The panel concluded that one of the biggest hindrances to a recovery in the near-term was the current degree of oversupply in the form of dry bulk vessels that were slow steaming. While there was some disagreement about whether slow steaming was permanent or temporary, the panel agreed that if slow steaming were to end, it would only be once dry bulk shipping spot charter rates had improved dramatically from current levels. The lack of an order book beyond 2013 was viewed as a reason for optimism for a recovery of the dry bulk shipping market over the next 12-18 months.
OFFSHORE DRILLING PANEL DISCUSSION
Truls Trøan, Head of Corporate Finance - RS Platou Markets AS
George Economou, Chairman of the Board, President & Chief Executive Officer - Ocean Rig
Ole B. Hjertaker, Chief Executive Officer - Ship Finance International Ltd.
Paul Bragg, Chief Executive Officer & Director - Vantage Drilling
Scott Kerr, Chief Executive Officer - Sevan Drilling
Robert W. Rose, President & Chief Executive Officer - Prospector Offshore Drilling
The drilling markets is less fragmented compared to the shipping market, and thus drillers are more disciplined compared to ship-owners when it comes to placing new rig or drillship orders, which should prevent periods of excessive over supply. For UDW drilling, it takes more time to drill the UWS wells and this is the reason behind the dramatic increase in the number of UDW rigs used. A significant number of UDW discoveries are yet to be developed and this should add to the demand for rigs. For jackups, there is an increasing need for higher spec jackups, and the lead time to secure them has almost doubled from 9 to 18 months. The panelists were in consensus that current stock valuations do not reflect sector fundamentals.
BANKING & SHIPPING PANEL DISCUSSION
Socrates Leptos-Bourgi, Partner, Global Shipping & Ports Industry Leader - PwC
Harris Antoniou, Managing Director, Energy, Commodities & Transportation - ABN AMRO
Michael Parker, Global Head of Shipping - Citi
The Banking and Shipping panel analyzed some of the issues banks are currently facing that restrict their ability to extend loan finance in general and to the shipping industry in particular. Such issues relate primarily to capital adequacy considerations and regulator pressure and are expected to continue to be at the forefront in the short to medium term. Companies seeking to raise loan finance need to be well capitalized, have projects with visible cash flows and be ready to accept tighter terms on such loans. Smaller companies are likely to face more difficult conditions in attracting loan finance, so should be preparing themselves to find alternative sources of finance, such as organizing themselves in more transparent and corporate structures or improving their corporate governance. The panelists suggested this may lead to some consolidation in the industry for smaller players since larger entities will likely be more attractive to finance providers, including banks.
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