COLUMN | Get the PSVs to the Greek; get the drillships to the Belgian; get the sunken treasure to the Briton: Standard Supply, Vantage Drilling and Ocean Infinity [Offshore Accounts]
According to his carefully edited Wikipedia entry, Evangelos Marinakis “is a Greek media mogul, shipowner, lyricist, and member of the Piraeus city council. He is the founder and owner of Capital Maritime and Trading Corporation and also the owner of the football clubs Olympiacos in Greece and Nottingham Forest in England.”
And now he is apparently the proud owner of a trio of dynamic-positioned platform supply vessels (PSVs). Last week, Norwegian speculator Standard Supply reported the en bloc sale of its final three large PSVs, the 2007-built Standard Viking (5,150 DWT and 1,060 square metres clear deck), 2008-built sister vessel Standard Supplier, and the 2019-built UT 717 CDX design Standard Defender (4,200 DWT, 900 square metres clear deck) for a gross total of US$72.2 million. Adjusting for ownership, Standard Supply said it would receive US$69.5 million when the deal closes with Mr Marinakis, no later than mid-January 2024.
The two larger units are trading in the North Sea, whilst Standard Defender was dispatched to Equatorial Guinea for the winter to support the semi-sub rig Island Innovator for Trident Energy for two firm wells and five option wells.
“An asset play with an opportunistic approach”
“Standard Supply was always intended to be an asset play with an opportunistic approach towards the market,” Martin Nes, Chairman of Standard Supply, commented in the press release. “We have seen a robust recovery within the PSV market since the IPO in 2022, and opting to realise our gains at this juncture aligns with our strategy. As with previous sales, we intend to return capital to our shareholders.”
Following the sale, Standard will control a fleet of just four PSVs through its 51 per cent ownership interest in Northern Supply, all trading in the North Sea and all managed by Fletcher Shipping. Three of the four vessels are on short-term contracts and available for new charters in the upcoming months.
What now for Standard Supply?
It is hard to see where Standard goes next. In September, Northern sold the PSV FS Balmoral for US$9.5 million, and in August, Standard flipped the UT755 design Standard Duke for US$11 million. Tactically, these were all profitable trades for the company, but where does the company go now?
It could buy some of the few remaining laid-up vessels, reactivate them, and try to flip them again, but that would mean re-entering the market at a time when asset values are at eight-year highs. The recent sale of the large PSV GSP Perseu (2006 built, DP2, 4,300 DWT) from Romania’s GSP to Posidonia Shipping in Brazil shows there is a still a hunger for high quality tonnage internationally. The remnants of the former R. K. Offshore fleet of 120 tonners are being circulated in cold stack by brokers in Asia. Perhaps Standard will shift its focus from PSVs to anchor handlers, where, as we have seen, the market recovery has been slower?
Standard ELO is now a Dolphin play?
Or perhaps Standard ELO, the parent company, which is controlled by Oystein Stray Spetalen and his business partner Martin Nes, just focus on its investment in Dolphin Drilling. The latter is firmly in recovery mode now and has proven an astute investment. Nobody lost money taking a profit even if Standard’s frenetic vessels buying and selling over the downturn would have been better served by a buy-and-hold strategy with hindsight.
With several rigs laid up, and its stock down 20 per cent since it listed in 2022, Dolphin still has some way to run.
Greeks and offshore: oil and water?
Good luck to Mr Marinakis, meanwhile. The record of Greek owners in offshore has historically been… dreadful.
The only current Greek owner of note in offshore supply is MCT in Athens, which has built up a fleet of over half a dozen ships, buying anchor handlers in lay-up from troubled owners Bourbon (now Panos P and sisters), Havila and Brodospas (former Brodospas Alpha and Brodospas Beta, both 2009-built, Damen 6615 design AHTS of 120 tonnes bollard pull) to put them to work in Africa and Brazil.
There comes a time in every offshore cycle where the deep-sea shipping Greeks get excited and believe that their acumen in tankers and dry bulk will translate into bumper profits from offshore. They then learn that offshore is a long-cycle business with illiquid assets and a different contract structure to wet and dry cargo trades.
Angelopoulos’ not so golden drillship investment
Golden Close Maritime Corporation, which was 60 per cent owned by Theodore Angelopoulos, took delivery of two sixth generation deepwater drillships, Deepsea Metro I and Deepsea Metro II, from Hyundai Heavy Industries in 2011. The first was laid up and out of work in 2015, and the second followed suit in 2017. Both ships were eventually sold for less than a third of their newbuild prices, the first going to its lenders for a reported US$175 million in 2016, which then sold it to the Turkish state oil company TPAO for US$210 million in 2017 and renamed Fatih. The second was auctioned to TPAO in 2018 for what Bassoe reported as US$262.5 million, and was renamed Yavuz.
