The deepwater OSV market in the US GOM is becoming a “tale of two groups” of vessel supply. The newer, more capable, and most efficient deepwater OSVs are in high demand with sustained long-term contracts. On the side of the market are the oldest, least capable, and least efficient OSVs that are chartered to fill spot requirements and sparingly chartered on longer-term.

While the market continues to be robust with demand keeping vessel utilization in the 90%+ range, there is not any meaningful and sustained incremental demand. There are spurts of spot vessel demand which will continue through the spring and summer seasons. However, the number of active deepwater floating drilling rigs has and will remain stagnant between 20 and 22. For these reasons, sustained incremental vessel demand is not likely to rise.

There had been an anticipation for incremental demand and as a result, many of the oldest and most inefficient (yet still deepwater capable) OSVs were reactivated. This was surprising because no more than a few of these older vessels were expected to ever be reactivated after being cold-stacked for more than eight years. But in fact, many more than just a few of these old vessels have been reactivated and put into service.

What is resulting is an oversupply of older, less capable, much less efficient deepwater OSVs that are the least desirable among charters. These vessels are also the last to be chartered and the first to released. Though spot charter rates for these older boats have been relatively robust, charter terms are short and any opportunity to supplant an older OSV with a newer one are quickly taken.

How this evolves after the favorable markets during the spring and summer will need to be monitored. A persistent oversupply of older, less capable OSVs will hopefully result in those vessels being marketed outside of the US GOM or to other offshore industry support.