Development of the Commodity AHTS Market and introducing the 'Six Eighty’

We are the Experts. Ask us! 1 1

1 Commonwealth Lane #06-21 One Commonwealth Singapore 149544 Tel: +65 6327 4606 (24 Hrs) Fax: +65 6221 4606

Email: [email protected]

Copyright 2012 – M3 Marine Group, All Rights Reserved

www.m3marine.com.sg

Professionals who add

Technical & Commercial Competence

to your Offshore Marine vessel needs

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PRESENTATION ON THE COMMODITY AHTS MARKET

And INTRODUCING THE “6-80” (6,000 BHP 80T BP AHTS)

OFFSHORE SUPPORT VESSELS ASIA PACIFIC, KUALA LUMPUR

27th – 28th February 2013 Capt. John Meade, M3 Marine Group

M3 Marine Group

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M3 Marine Group

COMMENTARY

HISTORICAL COMMENTARY Since 2005 we have seen huge growth in a series of simple Asian designed and built ‘fit for purpose’ AHTS’s grow into and dominate the markets of South East Asia, the Middle East, West Africa and further afield. These designs were led by local Naval Architect design houses Khiam Chuan (KCM) and Conan Wu. They were ‘about’ 60m long and 15m beam. They had twin medium speed or high speed engines totaling circa 5,000 BHP. Latterly CAT 3516 Engines predominated and with a total horsepower of 5,150 BHP, this ‘commodity’ vessel type became known colloquially as the “Fifty One Fifty” (51-50).

“SEA GUARDIAN” one of the earlier 5150’s built for GULFMARK by JAYA in China in 2006

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M3 Marine Group

Incumbent Vessels in the market: 5,150 BHP 65 TBP AHTS Vessel

To date, we estimate up to 300 of these units have been built and operate internationally (over 100 from the Fujian South East Shipyard (FSES) yard in Fuzhou alone). The Bollard Pull for these vessels range from 60T through to 69T (and only very occasionally do they reach 70T).

COMMENTARY

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M3 Marine Group


“DAVID TIDE II” delivered to Tidewater from Chinese yard in 2010

COMMENTARY

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M3 Marine Group


2010 built “VOS HECATE” from a series built by VROON OFFSHORE in Fujian South East Shipyard, China

COMMENTARY

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M3 Marine Group


One of JAYA OFFSHORE’s modern 5150’s the “JAYA ALMIGHTY”

COMMENTARY

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M3 Marine Group

COMMENTARY

A small selection of these vessels have been built in Singapore and Batam, however these vessels are now almost exclusively being built in China with Yards such as Fujian South East, Yuexin, Hangtong and GMG dominating the sector. There are a few still being built in Miri (Sarawak) however China pricing and quality impact their ability to be competitive.

The “ABLE SENTINEL” a modern DP1 5150 built for SENTINEL MARINE at Fujian South East 2012

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M3 Marine Group

COMMENTARY

These vessels are very much ‘work horses’ and are being used extensively for rig and platform supply, jack-up towage, offshore construction support and barge towing duties.

“GO ACAMAR” built by OTTO towing a barge laden with a Detachable Turret Mooring (DTM) from Singapore to Australia

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M3 Marine Group

DESIGN TRENDS FOR THE 5150

LOA / BEAM

LOA’s range from 55m up to 63m Some vessels extended past this (up to 70m) The commodity 5150 is typically between

58m and 61m with bollard pull in the low to

high 60’s (Tonnes).

A VROON 5150 “rolls” off the production line at FSES. Standard design assists the production process, improves quality and decreases costs.

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M3 Marine Group


DRIVE Twin shrouded CPP propulsion

dominates. There are examples of ASD,

although rarer due in the main to ‘cost’.

SIDE THRUST Earlier single 5T to 6T tunnel bow thrusters. Now twin bow thrusters (to satisfy a long

standing Saudi Aramco specification) with power ratings up to 8T as standard.

Stern thrusters became ‘standard’ on the Conan Wu variant and were also fitted to some Owners KCM designed vessels (notably Vroon Offshore).

