COLUMN | More of the same: Tidewater closes Solstad deal; BW Offshore sells to Century; Acta and Bernhard Schulte order CSOVs; Scottish Ferries Fiasco [Offshore Accounts]

Tidewater’s Pac Man-like expansion continues, and the market loves the strategy. Tidewater stock finished up 10 per cent on the week on Friday, July 7, at a record high of over US$58 per share, after the supply vessel operator closed the purchase of 37 platform supply vessels (PSVs) from Norway’s Solstad Offshore on July 5.

Tidewater now has a market capitalisation of close to US$3 billion, making it both the biggest offshore player in terms of fleet size, as well as the most valuable. Solstad shares fell five per cent on the week, reflecting the loss of some of the company’s most lucrative vessels in a self-harming move driven by its short-sighted banks, which leaves it a pureplay anchor handling towing supply (AHTS) and construction vessel operator.

Tidewater raising cash at ten per cent

The purchase of the Norwegian vessels was finalised after Tidewater completed a US$250 million bond offering in the Nordic market on July 3, paying over 10 per cent interest, and raised another US$325 million in loans from DNB Bank and other lenders on June 30. DNB Bank is Norway’s largest financial services group, and is 34 per cent owned by the Norwegian government. DNB also holds a five per cent shareholding in Solstad, having previously converted some of the loans it made to Solstad into shares in the company in 2020 when the company restructured.

I am now half-expecting to read of Solstad merging with DOF to create a new national champion, as both companies have recently restructured, and there is a good strategic fit between them. However, DOF recently rebuffed efforts by Kristian Siem, who also has interests in Siem Offshore and Subsea 7, to acquire it ahead of its relisting on the Oslo Stock Exchange, as we reported last month.

The purchase price paid by Tidewater consists of the previously announced US$577 million base purchase price for the vessels, along with an initial US$3 million purchase price adjustment, that will be adjusted for bunkers and other consumables within the next fourteen days.

Where does that leave the industry?

With Bourbon still a ward of its creditors (and possibly subject to sale or breakup) and privately held Edison Chouest struggling behind closed doors with its own balance sheet, the road appears open for Tidewater to continue its march to raise PSV charter rates higher than the current leading edge rates of US$30,000 per day. When long-term charter rates hit US$40,000 per day, you can expect to see a flood of newbuilding vessels ordered. Indeed, at Nor Shipping, some of the Norwegian designers unveiled their first new designs for offshore vessels since the industry downturn ravaged the market in 2014.

In the meantime, Tidewater might like to take a swing at United Offshore Support (UOS), the German-based owner of a fleet of twelve 180-tonne bollard pull anchor handlers, the company having emerged restructured from the wreckage of Hartmann Logistik in the downturn. UOS has now been put up for sale by its private equity owners.

With only ten large AHTS, which it acquired in its takeover of Swire Pacific Offshore last year, Tidewater would face far fewer anti-trust and competition issues buying the UOS fleet than attempting to buy more PSVs, where it already has a dominant market share in the North Sea after the Solstad deal.

Alternatively, perhaps UOS will be purchased by Siem Offshore, which already owns nine high-bollard pull AHTS itself, and where its 33 per cent shareholder and chairman Kristian Siem has made it clear that he sees offshore industry consolidation as necessary.

BW Offshore’s sale of the century

Another Norwegian company carrying out its own mini “Sale of the Century” is floating production storage and offloading (FPSO) vessel specialist BW Offshore, headquartered in Oslo and controlled by the Sohmen-Pao shipping dynasty.

In the last six months, BW sold four of its operational FPSOs, with a fifth, Abo FPSO, confirmed to be under sale discussions with its charterer, Italian oil company ENI, in Nigeria, after its long-term contract ended in May.

From a stock market point of view, BW Offshore has been a dog, one of the few offshore players whose shares are lower today than in 2021 or 2019, although it has paid out a consistent dividend of total US$11 million per quarter. Its most recent strategy presentation is here.

After these sales, BW will own only three FPSOs in operation, and one under conversion for the Barossa project in Australia.

Espoir springs eternal… until sold

In June, BW sold the FPSO Espoir Ivoirien to its charterers Canadian Natural Resources (CNR) for US$20 million on contract in Espoir field in Ivory Coast. The unit has been producing for CNR there since first oil in 2002, and the field has been in gradual decline since 2006.

Earlier this year, BW sold the FPSOs BW Opportunity in lay-up in Malaysia for US$125 million and the 1994-built BW Athena in lay-up in Rosyth in Scotland for US$5 million without naming the buyers. The company disclosed that there was an engineering and design project underway to redeploy the unit in South-East Asia, and that BW was discussing contract terms for the provision of operations and maintenance services to the buyers for a five-year transitional period.

