Making waves through turbulent times

Making waves through turbulent times Durham Shaun Heywood June 9, 2011

Contents 1. Section 1 Supply How the fleet is changing Where have all the newbuilds gone? 2. Section 2 Demand The drivers behind the market 3. Section 3 Utilisation Will the market cope with the oversupply? 4. Section 4 Decommissioning A future demand builder 5. Section 5 Attrition Will it happen? 6. Section 6 Day rates Looking at the rates in the market for shallow and deep waters 2

How is the subsea vessel fleet changing?

Number of vessels How old is the fleet? Age of subsea fleet 80 70 DSVs ROVSVs 60 50 40 30 20 10 0 0-5 years 6-10 years 11-15 years 16-20 years 21-25 years 26+ years 4

When will the newbuilds arrive? Subsea fleet newbuilds 2013 ROVSVs DSVs 2012 2011 0 5 10 15 20 Number of vessels Source: ConstructionVesselBase 5

How is the pipelay vessel fleet changing?

Number of vessels How old is the fleet? Age of pipelay fleet 40 35 30 25 Pipelay Derrick Pipelay 20 15 10 5 0 0-5 years 6-10 years 11-15 years 16-20 years 21-25 years 26+ years Source: ConstructionVesselBase 7

When will the newbuilds arrive? Pipelay fleet newbuilds 2013 Derrick Pipelay Pipelay 2012 2011 0 2 4 6 Number of vessels Source: ConstructionVesselBase 8

Newbuilds where have they gone? Subsea and Pipelay fleet

Geographical distribution of new vessels June 2011 Diving support and ROV support vessels (43 vessels) West Africa, 5% Northwest Europe, 30% Asia-Pacific, 35% North America, 9% Middle East, 7% Mediterranean, 2% Latin America, 12% Source: ConstructionVesselBase 10

Recently delivered vessels current activity Diving support and ROV support vessels (43 vessels) Support, 16% Survey, 2% Idle, 19% Removal, 2% Mobilisation, 5% Maintenance, 7% Installation, 7% Working - Other modes, 7% Commissioning, 2% IRM, 33% Source: ConstructionVesselBase 11

Geographical distribution of new vessels May 2011 Pipelay vessels (20 vessels) Northwest Europe, 10% West Africa, 10% Asia-Pacific, 55% Middle East, 10% Latin America, 10% Caspian, 5% Source: ConstructionVesselBase 12

Recently delivered vessels current activity Pipelay vessels (20 vessels) Mobilisation, 15% Idle, 11% Standby, 11% Installation, 22% Maintenance, 6% Pipelay, 44% Source: ConstructionVesselBase 13

The drivers behind the market Demand

km of pipelines Global Pipeline installations 2003-2015 Including export lines, flowlines and trunklines 14,000 12,000 Tendering Possible Planned Installed Construction 10,000 For more information please contact your ODS-Petrodata account manager 8,000 6,000 4,000 2,000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: FieldsBase 15

km of pipelines km of pipelines Pipeline installations 2003-2015 Brazil Nigeria 800 700 600 500 400 Tendering Planned Construction Possible Installed For more information please contact your ODS- Petrodata account manager 800 700 600 500 400 Tendering Planned Construction Possible Installed For more information please contact your ODS- Petrodata account manager 300 300 200 200 100 100 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: FieldsBase 16

Vessels IRM a growing market IRM demand 2006-2014 140 120 100 80 60 For more information please contact your ODS-Petrodata account manager Shallow & benign Pipeline IRM Harsh & deep Pipeline IRM 40 20 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: ODS-Petrodata 17

Subsea tree installations for 2010 Subsea trees per geographical region South America, 15% Russia and Caspian, 1% Africa, 29% North America, 17% Med/Middle East, 4% Asia-Pacific, 10% Central America, 1% Europe, 23% Source: FieldsBase 18

Number of trees Global subsea tree installations 2003-2015 600 500 400 Installed Construction Tendering Planned Possible For more information please contact your ODS-Petrodata account manager 300 200 100 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: FieldsBase 19

Number of trees Number of trees Global subsea tree installations 2003-2015 Brazil 100 Nigeria 100 90 80 70 60 50 40 Installed Tendering Possible Construction Planned For more information please contact your ODS- Petrodata account manager 90 80 70 60 50 40 Installed Tendering Possible Construction Planned For more information please contact your ODS- Petrodata account manager 30 30 20 20 10 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: FieldsBase 20

Number of vessels DSV demand 2003-2015 Global demand for the diving support vessel market 80 70 60 50 Shallow & benign Harsh & deep For more information please contact your ODS-Petrodata account manager 40 30 20 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: ODS-Petrodata 21

Number of vessels ROVSV demand 2003-2015 Global demand for the ROV support vessel market 160 140 120 100 Shallow & benign Harsh & deep For more information please contact your ODS-Petrodata account manager 80 60 40 20 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: ODS-Petrodata 22

Number of vessels Pipelay demand 2003-2015 Global demand for the pipelay vessel market 90 80 Shallow & benign Harsh & deep 70 60 For more information please contact your ODS-Petrodata account manager 50 40 30 20 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: ODS-Petrodata 23

Will the market cope with the oversupply? Utilisation

Utilisation Average utilisation by age in 2010 Global subsea fleet 100% 90% DSVs ROVSVs 80% 70% 60% 50% 40% 30% 20% 10% 0% 0-5 years 6-10 years 11-15 years 16-20 years 21-25 years 26+ years Source: ConstructionVesselBase 25

