DNB ASA and Nordea Bank AB, two of the world’s biggest lenders to the offshore industry, are talking with drillers about easing loan terms as they face a market slump expected to last at least two more years.
The banks and some of their clients in the industry are discussing delaying loan payments and covenant changes in return for measures such as asset sales, equity issues and dividend cuts, DNB and Nordea’s heads of shipping and offshore said in interviews at the Nor-Shipping conference in Lillestroem Tuesday.
“All stakeholders must make their contributions to get through a difficult market,” said Hans C. Kjelsrud, Nordea’s head of Shipping, Offshore and Oil Services. “Shareholders must contribute, banks must contribute, and maybe some rigs and assets must be sold.”
The collapse in crude prices last year has led oil companies to cut spending, reducing demand for drilling services as a glut of new vessels was already weighing on offshore rig companies. Charter rates for the most advanced vessels have dropped to below $300,000 a day from as high as $650,000 in the middle of 2013, according to Pareto Securities.
Drillers such as Seadrill Ltd., Transocean Ltd. and Ensco Plc have over the last months cut dividends, scrapped or idled rigs, delayed new deliveries and renegotiated contracts as day rates plummet.
“The industry is going through a very difficult period,” said DNB’s head of Shipping, Offshore and Logistics, Kristin Holth. ‘You have to wait at least until 2017 to see any improvement. 2016 will be a demanding year.’’
DNB and Nordea declined to name specific clients or loan agreements.
“It’s a package, it’s a give and take,” Holth said. “Everyone’s preparing in a very constructive way.”
Seadrill, the rig company controlled by billionaire John Fredriksen, said last week it has agreed to a leverage covenant waiver with its banks. In an interview with Dagens Naeringsliv last week, Fredriksen said the rig market would need oil at $80 for the business to pick up.
Benchmark Brent crude traded at about $65 on Tuesday.