Mr Angelopoulos’ 40 per cent partner in Golden Close, Norway’s Odfjell Drilling, took an impairment charge of US$245 million in 2015 when it was forced to write down its investment in the rigs and in the rig owning company to zero. That implies Mr Angelopoulous lost US$367.5 million on his controlling share in the business – not exactly a stellar outcome.
Ocean Rig: lost on the equity, won on the management fees
The saga of Ocean Rig followed a more predictable pattern, as George Economou proved once again where even if the other investors in his companies are wiped out by his bad decisions, he will still profit personally.
In May 2008, just ahead of the global financial crisis, Mr Economou’s Dryships, flush with cash from the biggest boom in the history of the dry bulk business, acquired 100 per cent of Norwegian listed rig owner Ocean Rig, which owned two harsh environment, dynamically-positioned semi-subs, for US$700 million. The timing wasn’t auspicious and within 12 months, the oil price had crashed to below US$50 per barrel and the price of semi-subs had…er, corrected.
The market bounced back in 2010, Ocean Rig listed in New York, and the company went on a US$4 billion borrowing frenzy to build eight deepwater drillships, only for the deepwater market to crash again in late 2014. By 2017 Ocean Rig had filed for Chapter 15 bankruptcy protection. The final restructuring agreement saw the shareholders wiped out, including Mr Economou, when the holders of 73 per cent of Ocean Rig’s debt worth US$3.7 billion took over the restructured company.
The restructuring agreement also called for new ten-year management contracts for the company’s drillships with Mr Economou’s privately held TMS Offshore. This proved a boon for him, as when Transocean finally acquired Ocean Rig in 2018, Transocean to pay Mr Economou’s company US$130 million to terminate the rig management contracts. Every cloud has a silver lining and all that.
Economou also bought four oil spill recovery vessels (OSRVs) and two PSVs, Vega Corona and Vega Crusader (now Eco One and Good Wind), through Dryships in 2015, for a combined price of US$87 million, plus around US$33 million of net debt. Their Petrobras contracts expired in 2017, and the PSVs ended up being laid up for several years and sold for a loss in 2021.
So, the arrival of Mr Marinakis might be seen as a sign that the offshore PSV boom is maturing as Norwegian speculators have picked over the market.
Vantage Drilling: Exmar takes a bite
But it is not just Greek shipping magnates who are attracted by the siren lure of offshore. Belgium’s Exmar, controlled by Nicolas Saverys, made a surprising return to the offshore drilling sector last quarter, nearly thirty years after it sold a stake in Diamond Offshore in the 1990s. The Saverys family holds 84 per cent of the outstanding shares in Exmar, which reported net profits of US$39 million for the quarter.
Exmar is renowned for its presence in the liquefied natural gas (LNG) segment, both as an owner of gas carriers and of the Eemshaven floating storage and regasification unit deployed in the Netherlands. It also owns two 300 passenger floating accommodation units, Nunce and Wariboko. Last year, Exmar sold the Tango FLNG unit to ENI for around US$700 million, and chartered ENI the gas carrier Excalibur as a floating storage unit for Tango in shallow water offshore Congo. Exmar served as the engineering, procurement, and conversion contractor for the ENI Congo project.
In Exmar’s third quarter results, the company announced it had bought an 11.5 per cent stake in Vantage Drilling. Vantage is the owner of two deepwater drillships and two jackups, and has been tipped by me as an obvious take-over candidate since it is illiquid and subscale. The company trades only on the over-the-counter market in the United States following a brutal bankruptcy restructuring in 2016.
It’s a strategic investment, duh
Exmar said this was a “strategic investment.” Those are words that always fill me with concern as it implies that the deal lacks commercial logic, and indeed this is a pure punt by Exmar – in other words, a gamble.
“This strategic investment is driven by promising value due to continued underinvestment in the offshore drilling market,” Exmar reported in the third-quarter filing.
What does this mean? Exmar has made speculative investment of around US$30 million in Vantage, a company that it doesn’t control and that recently bid to ENI Indonesia a deepwater drillship reportedly at lower than US$400,000 per day. Vantage has only just returned to break-even after years of crippling losses, mitigated only by a courtroom victory against Petrobras that netted it US$701 million in 2019, and the sale of a trio of jackups to Saudi Arabia’s ADES in 2022 (Emerald Driller, Sapphire Driller and Aquamarine Driller for US$170 million).
Whilst Vantage has floundered, Diamond announced a record high for a rig fixture, the best since 2014, when it reported a day rate of US$513,000 for a single well to be drilled by Ocean BlackRhino offshore Guinea-Bissau in the middle of next year when the rig finishes its current contract off Senegal with Woodside.