Utilisation Average utilisation by age in 2010 Global pipelay fleet 100% 90% 80% Pipelay Derrick Pipelay 70% 60% 50% 40% 30% 20% 10% 0% 0-5 years 6-10 years 11-15 years 16-20 years 21-25 years 26+ years Source: ConstructionVesselBase 26

Utilisation Utilisation Utilisation 2007- May 2011 Brazil Nigeria 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% DSV ROVSV All pipelay DSV ROVSV All pipelay 50% 50% 40% 2007 2008 2009 2010 2011 40% 2007 2008 2009 2010 2011 Source: FieldsBase 27

Utilisation Utilisation DSV, ROVSV and all pipelay vessels, including derrick pipelay 100% 90% 80% For more information please contact your ODS-Petrodata account manager 70% 60% DSVs ROVSVs All pipelay 50% 40% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: ODS-Petrodata 28

Decommissioning A future demand builder

Number of platforms Decommissioning an expense that has to happen 100 90 80 70 60 50 40 30 20 10 0 Fixed platforms in Northwest Europe 25-29 years 30-34 years 35-39 years 40+ Source: FieldsBase DECC s estimated total cost of decommissioning in the North Sea is USD 38-48 billion USD 25 billion to decommission 253 offshore installations USD 11 billion to remove 278 subsea production systems USD 3-11 billion to remove 3,300 pipelines Less than 10% has been removed Water depth varies between 2-312 msw Yearly spend on decommissioning UK USD 500 million 30

Number of platforms Decommissioning a future demand builder 700 600 500 400 300 200 100 0 Fixed platforms in the Gulf of Mexico 25-29 years 30-34 years 35-39 years 40+ Source: FieldsBase Government pushing to get idle infrastructure out over a period of three years Benefits for operators include Reduced insurance premiums Increased workforce utilisation Planned decommissioning is cheaper than decommissioning due to a hurricane Removal costs 3,000+ wells USD 200-300,000 = USD 600 million to 1.1 billion 775 idle structures USD 1.2-2.8 million per structure = USD 930 million to 2.2 billion Removals have and will be outpacing installations in this region Yearly spend on decommissioning GoM USD 600 million and rising 31

Attrition Will it happen?

Number of vessels Attrition scenarios for diving support vessels 90 80 70 60 For more information please contact your ODS-Petrodata account manager 50 40 30 20 Excluding fleet > 35 years Excluding fleet > 25 years Excluding fleet > 30 years All visible fleet 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: ConstructionVesselBase 33

Number of vessels Attrition scenarios for ROV support vessels 250 200 Excluding fleet > 35 years Excluding fleet > 25 years Excluding fleet > 30 years All visible fleet For more information please contact your ODS-Petrodata account manager 150 100 50 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: ConstructionVesselBase 34

Number of vessels Attrition scenarios for pipelay vessels 100 90 80 70 For more information please contact your ODS-Petrodata account manager 60 50 40 30 20 Excluding fleet > 35 years Excluding fleet > 25 years Excluding fleet > 30 years All visible fleet 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: ConstructionVesselBase 35

Number of vessels Attrition scenarios for derrick pipelay vessels 90 80 70 60 For more information please contact your ODS-Petrodata account manager 50 40 30 20 Excluding fleet > 35 years Excluding fleet > 25 years Excluding fleet > 30 years All visible fleet 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: ConstructionVesselBase 36

Day rates

Day rates Day rates Day rates including full spread in Asia-Pacific Shallow & benign vessel day rates Harsh & deep vessel day rates Diving Support Pipelay ROV Support Diving Support Pipelay ROV Support Source: ConstructionVesselBase 38

Conclusions Oversupply, yes! But oversupply in older vessels operating in benign waters. Additional high-end tonnage may be required as we enter deeper waters, and definitely when the Arctic opens up. Estimated 25% of world s petroleum reserves are in the Arctic regions. 90 billion barrels of oil 1,700 trillion cubic feet of natural gas 44 billion barrels of natural gas liquids may remain to be found in the region The market is healthy, demand is on the rise and confidence has returned. Operators may restrict the age of tonnage they use. Decommissioning will be big business, for fabrication yards and vessel owners alike, despite reduced rates compared to installation work. 39

ODS-Petrodata Field Development Research for this presentation comes from the following databases and published ODS- Petrodata market reports: Databases: ConstructionVesselBase FieldsBase Online databases and news service combined. Updated daily Published ODS-Petrodata market reports: The Aquanaut Offshore Field Development Monthly Petrodaily Subsea & Field Development Monthly Monthly Live online news service 40

Contact Us Should you have any questions or need additional information, please contact us at one of our regional offices or visit us online: HOUSTON ABERDEEN OSLO DUBAI SINGAPORE 3200 Wilcrest Dr. Suite 170 Houston, Texas 77042 USA 2 nd Floor The Exchange No. 1 Market Street Aberdeen AB11 5PJ Scotland Tjuvholmen allé 3, 6 th Floor NO-0252 Oslo Norway Crown Plaza 19 th Floor Sheikh Zayed Road Dubai United Arab Emirates 04-30 Nordic European Centre 3 International Business Park Singapore 609927 T +1 832 463 3000 T +44 1224 597800 T +47 21 05 90 00 T +971 4 3117118 T +65 6890 1616 www.ods-petrodata.com 41