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M3 Marine Group

DYNAMIC POSITIONING (DP) Joystick control on all vessels with DP 1

becoming the norm. DP2 has been fitted to a very small number of

vessels in this class. CARGO CAPACITY Carry Liquid Mud (Brine), Dry Bulk, Cargo Fuel

Oil and Water . Very few are fitted with Oil Recovery even fewer with Methanol. Deck Space is typically 350 m2 Deck capacity is circa 500 Tonnes with 5 to 7.5 T/m2 deck loading. Deadweight circa 1,200 to 1,400 Tonnes.


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M3 Marine Group

ANCHOR HANDLING, TOW and DECK EQUIPMENT Simple fit for purpose, high pressure twin

drum hydraulic Waterfall Anchor Handling and Towing Winch Systems.

2 x 8 to 10 Tonne SWL Tuggers Twin Capstans aft. Shark Jaws and Tow pins Stern Rollers are fitted as standard. 3 to 5T deck crane We have witnessed a trend to have the

vessels classed with AH (Anchor Handling) notation rather than the earlier Offshore Support Vessel notation, important as Petronas, for example, now mandate this.

Meeting AH notation often requires a ‘beefing’ up of scantlings aft and around the stern roller. At the design and build phase, we feel this nominal extra cost is well justified.


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M3 Marine Group


OTHERS Classed FiFi 1 is fitted as

standard Accommodation capacity is

typically 35 to 42 persons. Non SPS compliant (only now do

we see the first 5150’s being built with SPS)

Single FRC Oil Dispersant booms and

tankage are fitted as standard but typically not Oil Recovery.

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M3 Marine Group

CHART 1: HISTORICAL EARNINGS AND VALUATIONS 5150

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M3 Marine Group

As you can see, values in the sector have ‘stayed up’ but have plateaued over the last 2 years however we would note that the vessels sold latterly may have premium spec (twin 8T thrusters and DP1) and were therefore more expensive to build. The DCR’s have bounced back from their lowest levels about a year ago. Vessel owners who were highly leveraged when the DCR was at its lowest were hurting. Established owners were still able to make a small profit and easily rode out this brief storm.

HISTORICAL EARNINGS AND VALUATIONS 5150

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M3 Marine Group

CHART 2: 5150 CURRENT VALUATIONS ACCORDING TO AGE OF VESSEL

There is a sharp drop off in value as the vessels come up to their first special survey. The value remains steady through the next 5 year cycle with less of a fall.

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THE FUTURE TREND – WILL THIS FORCE A BLANKET DESIGN CHANGE ACROSS THIS COMMODITY VESSEL TYPE? (YES… WE THINK SO).

Whilst the demand for these ‘fit for purpose’ and inexpensive AHTS’s remains high, it is M3 Marine’s opinion that the market is in need of a revitalized vessel model to replace the existing “5150” commodity vessel type. We are not alone in this assertion, as we note a significant round of new build orders in the slightly higher horsepower and higher specification vessel bracket.

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M3 Marine Group


What is driving this?

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M3 Marine Group


We see a client driven demand for higher specification in specific areas, particularly; Bollard Pull – 65 TBP frankly does not cut it anymore. Clients need 70 TBP+ to support ever larger construction barges and jack-up rig Marine Warranty requirements. We feel aiming for 80 TBP within a certain price bracket will future proof acceptance of the new commodity vessel for many years to come. Deadweight – Due to their versatility and low day-rate compared to small PSV’s, these commodity vessels often win contracts as SSV’s, especially in Malaysia and Indonesia. As fields develop further out to sea, the supply function demanding bigger deck space and increased deadweight becomes more and more important.

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M3 Marine Group

Dynamic Positioning. End users are now used to DP1 and are becoming more and more exposed to vessels with DP2. Rightly or wrongly, their perception is that DP2 is safer and are demanding such capability on vessels that interact with their facilities. DP2 coupled with extra deck space and enhanced accommodation opens opportunities for simple ROV support roles.


