Due diligence and valuation of an OSV owner-operator

Background

• The client is a subsidiary of a national oil company in Southeast Asia and a leading company in the field of energy shipping, marine and logistics services.
• Drewry was appointed by the company to carry out a due diligence of an investment in an Offshore Service Vessels (OSV) owner-operator company with operations in over five countries. 

Objectives

• To undertake global OSV (AHTS, PSV and Other Specialised vessels) market assessment and forecast of earnings and asset values;
• To conduct commercial due diligence of the target company and comment on the management team;
• To estimate charter free and charter attached values of the assets;
• To undertake business valuation of Asset co and Ship Management co to be owned by the proposed joint venture.

Approach

• The offshore market is presently on the upward trajectory driven by sustained increased in oil prices. Hence, it is a good time to invest in this market. However, Drewry also pointed out the volatility and imminent risks in this sector such as peak fossil fuel demand;
• The commercial due diligence highlighted some of the existing clauses in the charter parties which involved some risks and also advised some of the proposed changes for risk mitigation;
• A detailed risk analysis was completed to assess commercial and operations risks. Drewry also proposed risk mitigation measures.

Result Achieved

• The report also included key success factors and a SWOT analysis of the new venture;
• The target company was benchmarked against industry peers;
• A competitive analysis of over 40 companies across different geography was also conducted;
• Drewry estimated three scenarios for valuation of the Asset Co and Ship Management Co using DCF method.