Two more BW units have also been disposed of. FPSO Polvo in Brazil was sold to sister company BW Energy for US$50 million with final payment deferred until around June 2024 when the unit should be back in oil production mode. BW Energy will upgrade and redeploy the FPSO on the Maromba field, located in the southern part of the Campos Basin. Petróleo Nautipa, which came offhire in Gabon last year from Vaalco, will finally be decommissioned and scrapped.

Ken Etete of Century

The sale that caught our attention, however, was the disposal of the FPSO Sendje Berge after its contract ended in Nigeria, and production stopped in May 2023. Last week, BW Offshore closed the transaction for the sale of the FPSO to a local producer, the Century Group of Nigeria, for a total consideration of US$15 million. Following the transaction, BW announced that the buyer had assumed responsibility for operation of the unit. Sendje Berge had completed more than 18 years on the Okwori field since it commenced operations there in April 2005 for Addax Petroleum.

When we clicked on the Century Group website, we noticed something familiar. The company’s chief executive and chairman, who “provides visionary leadership to the functional subsidiaries in Century Group,” is none other than Mr Ken Etete. Mr Etete’s company website says that “his career spans over twenty years, with a proven track record of competence and innovation during his time at Wilbros and Bluewater.”

Etete… that name sounds familiar?

Etete, Etete? What Etetes do we know?

Oh yes, we remember – one Dan Etete, the “very famous” (notorious, some might say) former Nigerian petroleum minister from 1995 to 1998, a man whose close ally apparently admitted receiving US$400 million as a consultancy fee relating to a certain offshore deal, according to Sahara Reporters.

This Dan Etete’s somewhat conflicted dealings over deepwater offshore block OPL 245 catapulted him into the news, as the eventual buyers of the block, Shell and Eni, faced some lawsuits about the circumstances of their purchase, and what happened to the US$1.3 billion in funds they paid for the block, lawsuits, which we should stress, that they successfully defended in Milan.

No wrongdoing is implied by mentioning these cases. Reuters provides excellent coverage of the timeline of the OPL 245  events, which began under the military dictatorship of General Sani Abacha.

So, is there a connection between Dan Etete and Ken Etete the buyer of the BW Offshore FPSO? Or is this just a chance case of two unrelated men with the same family name? This being Nigeria, what do you think?

Our good friends at Vanguard newspaper in Nigeria confirmed in 2018 (here) that there is indeed a connection. The Century Group had issued a statement to the publication after Ken Etete first appeared on the radar as the leader of his major Nigerian oil and gas group, a statement denying that Ken Etete was Dan Etete’s son. However, as per Vanguard:

“The fact remains that Mr Dan Etete is the biological uncle [our italics] of Mr Ken Etete and therefore a close relative. According to Mr Ken, this blood relationship is cherished and cannot be sacrificed on the basis of unproven allegations. Mr Ken Etete is not a member or director of Malabu Oil and Gas and did not play any role or participate in any transaction in relation to OPL 245 nor did he benefit directly or indirectly from the proceeds of the transaction between Malabu Oil and Gas, Mr. Dan Etete, or Eni and Shell.”

One can’t hold a family connection against anyone. Indeed, who today doesn’t have a slightly disreputable uncle, or a cousin with a bit of history? However, we expect BW Offshore will have done all the necessary due diligence on the buyers, and we look forward to reading more about the successes of the Century Group now that it has bought the FPSO for onward deployment in Nigeria.

As Vanguard concluded back in 2018: “[Ken] Etete is not engaged in shady or corrupt practices. It is noteworthy that Etete is listed as number seven on the prestigious Choiseul 100 Africa 2016: Economic Leaders of Tomorrow, and a host of other awards that are public information.”

More newbuild SOVs

Two weeks ago we reported on the first newbuilding subsea vessel in nearly a decade, as Norwegian company Agalas ordered a versatile dual-fuel vessel at Sefine Shipyard in Turkey. Now normal service has resumed with yet another wave of newbuilding commissioning service operation vessels (CSOVs) for offshore wind farms.

It was only in May that we ran a piece titled “More more more” about Purus ordering two firm CSOVs and two option vessels from Vard, whilst Edda Wind ordered four, and North Star two firm plus two optional windfarm service vessels.

More, more, more, indeed. The last fortnight has seen Dutch owner Acta Marine sign newbuilding contracts for two more methanol dual-fuel CSOVs to be built in Turkey, as it declared the options it held in addition to the two existing firm orders it had already placed at the same yard. The first two ships are scheduled for delivery in the second half of next year, whilst the newly confirmed optional vessels will most probably enter service at the end of 2024 and in early 2025.

The two new CSOVs have contracts in hand already, as Acta was recently awarded a charter with German utility RWE to put the vessels to work supporting turbine commissioning on the British Triton Knoll and Sofia offshore wind farms, which are under construction in the North Sea.

