Clarksons Platou Securities has identified a "compelling" market in OSV owners' shares after a summer sell-off.

Analysts Turner Holm, Fredrik Stene, Tobias Eckbo and Sven Sele also said in the company's quarterly oil services report: "After a brutal sell-off in August, OSV stocks now reflect asset values far below indicated levels by shipbrokers for secondhand market sales.

"As far as we know the gap between the equity market and secondhand market has never been bigger."

The report said that for equity market values to make sense, rate levels would need to fall, but this looks unlikely.

"We view current values as compelling," the analysts added.

Clarksons Platou said spot rates in the North Sea, though volatile, have shown much improvement in 2019.

So far, levels have averaged about $14,500 per day or 40% above the same period in 2018.

The second quarter of 2019 represented the strongest quarter for spot rates since 2014, it added.

Further along the road to recovery

The analysts said: "We often hear investors say the OSV market is 'the most oversupplied' of all offshore asset markets. The facts suggest to us that certain OSV segments are farther along the road to recovery than almost any other offshore category.

"The sector has been benefiting from a gradual ascent in offshore activity, though growth is uneven across segments."

High-end segments are recovering faster, the company believes. Demand for the top-spec platform supply vessels of more than 3,000 dwt is expanding at 8% year-on-year, while the low-end units below 3,000 dwt are growing at a slower 4%.

"With higher growth and higher utilisation, high-end PSVs are best positioned for rate increases," Clarksons Platou said.

Fleet size stable

"Across all OSV segments fleet expansion is at or near zero."

It added: "A notional orderbook overhangs the supply side, but the industry expects few of these vessels to actually deliver as many newbuilds have sat at shipyards for five years versus two to three years for a typical delivery.

"This time gap illustrates the reality that most remaining vessels are 'orphans', whereby the companies that originally ordered them pre-crash either no longer exist or do not have the financial resources to take delivery. The near total absence of bank financing for OSVs without contracts makes this issue worse."

The report added: "Some owners are scrapping vessels that have been laid up for multiple years. With almost no orders in recent years, fleet growth should stay very low going forward."

Low secondhand vessel prices also mean that resales of orphan newbuilds would lock in losses for yards in many cases.

"We do think some orphans will gradually deliver, mostly the high-end PSVs (4,000 dwt) and AHTS (+18,000 bhp)," the analysts said.

Idle vessels a "critical challenge"

Idle capacity remains a critical challenge facing the OSV market, the report added.

It said that gaining pricing traction for an active vessel can be difficult if an idle vessel will do the job for a low price in order to re-enter the market.

But this situation is becoming more rare as demand rises and the number of idle vessels has declined.

Clarksons Platou believes the best vessels have largely been reactivated.

The number of PSVs that are less than 15 years old and stacked has fallen by 67% since late 2017.

For ships older than that, the drop is only 10%.