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M3 Marine Group

SPS – more than just a buzz word, SPS is now a minimum requirement for vessels capable of operating with Special Persons in regions such as India and Australia. This requirement will (and is) spreading internationally. In short, if you are carrying more than 12 persons in addition to the crew (regularly) SPS is a must and at the design stage has little cost impact.


Oil Recovery. This has not typically been fitted to vessels of the commodity

type.

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M3 Marine Group

THE DESIGNS

We see several designs emerging in the market which meet the trend towards the higher specification and satisfies the above improvements. These vessels are circa 6,000 BHP total and are designed to pull 80 TBP. We are tagging this vessel type as the

“Six Eighty” The first raft of 6-80 orders predominately designed by KCM are framed around an existing 60.5m hull form and we feel it is almost tailored exclusively for Saudi Aramco. We see a lot of technology ‘squeezed’ into this small hull form here. Building to order is fine and if you can satisfy the client for the life of the vessel, you are on to a winner, however, our feed back from our client base leads us to believe that the market needs to move away from building boats against single clients requirements and to innovate in order to service the market as a whole. Especially when a single clients ‘approved spec’ can change in a heartbeat (Aramco).

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M3 Marine Group

THE DESIGNS

The KCM “SIX EIGHTY”

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M3 Marine Group

End of the line? We note that the first series of these 6-80’s utilize the existing CAT 3516 Main Engines re-geared and re-rated to 6,000 BHP by increasing the Revs to 1,800 RPM. This is effectively running the engines on the ‘blood’ and we predict that there will be no-where else to go for this engine class in this commodity vessel market.

THE DESIGNS

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One design that has captured our attention is a bottom up design from SE Asian design house Focal Marine. This version of the Six Eighty features improvements and additional features across the board as can be appreciated against the below side by side table of comparisons to the incumbent “Commodity” vessel the 5150.

THE DESIGNS

The Focal Marine “SIX EIGHTY”

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M3 Marine Group

THE DESIGNS

Standard KCM 59.25m “5150” AHTS Focal Marine “Six Eighty Five” AHTS

LOA / Beam: 59.25 x 14.95 m 65.00 x 16.00 m

Criteria 1,340 tonnes 1,650 tonnes

Clear Deck: 330 m2 435 m2

Bollard Pull: 65 tonnes 80+ tonnes

DP: DP 1 DP 2

FiFi: FiFi 1 FiFi 1

Pax / SPS: 42 persons / Nil SPS 50 persons / SPS Compliant

Oil Recovery: Nil Oil Recovery Class 1

Haz Materials Nil Compliant

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M3 Marine Group

THE DESIGNS

A non-Commodity and enhanced 6-80 To appreciate what we mean by commodity vessel, we can compare the 6-80 we are discussing with the enhanced version offered by BOURBON OFFSHORE. Their high spec LIBERTY class, built by Sinopacific Shipyard in China formed part of a massive order for the French OSV player and features a Diesel Electric power plant and 3 x Azimuth Thrusters aft for propulsion and positioning.

Significantly more expensive to build, these vessels have performed well in one of BOURBON’s key markets (West Africa) but struggle to realise the required day rates (versus cost) in the Asia region (where they fight head to head with much cheaper vessels). The ‘day rate is king’ End Users are generally not motivated to realise the benefits that D/E power can offer in fuel savings. This may yet change in, say, Australia (carbon tax) and against very long term contracts.

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M3 Marine Group

PRICING

For a vessel to effectively the 5150 from its “commodity mantle”, build cost for this higher spec vessel becomes the key issue. From the earlier chart, we see that if you were to order a DP1 “5150” from a yard in China today, you would pay between USD $10 and USD $11M depending on specification. Current resale prices are between USD $11.5M and USD $12.5M. For the Six Eighty, we have seen ordering costs in the $11.5 to $12.5M range… again dependent on final specification. At the higher price range, high speed engines are replaced with medium speed engine packages. Medium Speed engines will ensure less wear and tear, standard gearing, more reliability, higher torque and less maintenance. Typical makers of these Medium Speed engines are Niigata, MAN, Yanmar and Wartsila. We predict that this first raft of 6-80’s will resell, ex yard for between USD $13.5M and USD $14.5M with a price trend upwards.

