The offshore market.in 10 minutes

Transcription

1 May 2011 The offshore market.in 10 minutes Mare Forum Italy, May 2011 Wilhelm Magelssen Direct: Mobile: Please refer to important disclosures at the end of this document

2 The oil price is approaching boom levels.. The oil price has only been higher in 2008 Strong global oil demand growth Political unrest Strong global GDP growth Falling oil inventories Tight non-opec supplylong term supply fears Source: Factset 2

3 ..which has caused oil majors to raise E&P spending guidance Offshore supply rates are correlated with oil companies exploration and production efforts Latest announcements of E&P spending budgets point to 15% growth in Planning price significantly lower than present oil price - Petrobras aims to increase spending by ~30% Year over year change in E&P spending After the decline in 2009, 2010 again witnessed growth in E&P spending Source: Pareto Research, Company reports 3

4 We are in a long term growth market Demand for energy increase The world`s energy consumption is set to grow more than 30% towards 2030 New discoveries have been below productionlevels since 1980 Size of new discoveries is falling steadily The production from existing reserves looks set to drop by almost 2/3 in the next 20 years The need for new reserves equals about 160 bn barrels the next 10 years and double of that the next 20 years Growth to come from offshore production Hydrocarbons (oil/gas) will still make up approximately 60% of the consumption Natural gas will emerge as one of the fastest growing sources of energy Offshore production is expected to grow 3% p.a, onshore will be flat Deepwater oil production looks set to more than double in the next 20 years 4

5 Old units need replacement industry is calling for investments By 2012, 41% of the jack-up fleet will be more than 30 years old. There may be a need to replace as many as 150 rigs in the next 5 years. Only ~50 new rigs have been ordered so far. About 20% of the supply vessels are older than 30 years. The majority of ships stacked or trading in the spot market are older and smaller vessels. Half of the high end seismic fleet was built in the 90s. These are already becoming technically obsolete. 5

6 Stock market is leading the way Oil service shares on the Oslo Stock Exchange are only ~10% off the previous peak The stock market is forward looking by nature and is already pricing in growth in both values and earnings Source: Oslo Stock Exchange 6

7 Rates and values in underlying markets are still well below peak The values have more than 40% upside to the previous peak (2007/08) The dayrates have more than 70% upside to the previous peak (2007/08) If the oil and stock markets tell us anything, it is time to increase your offshore exposure 7

8 Where are we in the cycle? It pays to invest as early as possible Investments at the peak take longer to pay off In the middle of recovery Heading towards growth and boom Slowdown Recovery Slowdown Recovery Boom Growth Boom Growth The returns decline. The clock is ticking. 8

9 Summary The oil price is well above $100/barrel and heading towards old levels Oil related stocks are only 10% below historical peak levels -> the financial markets are expecting a solid upturn The oil services markets are set for a long period of growth 9% annual growth in the past 20 years, an accelerating oil price gives boost (the oil industry s planning price is $76/b for 11 ) Need for replacement of old units Newbuild prices and secondhand values are still well below previous peak levels With a long upturn ahead, this provides excellent investment opportunities The typical upturn lasts 7 years or more, we are only one year into the current Early investments pay off 9

10 Contact Details Peter W. Wallace Tlf: Mobil: Pareto Project Finance AS Dronning Mauds gate 3 P.O. Box 1396 Vika 0114 Oslo Nicolai Heidenreich Tlf: Mob: nicolai.heidenreich@pareto.no Cato Hellstenius Tlf: Mob: cato.hellstenius@pareto.no Christian Løken Wilhelm Magelssen Rolf Zapffe Kristoffer L. Sandaker Tlf: Tlf: Tlf: Tlf: Mob: Mob: Mob: Mob: cfl@pareto.no wcm@pareto.no rolf.zapffe@pareto.no kristoffer.sandaker@pareto.no Singapore Office Mas Gram Tlf: Mob: mas.gram@pareto.no Petter Haavik Tlf: Mob: petter.haavik@pareto.no Disclaimer These materials have been prepared by Pareto Project Finance AS and/or its affiliates (together Pareto ) exclusively for the benefit and internal use of the client named on the cover in order to indicate, on a preliminary basis, the feasibility of one or more potential transactions. The materials may not be used for any other purpose and may not be copied or disclosed, in whole or in part, to any third party without the prior written consent of Pareto. The materials contain information which has been sourced from third parties, without independent verification. The information reflects prevailing conditions and Pareto s views as of the date of hereof, and may be subject to corrections and change at any time without notice. Pareto does not intend to, and the delivery of these materials shall not create any implication that Pareto assumes any obligation to, update or correct the materials. Pareto, its directors and employees or clients may have or have had positions in securities or other financial instruments referred to herein, and may at any time make purchases/sales of such securities or other financial instruments without notice. Pareto may have or have had or assume relationship(s) with or engagement(s) for or related to the relevant companies or matters referred to herein. The materials are not intended to be and should not replace or be construed as legal, tax, accounting or investment advice or a recommendation. No investment, divestment or other financial decisions or actions should be based solely on the material, and no representations or warranties are made as to the accuracy, correctness, reliability or completeness of the material or its contents. Neither Pareto, nor any of its affiliates, directors and employees accept any liability relating to or resulting from the reliance upon or the use of all or parts of the materials. 10