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Surviving the turbulence
TO navigate the current environment, offshore supply vessel (OSV) operators should continue to:
- Review and stress test current liquidity assumptions and forecasts. Companies must develop a firm understanding of liquidity runway, identify and manage key risks, and seize opportunities to extend themselves through what could be a prolonged market downturn.
- Reduce overhead costs to align themselves with market realities.
- Maximise fleet utilisation. With day rates dropping, the locking-in of contracts for longer time periods could help stabilise OSV companies' top lines and provide some predictability for the exploration and production companies that are also trying to stabilise their own costs. As long as marginal costs get covered, remaining cash flows can be used to service and reduce debt. A rigorous process should be implemented for each charter to see whether it can contribute in this way or to determine whether the vessel should be stacked or sold.
- Reduce capital expenditures in similar fashion to oil companies that have slashed their capital spending. OSV operators should do the same. Each company must identify and rank its own projects and cut out all spending that will not generate sufficient cash-on-cash returns.
- Negotiate better rates from their own service providers.
- Uncover slack and inefficiencies in their supply chains and reduce those costs.