One of Norway’s deeply troubled offshore firms, Havila Shipping, managed to avoid being put into bankruptcy on Monday, but the crisis in the offshore service sector is far from over. “We have to roll up our sleeves and keep on working,” Havila chief Njål Sævik told Dagens Næringliv (DN).
The dive in oil prices has hit not only the oil companies themselves but also the firms that serve them, like Havila, with its large fleet of offshore vessels. Many are now in lay-up, because there’s simply no work for them.
At the same time, reported DN, Havila Shipping has debt of NOK 5.6 billion. It narrowly avoided being put into bankruptcy by its banks, which have lent Havila around NOK 4.5 billion, when other creditors owed NOK 1.1 billion agreed on Monday to go along with a bail-out plan demanded by the banks. They in turn have agreed to extend repayment dates on NOK 3.2 billion in debt until 2019. Another 1.6 billion of debt is to be cut by selling a third of Havila’s vessels and converting debt to capital.
Havila’s banks include DNB, Danske Bank,, Swedbank, Nordea, Garantiinstituttet for eksportkredit (Giek), Sparebank 1 and DVB Bank. Havila, based in Fosnavåg on Norway’s northwest coast, has operated a fleet of 27 vessels within subsea construction, anchor handling, platform supply and multi-field rescue and recovery.
Havila’s boss, Sævik, is relieved by the rescue plan, while 800 jobs were also saved, at least for now. He told DN the company can thus carry on until November 2020 but there would be no celebration. “No, no, there are many more meetings,” he told DN. “We can’t rest on our laurels.”
Several other shipowning companies specializing in offshore vessels are in trouble, too. Farstad Shipping, for example, reportedly is on the verge of a bailout by shipowner Kristian Siem, who has been urging more consolidation in the industry. His Siem Offshore is believed to be ready to take over Farstad.
Rem Offshore, which has a fleet of 18 seismic vessels used in oil exploration, was taken over by Solstad Offshore, with help from Kjell Inge Røkke and his Aker concern. DN reported how Island Offshore and Olympic Offshore are both in negotiations with creditors and in the midst of a desperate attempt to secure new capital to survive. Eidesvik Offshore is also moving into negotiations with its banks in order to survive the downturn in the offshore sector that’s likely to stretch into 2020 or 2021.
Shipowner Åge Remøy, who founded Rem Offshore in 1996, told DN late last week that he’s never seen Norway’s offshore industry as bad off as it is now. “We sit here and wonder what’s happening,” he told DN as he gazed at idled ships in layup on the coast of Sunnmøre. “It wasn’t long ago that all the ships were in full swing. In 2014 everything was great. Now it’s just the opposite.”
‘Everyone is to blame’
Wenche Nistad of state-controlled Giek, which has guaranteed NOK 27 billion of the crisis-hit offshore branch’s debt, told DN that she thinks the crisis is much worse than earlier thought and that there may be other bankruptcies. Many of the offshore firms have lost all their own capital and have collective debt of around NOK 100 billion. Restructuring and recapitalization is taking much longer than anticipated, and all creditors have to agree.
“Everyone is to blame for this,” she told DN, “both those who made the investment decisions and those of us and the banks that went along with them. Oil companies chartered in more rigs than they needed (before oil prices fell). All the new rigs led to expectations of rising demand for supply ships. Shipowners and shipyards were eager to build more, better and bigger ships.” Now the markets for everyone have collapsed.
“There also are various views on reality,” Nistad said. “Some thought things would be better in 2017.” She now thinks 2017 will be worse.