Monday, May 27, 2013

Hornbeck Offshore Investor Presentation - May 2013 ($HOS $CNRD)

Hornbeck Offshore gave a presentation that's worth reading if you're interested in oil supply or Gulf of Mexico oil services capex [presentation, appendix, transcript]. Some highlights from the transcript:

One of the things we noted on our last call is a bit of a bright spot or so, favorable surprise is to see how strongly some of the independents are coming back into the Gulf, conventional wisdom right after Macondo is that it was going to be a major oil company game with the new owners’ rags in the high risk profile, but looks like the independents are going to be able to get back into the game and that’s good for us with more customers.

And since then, we now are above pre-Macondo levels with 37 active rigs. Conventional wisdom is that we’ll have as many as 60 active floating rigs in the Gulf by the end of 2015, that’s 23 incremental rigs at a 3 to 4 a boat to rig multiply that’s 75 to 90 more vessels on the margin needed and there are only 62 under construction today including our 24.

[Regarding the Jones Act] If anything we feel that Jones Act is getting stronger. It’s not a trade protections act, it’s a homeland security and national security act, it was the fourth act passed by the Constitutional Congress in 1789, and it’s only gotten stronger overtime. [...]If anything, the Jones Act – the government agency that is charged with enforcement of it has only recently doubled down on public rhetoric about even going after the 42 foreign flagged MPSVs that are operating in the Gulf today...
Then, from the presentation on page 41 - OSV dayrates have hit record highs. You would suspect that to be bullish for OSV repair / maintenance vendors in the Gulf. Higher dayrates and utilization means that the margins your repair shop makes are less of a concern than proximity, speed, and reliability.

From the appendix - page 61, see how one tank barge (100k bbl which is big) equates to 162 rail tank cars or 439 tank trucks. Also good chart on 64 of retiring single hull tank barges. Should be quite a bit of capacity being scrapped in 2013 and 2014.


John said...

Interesting stuff.

A couple of thoughts:

- In the presentation, there is no mention of how fracking will affect the supply/demand of offshore drilling.

- The comment on Jones Act is rather self-serving. Why is it a national security issue? Worried about bugging inside the hull?

CP said...

Fracking for oil does not have the ability to replace depleting production in a meaningful way. There are individual platforms in the GOM that produce almost as much as the entire Bakken, for example. The GOM produces 4x as much/day as the Bakken and its short lived wells.

The Jones Act is the only reason a U.S. shipbuilding industry still exists.