COLUMN | Tidewater and Edison Chouest: Regina monologue illustrates differences [Offshore Accounts]
In July 2020, Regina Mayor, Global and US Head of Energy with KPMG recorded an interview with Quintin Kneen, President, CEO, and Director of Tidewater, which is available as a podcast here. It is well worth listening to, because, firstly, you can learn how to pronounce Mr Kneen’s name correctly, and, secondly, you can learn how this “resilient and decisive” leader has a new vision for Tidewater and the whole offshore industry.
Harnessing the power of technology – again
Like MMA Offshore (here), and P&O Maritime Logistics (here), Mr Kneen wants Tidewater to “harness the power of technology” to build a better, lower cost company to weather the downturn. It is clear that digitalisation, like subsea robots in offshore survey (here) and hybrid battery power for OSVs (analysis coming soon to Baird), is a now new battlefield in the struggle for competitive advantage amongst vessel operators. Expect the Scandinavian technology players BASS Software, with Bassnet, and Spectec, with AMOS, to expand their offerings to OSV owners to compete with Tidewater’s SAP platform, and with other owners’ proprietary systems.
“We have been a real early adopter on technology in our own business, even beginning as early as 2010… leveraging technology to ensure our shore-based footprint is as light as possible and as flexible and scalable as possible,” Kneen commented. Tidewater has been an enthusiastic adopter of systems from SAP, the German ERP software group, with an iPad-based system of inventory management, order receipt, and purchasing for vessels. “By going to an app-based, an iPad-based interaction with the vessel, it really cleans up the administration required onshore,” the CEO observed.
Shrink the shore footprint
Alarmingly for Tidewater’s already shrunken shore management, Mr Kneen sees this as an opportunity for his app-based management system to raise efficiency by reducing headcount further.
“I am actually thinking about what type of shore-based footprint we need today, because of the ability to leverage technology.” He observes that the company is “a lot more nimble than it was five years ago,” but we might deduce that this is probably because Tidewater now operates only a fraction of the active vessels than it did at the start of the industry downturn.
“We had to adjust our business model to a shrinking offshore sector” after 2014, Kneen conceded to Ms Mayor.
Further fleet shrinkage
We have already seen how Tidewater has shrunk through the downturn (here), little realising that the company had sold not just the 10,439kW, 180-tonne bollard pull, AHTS Highland Courage for scrap in the third quarter, but also her sister anchor handler Highland Valour, as well as three former Gulfmark PSVs (Highland Bugler, Highland Challenger and Highland Rover) which had been laid up for four years in the UK, and the 4,000DWT PSVs Art Carlson and Robert H. Boh (built 2003) as well, also dispatched to the breakers after four years of lay up in Louisiana.
After his “sale of the century” Mr Kneen now sees more market consolidation and mergers and acquisition as the next step of Tidewater’s journey as the company finally returns to growth.
“Every cycle is different” he opines. “We got to a point in late 2019 where the supply and demand imbalance had started to balance itself”.
“This recent pullback has been about 25 per cent of activity” Mr Kneen said, and that he expected the current downturn would last a year or 18 months before profitability improves for Tidewater and the rest of the sector. “It has definitely been a very difficult cycle”, as we can all agree.
Offshore wind and the future
“A big discussion in our industry is when is peak oil demand” asks Mr Kneen, before skipping to the hot, new green future. “There is a renewed focus from all of the countries around the world on developing a sustainable energy platform as a part of their overall energy compliment”.
“There’s a proliferation of offshore wind”, he observed. “It is a very exciting time for the offshore energy space” he says, as we have also observed here.
Chouest scores first windfarm win in America
Unfortunately for Mr Kneen and Tidewater, last week, his domestic rival, privately-owned Edison Chouest, announced (here) that it has secured the long-term charter of the first Jones Act-compliant windfarm service operation vessel, to be built at Chouest’s own shipyards, and American-flagged and manned. The DP2 SOV will be 80 metres long and will accommodate 60 personnel onboard. Ørsted and its partner Eversource will charter the ship long-term to support their Revolution Wind, South Fork Wind and Sunrise Wind offshore wind farms, off the Atlantic seaboard.
Edison Chouest boasted that “crew will enjoy access to passenger staterooms with private bathrooms, an exercise room, cinema/training room, internet café and multiple lounges. The SOV will include a below deck warehouse to palletize storage for wind farm tools, components and supplies with step-less access to an elevator. A daughter craft, with associated launch and recovery system and hydraulic height-compensating landing platform, will also be installed for infield turbine repair operations. In keeping with the environmental goals of the offshore wind industry, this vessel will operate on diesel-electric power that meets EPA Tier 4 emission standards and will feature proprietary ECO variable frequency drive to reduce greenhouse gas emissions.”
Mr Kneen is right to identify offshore wind as a major new growth area for all vessel owners. Chouest has now scored first blood in the American windfarm industry with this Ørsted contract. Can Tidewater, Seacor, Harvey Gulf and Hornbeck fight back?
In the podcast Mr Kneen holds his silence on what Tidewater will do to meet surging demand in the wind sector both in the US and internationally. As we reported here last week, with Cemre Shipyard in Turkey launching DEME’s first newbuild windfarm support SWATH vessel Groene Wind, this is the one sector of offshore where investment is being directed.
Chouest wins in Guyana too
The same week also saw Chouest scoop another major success, this time with ExxonMobil in Guyana. Chouest signed a contract with Damen (here) for two 120-tonne bollard pull ASD offshore terminal tugs for the export tanker berthing at Exxon’s deepwater FPSOs in the South American state, fitted with Fifi1 and oil spill response equipment. Chouest will build the ships to Damen’s 5016 design at its shipyards in the USA, like the windfarm vessel.
Damen said that the tugs will “have a hybrid system that will be engaged when loitering…. To facilitate the hose maintenance, the vessel features a 27-metre aft deck with hose-flushing equipment and a full width sump. The tugs will also carry a workboat to assist in hose-handling operations.” More disappointment for Mr Kneen that a competitor should take this long-term, newbuild contract in a burgeoning new market.
Tidewater gets incremental with Hermitage crewboat purchase
But the recent week has seen evidence of Mr Kneen’s newfound strategy. Norwegian broker Fearnleys announced that Tidewater has bought the eleven small Petro Craft crewboats from the bankruptcy of Hermitage Offshore for US$5 million. Previously operated by Petro Services in Angola and Congo, these small, unexciting vessels will strengthen Tidewater’s position with Chevron, its largest and oldest client in Angola, as half a dozen of them were on charter out of Cabinda to the American supermajor.
Notably, however, Tidewater didn’t buy the ten modern, Norwegian-built PSVs which Hermitage was also auctioning in its bankruptcy. Instead, these became the property of its two main creditor banks, DNB and SEB, who have formed a new company called Pearl Bidco to take over the ships. You can read which of the great and the good of the offshore industry were Hermitage’s biggest creditors here.
Tidewater also reactivated the laid-up Troms Mira, a 2015-built, DP2, 4,100DWT PSV, against a contract in the North Sea. Step by step the market is recovering, and step by step Mr Kneen is clearly winning confidence in an incremental strategy, as his dialogue with Regina Mayor reveals.
Background and downloads
P&Os Maritime’s Head of Information Technology set out his thoughts on industry digitalisation here.
Readers who want P&O Maritime’s P&O Safety Observation Card app can download it here from the App Store.
You can download the full transcript to the KPMG podcast by Mr Kneen here.
The full offshore scrap report to the third quarter 2020 written by Robin des Bois, including FPSO, survey and safety standby vessels going to be made into razor blades, is available for download for free here.