Pareto Offshoreinvest AS - Pareto Project Finance

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undergoing yard stays for maintenance and repair. Considering the age profile of the current jack-up fleet we find it likely that a large number of these will remain at yards going forward. Of the remaining 320 rigs, 312 are drilling while 8 are en-route between contracts. The Middle-East continues to be the dominant region, with 84 rigs in operation, while the Other Asia and the Far East together employ 93 rigs. Focusing on the high-end segment consisting of IC units capable of drilling in water depths down to 300 feet, the market looks significantly better. 185 out of 245 jack-ups are contracted and only 16 are cold stacked. Of the 185 rigs that are currently drilling, 109 are free in 2010, 48 in 2011 while the remainder are contracted for 2012 and beyond. Lately we have seen the spread between old and new units increase to USD 40 – 50,000 per day and new jackups currently operate with 94 % utilization, while older jack-ups are below 85 %. With the current day rates, a lot of the older rigs that are currently cold stacked or undergoing yard stays could remain outside the market for years to come, perhaps never to return. This would help the supply/demand balance and would benefit newer rigs and their owners. The deepwater drilling market is typically oil centric and enjoys long lead times. The high capital intensity and complexity of deepwater projects results in typically only the major oil companies or national oil companies can sponsor them. The result of this has been continuous high deepsea market utilization despite the credit crisis because most units have been on longer contracts, hence very few deepwater rigs have been subject to contract renewal the last 18 months. Lately some new buildings have come into the market but also these rigs have been absorbed, although at lower rates. The latest UDW contracts have been closed at approximately USD 450,000/day and rates for rigs entering the market now seem to be pushed downwards against USD 400,000/day. This is significantly down from the record high levels seen 18 months ago, but still more than manageable for most owners considering contract periods are for several years. In late June, a New Orleans federal court issued a preliminary injunction against the six month drilling ban imposed in the US GoM and immediately prohibited the US government from enforcing the ban. Secretary Salazar immediately said they would appeal the injunction and also announced the governments intentions of issuing a new moratorium with more documentation to back it up. The new moratorium will likely include more exceptions to the drilling ban, including development and appraisal drilling of reservoirs with a low risk profile. Regardless of the drilling ban, the near term market situation for the UDW market is challenging. Most of the larger established companies should be well positioned to handle a weak market brought on by the current supply overhang.
Supply market A stronger oil price and more stable macro environment has increased the confidence in the supply and subsea markets as well. The spot market has shown strong development the past period and recently we have seen PSV rates of about 250,000 NOK/day. In comparison, average rates the last 3 years have been 200,000 NOK per day. The increase in rig activity will result in a higher demand for supply vessels, and the floating rig fleet is set to grow by 45 % by 2013. The high number of upcoming pipe-laying projects will further increase the need for supply vessels, and the currently known pipe-laying projects until 2016 could tie up 50–60 vessel years for pipe carrying PSVs. The supply vessel fleet is also set for growth due to the relatively large number of newbuildings on order. This is no new phenomenon as the “North Sea” PSV and AHTS fleet has grown by an average of 13 % per year since 1998. This growth have been absorbed by the market so far, and if we take into account that when “deleting” all vessels above 25 years of age the supply fleet is set to experience an almost stand still the next years. This and the increased activity related to rig activity and pipe-laying should give good reason to be optimistic for supply owners. Subsea We have also continued to see increased subsea tendering activity worldwide. However, for shorter-term SURF (Subsea Umbilicals, Risers & Flowlines) work, particularly in the UK North Sea and the Gulf of Mexico, the pricing environment remains competitive. In the Conventional market in West Africa this year activity has increased and we expect this market to continue to remain strong in the short and medium-term. Many subsea contracts were postponed during 2009 and these contracts are expected to come to market award during 2010 and 2011. The current SURF contracts will eventually move into the offshore installation phase which is expected to commence beyond 2011. One of the major players in subsea, Acergy, expects that the trend will be for SURF projects to continue to increase in size and complexity which will contribute to substantial industry growth in the mediumterm. Owners of modern high quality assets will be well positioned to capture these future growth opportunities. Seismic market The seismic market has turned a corner from the trough seen last year. With increased demand on higher E&P spending and general emphasis on resource expansion, coupled with limited fleet growth, the market balance is now looking far better than last year. In the short term, The Deepwater Horizon incident has however created uncertainty around how many seismic vessels which could potentially be leaving the Gulf of Mexico creating a tougher competition amongst the seismic players in the rest of the world. This will be highly dependant on how long the drilling moratorium will last. The long term view for seismic services are positive and we expect activity to increase in 2H 2010 and the beginning of 2011, however there have been no signs of increased profitability for seismic owners so far and we may have to wait until we se 2H 2011 before any increase in seismic rates are seen. Definisjoner I denne kvartalsrapporten har nedenstående utrykk følgende betydning, med mindre annet er direkte uttalt eller fremgår av sammenheng. De nedenstående definisjonene gjelder også for de foregående sidene i denne kvartalsrapporten. Definisjoner: Fondet Pareto World Wide Offshoreinvest AS VEK Verdijustert egenkapital PPF Pareto Project Finance AS Kvartalsrapporten er utelukkende ment for informasjonsformål, og må ikke under noen omstendighet betraktes som et tilbud om eller en oppfordring til å handle aksjer i Fondet. Det gis ingen garantier og det aksepteres intet ansvar for tap, direkte eller indirekte, som oppstår som følge av at leseren agerer på bakgrunn av informasjon, meninger eller estimater som finnes i dette dokumentet. Informasjonen i dette dokumentet, herunder uttrykte oppfatninger eller prognoser, er innhentet fra eller basert på kilder som vi har vurdert som pålitelige. Vi kan imidlertid ikke garantere for informasjonens nøyaktighet, tilstrekkelighet eller fullstendighet. Noe av informasjonen i dokumentet kan inneholde prognoser eller fremoverskuende uttalelser vedrørende fremtidige hendelser eller fremtidige resultater i markeder eller selskaper. Faktiske hendelser og resultater kan avvike substansielt fra dette. Pareto Project Finance AS aksepterer ikke ansvar for tap som oppstår som følge av bruk av slik informasjon. Det understrekes at den historiske kursutviklingen og de avkastningsmål det er referert til ikke innebærer noen garanti for framtidig avkastning. Det understrekes også at avkastningen/kursutviklingen kan variere som følge av svingninger i valutakursene. Vi gjør oppmerksom på at i dagens urolige marked er det stor usikkerhet knyttet til verdivurderingene da det er ingen eller veldig få transaksjoner som er gjennomført. Fremgangsmåten ved beregning av VEK er nærmere beskrevet i Pareto Project Finance AS’ markedsrapport av november 2009. Risikofaktorer og kostnadsstruktur er nærmere beskrevet i prospektet (Informasjonsmemorandum) utarbeidet i forbindelse med emisjoner i Fondet.
Page 1: Pareto Offshoreinvest AS 2010 Kvart
Page 4: Forvalters kommentar En stigende ol
Page 7 and 8: Kapitalutvikling (Mill. NOK) MNOK 3
Page 9: Markedskommentar Kilde: Pareto Proj

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