Norwegian shipowner SD Standard Drilling (SDSD) has painted a grim picture for offshore support vessels in the beleaguered North Sea market.
But it sees rays of hope for owners in the third quarter.
The platform supply vessel (PSV) and VLCC player said the sector had "rapidly come to a standstill" due to Covid-19 restrictions and oil price falls.
This has reversed a potential deficit of vessels required this summer to an oversupply, it added.
SDSD said: "The numbers of vessels in lay-up are increasing, and it remains to be seen how easily the vessels can be activated, when activity picks up.
"Owners of these vessels are already experiencing considerable financial strain and we therefore do not expect the majority of these vessels to return to the market in the short term."
The company is forecasting an uptick in activity for the third quarter, however, and it believes this will give surviving owners an opportunity to take advantage of any recovery.
Turning to red
The shipowner's net loss in the second quarter was $3.58m, from a profit of $4.56m in the same period of 2019. That brings the six-month loss to $14.16m, against earnings of $7.54m the year before.
The company, controlled by Norwegian investor Oystein Stray Spetalen, does not report income, but accounts for investments on a fair-value basis.
Utilisation was 61% for its fully-owned large PSVs, down from 93% a year ago.
The company believes the main impact on its profitability may arise from the decrease in the value of its ships.
"However, a reasonable estimate of the financial effect cannot be made with certainty at the time of approval of these interim financial statements," SDSD said.
"The operating result from the PSV fleet in the second quarter was disappointing, as expected in the market conditions we have observed," said chairman Martin Nes.
No debt on the books
"Covid 19 and the turmoil in the oil market are having substantial impact on the PSV market. It is difficult to state when this will change but we are confident that markets will have to improve."
Nes added that until then, the company has a strong balance sheet with no debt and a good cash position. SD will continue to focus on cash preservation, he said.
SD owns four big PSVs, has investments in another nine mid-size PSVs, and a third share of a new VLCC through a company called Zeta Owners, which also involves Idan Ofer and George Economou.
Cash stood at $37.4m at the end of second quarter, up from $18.8m at the end of the first three months.
The main reason for this increase is the credit facility taken out to fund the 300,000-dwt VLCC Gustavia S by Zeta, a portion of which was distributed to SDSD.
This ship completed its first voyage in June.
SDSD estimated time charter equivalent earnings for the tanker from delivery in January to the end of June at $35,000 per day.
