Weak market conditions marked by oversupply, financial distress and consolidation have led AP Moller-Maersk to drop its two-year effort to sell its OSV division Maersk Supply Service.
The decision to retain Maersk Supply Service was made by the company’s board following its inability “to establish any solutions meeting our objective of creating shareholder value” from the sale according to AP Moller-Maersk chief executive and energy division chief executive Claus V Hemmingsen.
AP Moller-Maersk said in a statement the OSV market has “over the last three years exhibited clear signs of distress, reducing company market capitalisations and lower asset values, negatively impacting the ability to find a sustainable ownership structure for Maersk Supply Service outside of AP Moller-Maersk.”
In response to the downturn, Mr Hemmingsen said in 2016 Maersk Supply Service was repositioned “with a more robust and differentiated platform to compete” when the offshore oil and gas market recovered. This meant Maersk Supply Service would pursue work in offshore wind, ocean clean-up and deepsea mining.
According to AP Moller-Maersk, approximately 30% of Maersk Supply Service's revenue was generated from those new business segments.
"Our diversification initiatives are building a presence in other markets and enable us to be less dependent on the traditional oil and gas market in the future," said Maersk Supply Service chief executive Steen Karstensen.
Copenhagen-based Maersk Supply Service owns 44 vessels, including 10 newbuild vessels delivered over the last two years – four Stingray-class subsea support vessels and six Starfish-class anchor handling tug supply vessels.
Those newbuildings are still being paid for. For fiscal year 2018, Maersk Supply Service reported revenue of US$263M and EBITDA of US$3M with a negative free cash flow of -US$316M due to payment for the newbuildings. At the end of 2018, invested capital was US$714M following a negative fair value adjustment of US$400M recognised in Q3 2018.
For 2019, the expectations are EBITDA close to break-even level and a negative free cash flow of around -US$200M due to delivery of the remaining newbuildings ordered in 2014.
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