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M3 Marine Group

CHARTER RATE POTENTIAL

We feel (as of today) time charter day rates for such a vessel conservatively be in the region of USD $10,500 to USD $11,500 per day with forecasts for this to rise over USD $12,000. Building a vessel on spec for a potential long term bareboat should net you a DCR of USD $6,000 to USD $7,000 per day for 3 to 5 years (again, this is a somewhat conservative view). This compares with rates today for a standard 5150 of; USD $8,500 – USD $9,500 per day for TC USD $5,000 – USD $6,000 per day for BB We therefore see ROCI as healthy and more importantly, the vessel is ‘future proofed’ well into the next decade.

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M3 Marine Group

CONCLUSION

“It is our opinion that the future of the standard commodity 5150 AHTS is now showing some signs of limitation. The vessels in circulation and the few remaining on order will serve the market well, however the future is demanding vessels of bigger, better and more complex specification. Raw speculative building has more or less finished and Owners are showing a lot more due diligence and exercising a lot more care prior to placing multiple orders. Pricing is key and we feel that the work done to secure a new build price in the mid $11’M’s to $12’M’s (depending on spec) will ensure ROCI similar to or exceeding the returns enjoyed by owners presently working the commodity vessel market.” John Meade COO M3 Marine Group Pte Ltd

M3 Marine Expertise Pte Ltd 15 Jalan Kilang Barat #06-03 Frontech Centre Singapore 159357 t: +65 6327 4606 m: [email protected] w: www.m3marine.com.sg All rights reserved. M3 MARINE GROUP PTE LTD ADDRESS 1 Commonwealth Lane, #06-21, ONE Commonwealth, Singapore 149544 T +65 6327 4606 M [email protected] W www.m3marine.com.sg All rights reserved.

Professionals who add Technical & Commercial Competence to your Offshore Marine vessel needs

M3 Marine was established in 2005 by Capt. Mike Meade

We pride ourselves as one of Asia’s largest independent offshore

ship broking and marine consultancy groups – possessing the

necessary qualities and capabilities to meet the growing local and

international demand for specialized offshore marine services

2005 2006 2007 2008 2009 2010 2011 2012

Established M3OB M3ME Singapore SME 1000

Singapore SME 1000 ISO 9001:2008 OCIMF OVID

Exciting times ahead!

M3 Marine (Offshore Brokers) was incorporated in 2008

M3 Marine Expertise was incorporated in 2010

M3 Marine Group achieved Singapore SME 1000 status in 2011

M3 Marine Group were again awarded Singapore SME 1000 status in 2012

Latest Developments:

M3 Marine Group are ISO 9001:2008 accredited

M3 Marine Group are OCIMF OVID accredited

ABOUT M3 MARINE GROUP OF COMPANIES

M3 Marine Group, one of Asia’s largest independent and leading offshore ship brokerage and marine consultancy groups, have, despite the tough market conditions in 2011, ended the year on a high note. Riding on the back of having a clear understanding of the standards required by the end user and employing top quality professionals with high level operational experience, we have built ourselves a solid reputation known for our prompt, quality and ‘added value’ service which differentiates us from our peers.

As featured in Singapore’s Business Times SME

Magazine. Q1 2012

M3 Marine Group Company Overview



M3 Marine Group

M3 Marine Offshore Brokers M3 Marine Expertise

Provides technical & commercial / corporate

consultancy services

Provides offshore ship broking services (time & bareboat charters,

sales & purchase, new building)

M3 MARINE GROUP CORPORATE STRUCTURE

The M3 Marine Group provides offshore ship broking and a comprehensive range of technical and commercial consultancy services tailored to meet the needs of the Offshore Marine, Oil & Gas Industry. With extensive, real and valuable, multi-faceted, industry experience and ‘up to the minute’ expert offshore knowledge, M3 Marine “adds value” where it matters. The Group has a team of dedicated brokers who each hold ‘real’ industry background and a team of experienced project engineers, experts in their respective fields. It is further underpinned by a network of associates and contacts and a non-exclusive pool of mariners, chief engineers, offshore engineers and industry professionals.




