Market Overview

Maersk Ends Spin-Off Of Supply Service Business Amid Weak Demand In Offshore Oil Productions

Maersk Ends Spin-Off Of Supply Service Business Amid Weak Demand In Offshore Oil Productions

Maersk cancelled plans to sell its offshore oil support fleet, citing poor market conditions for a sale. The reversal underscores the ongoing hurdles facing Maersk as it seeks to winnow its once sprawling ocean shipping business down to one just focused on container shipping and onshore logistics.    

Maersk Supply Service, which has about 40 offshore supply ships in its fleet, was listed for sale in 2017, part of the broad exit of Maersk from its energy business, which included tankers and oil drilling.

Maersk had hoped to find a buyer or split-off Maersk Supply Service by the end of last year.

But the company said that "no attractive separation solution has been identified for Maersk Supply Service, primarily due to the challenging market conditions with overcapacity within the offshore support vessel industry."

As a result, Maersk "has decided no longer to pursue a separation solution for Maersk Supply Service."

Maersk Supply Service generated $263 million in revenue last year, up 8 percent from the previous year. But the unit's operating profit dropped 77 percent from a year earlier to $3 million due to roll-off of existing contracts and higher project costs.

The offshore vessel support industry took a major hit from the drop in oil prices stemming from the glut of low-cost shale oil production.

"Offshore projects were often delayed or cancelled in the wake of the oil price crash in 2014. Revised designs were proposed that simplified, standardized and often downsized plans, and costs for new projects have fallen substantially, " the International Energy Agency (IEA) said in its last World Energy Outlook.

Despite some projects coming back on-stream, the IEA expects global offshore oil production to remain around 27 million barrels per day through the mid-2020.

The drop in the offshore vessel business forced Maersk to idle 14 vessels at the end of 2018. Maersk took a $400 million charge last year related to the declining value of the Supply Service business.

The offshore vessel business will be folded into Maersk's manufacturing segment, which includes its refrigerated container manufacturing business and its oil trading business.

Image sourced from Pixabay

Want more content like this? Click here to Subscribe


Posted-In: Freight Freightwaves Logistics MaerskNews Global Markets General


Related Articles

View Comments and Join the Discussion!

Trade Desk Forays Into China With Advertising Platform

Mid-Afternoon Market Update: Progress Software Surges Following Upbeat Q1 Results; RH Shares Slide