I feel Exmar would be better off encouraging Diamond to take over Vantage and consolidate the sector, pricing its fleet at Diamond rates, not the current “soft” fixing by Vantage.
Ocean Infinity – corporate ethics and the new long short
Kit Chellel from Bloomberg published what should have been a sensational exposé on offshore survey and treasure hunting company Ocean Infinity last week, setting out a pattern of lawbreaking that has seen the company’s ships detained for illegal activities in several countries and its ship’s officers and company representative fined in Cyprus for violating national laws on the preservation of the marine heritage.
Who can resist the line, “If you don’t care about hedge fund millionaires using underwater robots to hunt for Nazi treasure, I’ll be honest, my latest story probably isn’t for you…”?
Only we doubt whether Ocean Infinity’s customers or its financial backers will be much bothered. Ocean Infinity hasn’t published accounts at Companies House in London since 2020 – and that filing of heavy losses related to 2017 and 2018, so there are four years of unpublished filings for a company that owns, in a conservative estimate, at least US$200 million in assets, several of which have sat for months in Norway undergoing commissioning and whose proudly “uncrewed” 78-metre-long survey vessels Armada 7801 and sisters remain totally crewed with seafarers.
Chellel is the co-author of Dead in the Water, the gripping story of the conspiracy to hijack and set fire to the Liberian-flagged Suezmax tanker Brillante Virtuoso off Aden. The ship – ultimately owned by the Greek shipowner, scheming villain, and rally-car driver Marios Iliopoulos – was underway with a cargo of a million barrels of crude from Ukraine to China in July 2011 when a contrived disaster befell it off Yemen, and a British surveyor of the ship was subsequently murdered in Aden.
Now, Mr Chellel sets out how Anthony Clake, a senior partner in the hedge fund Marshall Wace, which has US$62 billion in funds under management and is partially owned by private equity firm KKR, used his eight-digit annual bonuses to create one of the most highly capitalised survey companies in the offishore industry, and one of the most prolific claimants of government subsidies in the offshore industry, as we have previously highlighted.
Ocean Infinity’s achievements have been legion. Aside from the detentions, the fines, and the lawsuits, the company has discovered, amongst other things, a sunken Spanish galleon with a purported cargo of gold and gems lost off Colombia in an 18th century battle, an Antarctic explorer’s lost ship in the Weddell Sea from 1915, a lost Argentinean submarine, and numerous Second World War wrecks.
Now, Mr Clake also appears to have found a novel way to fund his pet robotics company – by shorting the stock of his company’s own customers. The same day that Bloomberg’s piece came out, the Financial Times was reporting how “Hedge funds profit from bets against troubled wind energy stocks”.
“Marshall Wace and quantitative trading firm Qube Research and Technologies are among those to have made millions of pounds in profits from sharp falls this year in the share prices of wind industry stocks such as Siemens Energy and Ørsted,” Rachel Millard and Costas Mourselas wrote.
The wind farm customers may not care about the company’s brushes with the law, its lack of recent public accounts, and its tax structuring, but you would have thought that they might take issue with the owner of a major subcontractor being funded by the profits of shorting their shares. Let’s see.
Finally, get the government subsidies to the Germans
In our popular “Wind Wobbles” story two weeks ago, we noted that troubled Siemens Energy faced such woes with its wind turbine manufacturing business that it might need German state aid.
That’s exactly what happened – very quickly. Siemens Energy secured €7.5 billion (US$8.15 billion) in project-related state guarantees from the German government on November 15, a few hours after the company announced almost €4.6 billion (US$5 billion) in losses for its full 2023 fiscal year, and quarterly losses approaching US$1 billion, due to continued problems in its wind turbine unit.
With around 26,000 employees in Germany, Siemens Energy is simply too big to fail, as we expected.
What makes the Wikipedia page of Mr Marinakis such a compelling read is the list of all the things of which he has been accused, but was then subsequently acquitted of and found completely innocent. As Kenneth Williams put it in Carry on Cleo (1964): “Infamy, infamy, they’ve all got it in for me”.
We covered MCT’s purchase of three large AHTS from Havila, and its subsequent sale of one of the ships to the Chilean Navy here.
Mr Clake of Ocean Infinity made the headlines in The Guardian in 2017 when it emerged that he had given £50,000 (US$62,000) “to a 23-year-old fashion student to spend on the campaign to exit the EU” during the Brexit referendum campaign. That student was Darren Grimes, now a strident right-wing commentator in the UK, who appears frequently on GB News, a channel which is funded by Sir Paul Marshall, the founder of the Marshall Wace hedge fund where Mr Clake works.