Africa Drilling May Boost Supply-Ship Rates
Stock Chart for Bourbon SA (GBB)
Bourbon SA (GBB), owner of the biggest fleet of supply and crew ships for the oil industry, expects improved demand and higher rates for vessels this year and next as explorers develop offshore projects in Asia and West Africa.
“If oil prices remain high enough for investment, we will see growth in 2012 and 2013,” Chief Executive Officer Christian Lefevre, 54, said in an interview in Paris. “We could see vessel utilization rates in 2013 at levels last seen in 2007.”
Lefevre, a graduate of the French Merchant Marine National School who took the CEO position a year ago, plans to return the Paris-based company to profit this year while expanding the fleet by about a third by 2015. Bourbon bolstered its building program last year, even amid overcapacity in the global market and delays by oil companies in starting new offshore projects, on anticipation explorers would choose more modern vessels.
The company declined 33 percent in Paris trading last year on concern the European debt crisis would hurt demand and after a first-half loss because of weakness in the dollar. The shares have advanced for the past three months (GBB) as an improving outlook for the U.S. economy and the threat of conflict in the Middle East helped push oil prices back above $100 a barrel.
Bourbon’s average vessel utilization rate was 83.8 percent in the first nine months, compared with 79.5 percent the prior year and 89 percent for the supply fleet in 2009. Deepwater vessel utilization rates will “easily rise by 5 percent” and rates also improve in shallow waters, according to Lefevre.
The company, with about a quarter of West Africa’s market, had suffered from slumping oil prices and delays in development of offshore projects, reversing a boom as crude peaked in 2008.
“The years 2009 and 2010 were hard; there has been improvement in 2011, which we would have liked to have been faster, but we are very optimistic for the coming year,” said Lefevre, who had experience in West Africa working as an officer at Compagnie Chambon, a Marseille port-towing company bought by Bourbon in 1992. The company serviced offshore platforms in West Africa operated by Elf-Aquitaine SA, later bought by Total SA.
“We used to go up the Zaire River at night in supply boats to get drilling water for the oil platforms,” Lefevre said.
In January 2011, he took over as Bourbon CEO from Chairman Jacques de Chateauvieux, who had headed the company since 1977.
Bourbon, founded in 1948 by sugar plantation families on the French island of Reunion, sold assets including sugar mills, shopping malls and bulk carriers under de Chateauvieux to focus on oil-services shipping. Its clients include Exxon Mobil Corp., Chevron Corp., BP Plc and Total SA and oil-services companies such as CGG Veritas, Saipem SpA and Technip SA. Vessels in the subsea division, whose average daily rental rates reached $33,822 in the third quarter, are used to test oil wells.
Bourbon has moved into offshore wind turbine installations, winning contracts to help lay underwater cables off England, Germany and Portugal. The company also plans to bid for orders for energy projects offshore Indonesia and Malaysia as part of its Asia expansion and possible new developments off the coasts of Angola and Ghana, Lefevre said in the interview.
In contrast, Bourbon is moving cautiously in the expanding Brazilian market, where state-controlled Petroleo Brasileiro SA is tapping the largest discoveries in the country’s history in the so-called pre-salt region in deep waters off the coast.
“We are very cautious on Brazil because of costs, regulatory constraints and difficulties getting crews,” Lefevre said. “We aren’t prepared to fight on price to win contracts.”
Brazil requires oil companies to use locally produced goods and services as the country seeks to more than double oil output by 2020, spurring companies such as Technip SA and Vallourec SA to invest in domestic equipment-making installations. Bourbon’s ships are mostly developed in China by Sinopacific Shipbuilding Group in which de Chateauvieux is an investor. Brazilian vessels are 50 percent costlier and lower quality, according to Lefevre.
Under a $2 billion expansion plan, Bourbon plans to own 600 ships by 2015, up from 436. It’s the third expansion since 2006, when the company had about 260 vessels and will lead to average annual sales growth of 17 percent in the offshore division.
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