PROFESSIONAL AFFILIATIONS M3 MARINE GROUP’S PRESENCE IN INTERNATIONAL PUBLICATIONS


M3 Marine’s COO, Captain John Meade, is the Group’s lead for Sale and Purchase on the brokerage team and brings a wealth of knowledge and acquired skills across a wide range of marine disciplines. Having held senior roles in Marine Warranty, Pilotage, Towage and Port Operations, John provides additional depth to the Group’s consultancy arm M3 Marine Expertise and provides expert and valued opinion to the Industry. John is also a key member of M3 Marine’s vessel valuation panel and whilst working extensively on S&P and charter requirements worldwide, he maintains a particular focus on Australia.

The Group’s founder and CEO, Captain Mike Meade (MNI), is a trusted and respected contributor to the commercial needs of the offshore marine industry, with a slant towards the subsea network, both locally and globally and is Asia Pacific’s Representation on the IMCA Marine Division Management Committee. Mike previously held senior positions within the Swire Group and Seacor Marine Int. and has over 30 yrs of valuable commercial and operational experience.



M3 Marine Offshore Brokers (M3OB) are one of Asia’s largest independent offshore ship brokerage houses, incorporated in 2008 as a subsidiary company of the M3 Marine Group, situated in the ‘hub’ of marine activity and... sourcing a comprehensive spread of offshore support vessels to meet your chartering and /or purchasing

requirements facilitating and ‘adding value’ to your prospective transactions providing assistance in contract drafting translating into both time and cost savings ‘staying with you’ throughout the duration of the charter / sale / purchase / newbuilding process and maintain our

commitment to facilitating the relationship between the parties and our client’s objectives using BIMCO's IDEA, an internet-based charter party editing system, which protects the underlying text of edited

documents so that both parties will always know exactly what amendments have been made to the standard wording; playing a proactive role in ensuring ‘FAIR’ (IMCA) contracting principles are adhered to having direct access to a vast network of offshore vessel owners, operators, financial institutions, shipyards, keen

buyers and sellers offering REALISTIC RATE GUIDANCE having an excellent track record of satisfied clients and, as such, benefitting from a loyal customer base

Our brokers are constantly interfacing with the market and gathering invaluable ‘market intelligence’ in this process. Our data are live, updated daily to bring across first hand information to our clients and potential clients.

M3 Marine Offshore Brokers Introduction



M3 Marine Offshore Brokers Services Overview

M3 Marine Offshore Brokers (M3OB) possess the commercial and technical knowledge and attributes to offer our valued

Clients a spread of brokerage services for Newbuilding, Sales & Purchase and Chartering.

This page provides an overview of the Services offered by M3OB:

CHARTERING (TIME & BAREBOAT)

M3OB is well-versed in all manner of time, bareboat & towage contracts

Types of vessels M3OB brokers: AHT / AHTS / PSV DSV / ROVSV Barges Crew Boats / Fast Supply Boats Tugs (Harbour & Ocean going) Compact Semi Submersible Construction Support Vessels LCT Safety Standby Vessels Heavy Lift Vessels Jackup Barges / Liftboats Survey / Utility Vessels Workboats / Workbarges

NEWBUILDING

M3OB is actively involved in the entire newbuilding process – from the conceptualization of the vessel through to its delivery

This process includes: vessel design vessel specification pre-qualification of shipyard bidding shipyard selection contract negotiation commercial closing vessel delivery

SALE & PURCHASE

M3OB forges strong business relations with offshore vessel owners, financial institutions & numerous shipyards, thus we are always in the ‘loop’ of keen buyers & sellers

We are well-versed with the market conditions and dynamics of the S&P sector to match the right vessel to suit the job for the buyer without compromising the quality of the vessel being brokered


M3 Marine Expertise Introduction


Capt. Mike Meade, Group CEO

M3 Marine Expertise (M3ME), a subsidiary of M3 Marine Group, was newly incorporated in early 2010 to focus on providing first class technical and commercial / corporate consultancy services which meet the needs of the Offshore Marine, Oil and Gas industry.