Now Bernhard Schulte orders too

German owner Bernhard Schulte also announced last week that it was joining the throng of owners ordering CSOVs. Hamburg-based Schulte confirmed that it had signed a contract with Norway’s Ulstein Verft for the design and construction of two CSOVs built to the latter’s SX222 design for delivery in 2025. But wait; there’s more.

The deal also includes options for Schulte on four additional ships of the same design. Each will be 89.6 metres long and will have hybrid battery propulsion as well as being “methanol-ready” like so many vessels in this segment.

Like Acta, Edda Wind, North Star, and Purus, Schulte is already a player in the wind sector and currently operates a fleet of three windfarm service vessels. The company has built before at the Norwegian yard, in 2015 in 2018, and contracted Ulstein for the upgrade of its windfarm vessel Windea Leibniz, with the work being completed earlier this year.

Finally, more fiasco with those Scottish ferries

Meanwhile, there are more shenanigans in Scotland as yet more evidence emerges that the government’s decision to build two long-delayed ferries at Ferguson Marine on the Clyde has been an expensive and scandalous failure. This story is never out of the news, and must rank as one of the worst newbuilding contracts ever, anywhere in the world.

After Nicola Sturgeon, Scotland’s former chief minister, who presided over the contract award, was arrested by police and questioned over her party’s funding arrangements, the political heat has only been dialled up some more. It transpired that a report from consultants paid for by the government into the delays and the US$200 million of cost overruns on the ferry contracts had itself cost over US$750,000, just some of over £5.5 million (US$6.8 million) spent on consultants by the Scottish government on trying to sort out the nation’s troubled ferry services, according to The Herald.

More the fool us for offering our advice in these pages for free!

Jim McColl got a nudge and a wink

Now the BBC has obtained newly-released documents that scrutinise the process to contract the ferries at Ferguson, particularly how utterly flawed the process was in the first place. It has emerged that Scottish ministers and civil servants checked that Ferguson would be ready to prepare a bid for the ferries before the formal procurement process began in 2014.

Monaco-based millionaire Jim McColl, who owned the yard at the time but has conspicuously failed to recapitalise it or rescue it from bankruptcy, “says he was offered advice to ensure his firm was ‘well positioned’,” according to the BBC. The advice was presumably what the other, more competent but non-Scottish yards bidding did not receive.

Ferguson Marine was nationalised when it went bust trying to build the ships, and the first ferry, Glen Sannox, is now seven (?) years late.

Tens of millions more cost overruns

Then, at the end of June, it emerged that there were yet more problems with the hulls at Ferguson. Surprise! These will result in another £20 million (US$25 million) in extra costs for the Scottish taxpayer… and another delay of up to six months in the delivery of Glen Sannox, as per Yahoo! News. Inspections have found further faults in the build quality of Glen Sannox, requiring the replacement of some unstated equipment and some pipework by the yard.

Glen Sannox had been due to start work servicing the Scottish Islands this autumn under its very revised, very late schedule, but unfortunately, the ship is now set to complete sea trials and be delivered from Ferguson only next spring. At least it now has proper glass bridge windows, rather than the embarrassing, painted-on Potemkin Village-style windows with which it was launched.

Hull 802 is Late Oh Two

As for the second vessel, as yet nameless Hull 802, this was supposed to enter service in March 2024 under its much-revised schedule, but what do you know? The yard reports that the delivery of Hull 802 is now pushed back to November of next year, with Ferguson hoping to meet what it describes as “a contract backstop” of the end of December 2024. The fact that costs on these two ships are now close to US$375 million makes a mockery of that concept.

Jim McColl has even stated that the second hull should be scrapped rather than completed, and a whole new ferry could be built more cheaply and efficiently elsewhere, like at the Polish and Turkish yards that lost the original bid.

No wonder the Orkney Isles are considering the possibility of moving to self-government as an autonomous Norwegian territory.

We will keep you posted. This whole sorry tale is a case study in Sunk Cost Fallacy and in the perils of awarding public contracts to local champions. Ms Sturgeon has a lot of explaining to do.

Background Reading

The shareholders listing for DNB is here and Solstad’s is here. Aker Capital is the largest shareholder in Solstad, with just under 25 per cent of the shares.

Whilst we watch the SOV newbuilding market soar to new heights, we should also reflect on safety. The sight of this bollard being flung into the sky at high speed during the launch of Edda Goelo in 2022 in Spain is truly terrifying.

As a starting point on the Scottish Ferries Fiasco, see our first coverage from last November for background, and our update this March on the Scottish Parliament’s Public Audit Committee report into the whole sorry affair.

Click here for more news stories, feature articles, and vessel reviews as part of this month’s focus on offshore vessels.