This article has been modified, please see the correction at the end
With a new partner on board, Global Offshore Services, formerly Garware Offshore, is charting growth plans. A company providing offshore support for vessels in oil and gas exploration, it plans to include expansion of its own fleet, bareboat charters and list at a future date on a European stock market.
Last week, the company sold a 31 per cent stake in its Dutch subsidiary, Global Offshore Services BV (which has two platform support vessels, or PSVs), to a German Bank, DVB, for $13.9 million, thereby valuing the Dutch arm at $45 million. The Indian parent company is valued at $25-30 million.
Aditya Garware, vice-chairman and managing director, said the idea was to have a subsidiary owning at least three vessels with a joint venture partner in the Netherlands and then seeing how to grow the company further. “We would like to grow the Netherlands entity independently. We don’t want to stop at three vessels. We are studying opportunities.” The delivery of the third vessel will happen in around nine months.
With two vessels hired to Petrobras in Brazil, the company is looking to diversify with under-construction vessels. “The third and the fourth vessel are not Petrobras-specific or Brazil-specific vessels. The other two are being built with the North Sea in mind but can be used anywhere in the world. The third one is still nine months away from delivery but we have already started talking to charters for its deployment,” said Garware.
The company does not want to focus on a particular region and wishes to widen presence in India, the North Sea, Brazil and Africa, among other areas.
Garware said the company might eventually list the Dutch arm at a European stock exchange. The tipping point for an ideal listing of an offshore company in European markets is owning six to seven vessels and an equity of $50-70 mn, he said. He did not specify a timeline for the listing. “It’s very difficult to say. We have thought about it as something we would do ultimately,” he added. "Singapore and Oslo are the two markets which know the offshore business very well. However, one can’t tap equity markets with two ships. No one is going to take you seriously.”
The two new vessels coming in to the Dutch subsidiary will cost $90 mn, plus a bareboat for $15 mn. “Then we are looking at, in the next three-four years, capital expenditure of another $100-125 mn,” he said.
Its other subsidiary, based out of Singapore, has a PSV and a barge under its fold. The barge is currently operating in Nigeria. “We don’t own anything in the Singapore company and both the assets are on a bareboat charter to us,” he explained. Such a charter is an arrangement for the hiring of a ship or boat whereby no crew or provisions are included as part of the agreement; instead, the people who rent it from the owner are responsible for these.
At 10, its largest fleet section is held under the parent Indian company. “Our Indian company holds four anchor handling tugs and all are on long-term contracts. We have four PSVs, with two more on order, and one barge which is on charter to us,” he said. “Progressively, what we have done is that our fleet size in the last one year has come down by three ships. That is mainly because we sold two very old vessels and one recently which was just three years old; just couldn’t say No to the offer. We built her for $27 mn and three years later sold for $33 mn.”
The listed Indian parent will continue to own more assets for the foreseeable future. The company’s idea is to grow both the Indian and Dutch companies, with equal focus on both. The Netherlands subsidiary will grow in size in the coming years because of proximity to lucrative markets like the North Sea. Though it has only two PSVs in Brazil at the moment, the company knows the huge opportunity present in the region.
Garware said, “It’s a little early to say if we would want to set up something in Brazil ourselves. There are opportunities, yes. There are vessels available in Brazil that we have been offered to acquire, etc. But, I think, that is a call we will take maybe six months down the line. Right now, we haven’t really considered it, as we already have a partner in Brazil and are very satisfied with the association. Brazilian law requires a local company as a partner.”
Though operating PSVs in Brazil is the most expensive among all the markets Global Offshore is present in, it also earns the company the highest rent. The company said its PSVs in the Brazilian market earns $24,000 a day. In India, this is $15,000-17,000 a day and the North Sea market gets $13,000 a day.
The company is known for its conservative approach and doesn’t believe in deploying its vessels on spot rates. “Our story has been that the expansion has been aggressive but the deployment has been conservative. It has worked for us. Most financiers are happy when they see visibility of earnings over a longer term period,” said Garware.
Global Offshore has primarily become a PSV supplying company. When asked if it would venture into making oil rigs, he said, “Not yet. Though a lot of people have tried to convince us otherwise, especially our bankers. But I don’t think that is our business.”
DVB is German bank and not a Norwegian bank as was mentioned earlier. This has been corrected. The error is regretted.