Where Does the Time Go?

So, the end of 2009 is rapidly approaching. Did the year deliver what we thought it would? I'm not sure, but I think it delivered everything that we feared it would.

It's a funny thing, time. Use it wisely and you have a success on your hands, but get it wrong and the consequences can be dire. Just look at the variations in assets prices across the last cycle.

If we look at the bigger picture, the global economy, there have been signs for some hope of a recovery. But then, just as we start to feel perhaps, a little Christmas cheer, we hear the news of Dubai and its' problems. The world went back into shock and markets across the world fell again. It seems that all the bad news is not yet in the public domain. How much more to come? How many more set backs?

Shipping, including the offshore sector, could still very well hold a major shock yet to come. The order books are still bulging, spreading through to 2012. The hope must have been that things would have recovered by the time all this steel delivered, but surely, now that looks increasingly unlikely, and the banks will have to take yet more overvalued assets onto their balance sheets. The numbers are not small either!!

Despite a sustained oil price of over $70, offshore activity still appears sluggish in many locations. It begs the questions what is going to be required to kick start the oil patch again, and when will it happen?

Day rates are depressed just about everywhere, some more than others, and still seem to be falling. The reasons for this appear to be different across the various sectors.

In the lower BHP/DWT range there are just too many boats, which is down to my favourite soap box subject, scrapping! It must be done or rates will just not recover to where they should.

For the higher end sectors it seems to be a very definite lack of demand, but this should correct itself when the activity levels increase again. Of course, when this will happen is the big question. The collective wisdom now seems to be hanging its' hopes on 2011. Which means that the beleaguered owners of these assets (and their banks) have another year to endure before the good times return.

And of course, the boats are still rolling out of the shipyards on a weekly basis, piling on more over supply.

It's no different for rigs either. There are a lot of rigs still to deliver, some purchased at eye watering prices, and a growing number of distressed assets.

All in all, it hasn't been a very rosy year, and the hoped for recovery still seems a distant dream. There is still an enormous amount of financial risk in the system, and where it will land is still uncertain. But it seems likely that the banks will take the lions share of the bad news. Of course, all of this bad news will no doubt provide a wealth of opportunities for those with access to debt and equity, and there are early signs of consolidations going on, and most of the distressed assets continue to be picked up by canny buyers.

We've seen the bad times before of course, but the last cycle was so good, and so sustained that I think many of us have forgotten what they were like, and then we have a whole generation of new people in the industry that have never seen it before. Reality bites!

The good thing is that we tend to be a resilient bunch, pragmatic, bordering on the cynical, and we'll keep our spirits up and plough through it.

Let's hope that things improve soon, and then maybe I'll get to write my infrequent blogs with a happier note.