Maritime Professional - Q1 2014 - page 2

Reprinted with Permission from the Q1 2014 edition of Maritime Professional
Energy Growth Fuels Transactions
North America’s energy revolution is starting to have a
profound impact on the maritime and offshore sectors.
By Harry Ward
Insights
N
orth America is undergoing a gradual revolution
in energy production, and the transformation has
begun to have a profound impact on the maritime
and offshore sectors. Despite a few volatile years
and mixed performance of public companies in the offshore
service and drilling markets, the outlook for energy services
seems to be positive according to most analysts. Recovery in
the Gulf of Mexico (GoM) continues to accelerate since the
Deepwater Horizon spill and deep water rig utilization rates
are at their highest level in five years. According to IHS, the
number of deep water rigs under contract in the GoM is up
from 75 to 80 in the past twelve months. Optimism stemming
from such statistics has been reflected in increased deal ac-
tivity including company acquisitions, new vessel orders and
purchases of drilling rights in recent months.
Offshore Service and Maintenance
A wide range of companies that provide operations and
maintenance services to the offshore industry have seen over-
all demand increase, and there has been a noticeable increase
in the number of middle market M&A deals in the space. Late
in 2013, Teledyne Technologies (NYSE:TDY) acquired CD
Limited (CDL), a supplier of subsea inertial navigation sys-
tems and motion sensors for marine and offshore applications,
for $22.5 million. Teledyne continues to build on its strong
position in subsea instrumentation and imaging products, with
the acquisitions of CDL and BlueView Technologies within
a year of one another. Similarly, US-based Roper Industries
(NYSE:ROP) acquired a UK offshore technologies company
with its $55M purchase of Advanced Sensors Limited. Ad-
vanced Sensors holds a strong position in the growing seg-
ment of oil-in-water analyzers, and is likely just one of several
acquisitions to come for growth-oriented Roper.
Offshore oil production creates a tremendous amount of
waste, and there is a thriving industry built around consulting
and cleaning services for the oil patch. In early February, private
equity firm Lariat Partners announced the $100M acquisition
of Newpark Environmental Services from Newpark Resources
(NYSE:NR). Lariat will combine two acquired Newpark divi-
sions with its platform company Offshore Cleaning Systems,
to create a new industry leader called Ecoserv. Another small,
private equity-backed deal was the acquisition of $34 million
Coates Offshore by Houston’s SCF Partners. Coates provides
specialty rental equipment for well and pipeline test and main-
tenance to offshore operators in the North Sea, and was di-
vested by Coates Group Holdings Pty of Australia.
Clearly there has been a great deal of appetite among
American companies and investors for niche offshore services
companies in the UK. Closer to home, business activity in the
GoM continues to grow overall, despite some short-term fluc-
tuations. Offshore service company Harvey Gulf International
Marine has been making headlines for several quarters now
as it executes on an aggressive growth plan. Backed by the
large private equity firm The Jordan Company, Harvey Gulf
has expanded via acquisitions and newbuild projects, and has
established itself as a leader in the migration to LNG fuel sys-
tems for its fleet. In the fourth quarter of 2013, Harvey Gulf
completed the acquisition of Abdon Callais Offshore, LLC for
$460 million. Abdon Callais came with a young, technically-
advanced fleet of 48 offshore supply vessels. The company
also acquired 20 other advanced vessels from Gulf Offshore
Logistics and Bee Mar in the past couple of years, and has
a number of new vessels under construction. In a final note,
Harvey Gulf recently broke ground on its $25 million indus-
try-leading LNG fueling facility Port Fourchon, LA.
Jones Act Deals
Beyond offshore service vessels, the energy revolution has
energized business activity in other Jones Act segments. US-
flagged carriers for coastwise and inland transport of energy
products have been in high demand, and some high-profile
financial transactions have reflected this trend. In December,
pipeline and terminal giant Kinder Morgan Energy Partners,
LP (NYSE:KMP) agreed to acquire American Petroleum
Tankers (APT) and State Class Tankers (SCT) from an invest-
ment group including The Blackstone Group and Cerberus
Capital Management. The $962 million cash deal gets Kinder
Morgan into the petroleum marine transport business with
nine product tankers of about 330,000 barrels of capacity, in-
cluding four scheduled SCT newbuilds under way at the Gen-
eral Dynamics NASSCO shipyard.
Another interesting story in the Jones Act carrier world has
been the transformation of Aker Philadelphia Shipyard (Oslo:
AKPS) from a struggling, government-supported facility to
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