We are a young and dynamic company with an excellent track record of delivering high quality technical and

commercial analysis, assessments and reports and have earned ourselves a growing pool of satisfied and repeat customers.

We are supported by a team of dedicated in-house projects engineers, led by our esteemed Managing Director,

Joey Fisher, and further backed by a network of associates, contacts and a non-exclusive pool of mariners, chief engineers, offshore engineers and industry professionals.

Joey Fisher is a versatile and self motivated Class 1 Marine Engineer with a wealth of technical, operational and management experience in the Marine, Subsea and Offshore sectors, solution and results orientated with solid communication, report writing and organisational skills. With a keen eye for detail and a passion for doing things right the first time. Joey heads up our team of dedicated project engineers who are based in Singapore and provide a wide range of technical consultancy services.

Joey Fisher, (IEng IMarEng MIMarEST), Class 1 C/E and MD of M3ME

“Our clients value our astute commercial and operational acumen, up to date market knowledge and other synergies that we draw upon within the Group network of in-house technical and brokerage services. Through sharing of resources, assets and abilities, we strengthen and bolster the quality, depth and breadth of our services and our reserve of expertise, providing the technical assurance, adaptability and flexibility, as is required by our clients, over the course of a project.”



M3 Marine Expertise Services Overview

This page provides an overview of the Services offered by M3 Marine Expertise:

COMMERCIAL

ASSET VALUATION Valuation of Offshore Assets (OSVs, DSVs,

Barges, Tugs & Oil Rigs)

MARKET STUDY Market Study / Research for Offshore Oil

& Gas and OSV Markets

COMMERCIAL & CORPORATE CONSULTANCY Merger & Acquisition, Corporate /

Commercial Due Diligence

EXPERT WITNESS / PLACEMENT

EXPERT WITNESS Legal & insurance claims support

SPECIALIST RECRUITMENT

Placement for high level positions

EXPERT PLACEMENT Placement of Specialist Marine Personnel

i.e. Masters, DPOs, Chief Engineers etc.

TECHNICAL

AUDITS, SURVEYS & INSPECTIONS IMCA CMID & Diving System Audits, OCIMF

OVID Audits, Pre-purchase condition surveys

PROJECTS DP & Diving Systems Consultancy (including

Annual Trials & FMEA Authoring) DSV Services Wind Farm Installation Consultancy Newbuild and Conversion Supervision Project Management

MARINE WARRANTY

M3ME offers marine warranty services and related expertise through our European arm led by Capt. John Carroll: MARINE WARRANTY SURVEYS MARINE REPRESENTATION RISK MGMT & RISK ASSESSMENT SALVAGE & WRECK CONDITION SURVEYS & P&I REPORTING



Key Customers

http://www.hallinmarine.com/



Enquiries

FOR MORE INFORMATION ON OUR SERVICE OFFERINGS:

M3 Marine (Offshore Brokers)


Tel: +65 6327 4606 (24 Hrs)

Fax: +65 6221 4606

Contact Persons: Capt. Mike Meade, Managing Director - [email protected]

Capt. John Meade, Head of S&P - [email protected]

M3 Marine Expertise


Tel: +65 6327 4606 (24 Hrs)

Fax: +65 6221 4606

Contact Persons: Ms. Wei Ling, Low, Marketing & Business Development Manager - [email protected]

Ms. Angeline Chng, Commercial Manager - [email protected]

Mr. Joey Fisher, Managing Director - [email protected]

M3 Marine Group website: www.m3marine.com.sg

mailto:[email protected]







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Development of the Commodity AHTS Market and introducing the 'Six Eighty’

Technology