firm durations with start-up in 2026, requiring high-end units with North Sea capabilities, aligned with the completion of the Safe Notos’ current contract in 2026.
In 2022 Prosafe was fixing Safe Zephyrus at US$112,000 in Rio. Then in 2023, Upstream reported that Prosafe was bidding its units at US$205,000 per day to Petrobras, but losing. In a small market with limited units, day rates that were over US$100,000 a day in 2024 will probably be starting in the US$200,000s next year.
It has taken a long time, but Petrobras’ ambitious offshore production increases provide the demand that the high-end floating accommodation industry finally needs.
Before the cash has even arrived, the big players are now looking at spending it, like classic shipowners.
Floatel International has already indicated that it might be interested to buy a benign water player like Telford, as it stated in its recent investor presentation:
“We are in an excellent position to develop the company to meet these [higher client] demands – thanks to the stable order book, solid capital structure with recent debt extension to 2029, and the vast experience of our employees, we can pursue accretive expansion, explore mergers or acquisitions with other players to consolidate the market within our segment [and/or] diversify the fleet to meet requests outside of the core market – still serving tier one customers on high-end DP 3 markets.”
After ten years of suffering, protracted debt restructuring and write-offs, the company clearly needs a “transformative deal.” What could possibly go wrong this time around? Stand by the phone in Lugano (Nortrans) or Minnesota (Mercred for Telford).
And if anyone is doing due diligence on Telford, do check those unorthodox accounting policies.
Background reading
In 2021, we examined the first structuring of Prosafe and Floatel International here. Read Kroll’s summary of the Floatel International restructuring of that year for more information.
Oleksandr Mykhed on everyday life in missile-blasted Kyiv is a reminder to celebrate every moment, as your choices can have unforeseen consequences.
Listen to a reggae tribute to the Floatel Triumph crew here.