Deepwater woes: Below average new orders to plague Vard Holdings in the medium term

On the back of falling asset utilisation and charter rates.

Much of deepwater production now looks uneconomic with oil at c.USD550/bbl.

According to a report by OSK-DMG, the slower upstream investments and order flows over this year may have a longer-term effect on Vard’s financials, delaying margin and earnings recoveries. Already, deepwater rig prices and charter rates fall, together with those of their support vessels.

OSK-DMG adds that large anchor-handler (14,000 brake horsepower and above) prices have fallen >10% from mid-2014, according to the latest industry data. Even in the best of times, Vard’s operating margins were c.11-14% - such a fall could eat into the bulk of future earnings.