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OSV Valuation Variables

Introduction

The VesselsValue valuation methodology for the Offshore sector incorporates the 5-factor algorithm (Size, Age, Type, Features and Sentiment) described in our Mathematics of Market Valuation methodology and enables market valuations of vessels to be calculated in even the most illiquid markets. The following document outlines the specific features that are taken into consideration when valuing OSVs, allowing for accurate and unbiased values to be calculated.

Ship Type

Certain subtypes of OSVs can have premiums over their standard counterparts. For example, AHTSs have a premium over AHTs as they have a greater supply capacity.

Size

AHTSs/AHTs are measured by BHP (1,000-36,000 BHP). This is directly correlated to the amount of Bollard Pull a vessel has, meaning that both are covered by the score. PSVs are measured by DWT (100-7,500 DWT). Premiums and discounts for large/small vessels are calculated daily by the VV algorithms.

Age

The average lifespan of an OSV is c. 25-30 years. Premiums and discounts for vessel age (i.e. depreciation) are calculated daily by the VV algorithms.

State of the Market (Earning Sentiment)

The best proxy for Offshore earnings sentiment is an index derived from a long and short term rolling average of the Brent Crude price. The oil price is the prime driver for the Offshore market, and effects vessel utilization, charter rates and market values. The correlation has been tested historically. Fig. 1 illustrates the relationship between the Brent Crude price and Offshore asset values.

Fig.1 Graph to represent the relationship between Offshore Asset Value and Brent Crude Oil Spot

Fig.1 Relationship between Offshore Asset Value (USD mil) and Brent Crude Oil Spot ($/barrel)

Features

Builder

As with cargo shipping, the builder is a very significant variable to value. Please note that the builder premiums and discounts for Offshore vessels can be different to those for cargo vessels. These premiums and discounts are derived from the newbuilding and second hand markets.

Accommodation

Premiums and discounts are derived from a ratio between vessel size and total accommodation.

The black dotted line in Fig.2 represents the expected amount of accommodation for that size, and either side of the line shows the premium/discount for more or less size/accommodation ratio. This has been performed separately for all vessels.

Fig.2 Relationship between size and accommodation.

Fig.2 Relationship between size and accommodation.

The premium/discounts are based on the max/min accommodation a vessel can have at its position within the size range of the fleet. For example, two near identical 3,000 DWT PSVs, can be differentiated by the amount of accommodation they have and this will be represented in the accommodation score they receive.

Gear

A premium is applied for a vessel with lifting or other gear (cranes etc).

The premium is proportional to the crane capacity

US/Brazil flag

Both flags are given a premium.

Brazil flag premium is due to their ability to block foreign flagged vessels at the renewal of the Certificate of Charter Authorization (renewal of charter/taking of options).

Premium given for US flagged vessels, as preferred over non US flagged vessels for US Charters

Fifi (fire fighting capabilities)

Premium given for capable vessels, no discount for FiFi incapable vessels. Firefighting ability is measured on the number of monitors on board, and distance and capacity of the monitors. The order is FiFi 0-3, 0 being the minimum and 3 the maximum.

Deck Area

Premiums/discounts are derived from the ratio between vessel size and total deck area. The black dotted line in Fig.3 represents the expected amount of deck area for that size, and then either side of the line shows the premium/discount.

The premium/discount is based on max/min deck area a vessel can have at its position within the size range of the fleet. I.e. take two near identical 3,000 DWT PSVs that are differentiated by deck area, that difference will be represented in the premium/discount they receive.

Fig.3 Relationship between Deck Area (m2) and Size (DWT)

Fig.3 Relationship between Deck Area (m2) and Size (DWT)

Helideck

Premium given for the presence of a helideck, very rare in OSVs but some do exist. More pertinent in Subsea.

Class Society

Discounts given for lower regarded classes (i.e. non IACS).

Engines

Premiums given for Eco engines/diesel electric hybrids.

Dynamic Positioning

Premium based on what DP class it is. No discount applied for DP incapable vessels. DP 0/1/2/3represents how many back up computer systems are on board should one fail.

Ice Class

Ice class given premium with largest premiums for highest FS ice class certification (i.e FS ICE Class 1A)

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