11/11/13 Shipbuilding Market Trends and outlook Offshore Runar Haddal Vice President Business Intelligence 13 Rolls-Royce plc The information in this document is the property of Rolls-Royce plc and may not be copied or communicated to a third party, or used for any purpose other than that for which it is supplied without the express written consent of Rolls-Royce plc. This information is given in good faith based upon the latest information available to Rolls-Royce plc, no warranty or representation is given concerning such information, which must not be taken as establishing any contractual or other commitment binding upon Rolls-Royce plc or any of its subsidiary or associated companies. Content Global shipbuilding market value Target markets for yards in Market shares within target markets Offshore market drivers Global newbuilding market outlook Summary 1
11/11/13 Methodology and definitions Value of global shipbuilding production Definitions and methodology ~ 3. vessels ordered since 5 Actual price statistics from IHS Fairplay Data approx. as per September (IMO) Estimates where prices are missing Based on representative types / sizes Elements of uncertainty: Differences with regard to equipment Regional differences Market situation Vessel contract year Vessel definitions Data suppliers and time lag Yard = Main Newbuilding Contractor
11/11/13 Vessel types 1. Accommodation. Accommodation Platform, semi submersible 3. Accommodation Ship. Accommodation Vessel, Stationary 5. AHTS/AHT. Air Cushion Vehicle Passenger 7. Air Cushion Vehicle Passenger/Ro-Ro 8. Articulated Pusher Tug 9. Asphalt Tanker 1. Backhoe Dredger 11. Barge 1. Barge Carrier 13. Bitumen Tanker 1. Bucket Ladder Dredger 15. Bucket Wheel Suction Dredger 1. Bulk Cement Carrier 17. Bulk Limestone Carrier 18. Bulk Wood Chip Carrier 19. Bulker. Bulker - Great Lakes Only 1. Bulker Great Lakes only / Dumb. Bulker Open Hatch 3. Bunker Tanker. Buoy & Lighthouse Tender 5. Buoy Tender. Accommodation 7. Accommodation Platform, semi submersible 8. Accommodation Ship 9. Accommodation Vessel, Stationary 3. AHTS/AHT 31. Air Cushion Vehicle Passenger 3. Air Cushion Vehicle Passenger/Ro-Ro 33. Articulated Pusher Tug 3. Asphalt Tanker 35. Backhoe Dredger 3. Barge 37. Barge Carrier 38. Bitumen Tanker 39. Bucket Ladder Dredger. Bucket Wheel Suction Dredger 1. Bulk Cement Carrier. Bulk Limestone Carrier 3. Bulk Wood Chip Carrier. Bulker 5. Bulker - Great Lakes Only. Bulker Great Lakes only / Dumb 7. Bulker Open Hatch 8. Bunker Tanker 9. Buoy & Lighthouse Tender 5. Buoy Tender 51. Cable Layer 5. Cable Layer / Repair 53. Chemical Tanker 5. Chemical/Oil Tanker 55. Container Ship 5. Crane & Construction 57. Crane Vessel 58. Crane Vessel, non propelled 59. Crew/Supply Vessel. Crewboat 1. Crude Oil Tanker. Cruise Ship, Inland Waterways 3. Cutter Suction Dredger. Deck Cargo Pontoon 5. Deck Cargo Pontoon, non propelled. Deck Cargo Pontoon, semi submersible 7. Deck Cargo Ship 8. Dredger (unspecified) 9. Drilling Ship 7. Drillship 71. Exhibition Vessel 7. Fire Fighting Vessel 73. Fishing Vessels 7. Floating Dock 75. FPSO Vessel types 7. FPSS 77. Fruit Juice Tanker 78. FSO 79. General Cargo Barge, non propelled 8. General Cargo Ship 81. General Cargo/Passenger Ship 8. Grab Dredger 83. Grab Hopper Dredger 8. Heavy Lift Ship 85. Heavy Lift Vessel 8. Hopper Barge, non propelled 87. Hopper, Motor 88. Hopper/Dredger (unspecified) 89. Icebreaker 9. Icebreaker/Research 91. Jack-up 9. Lighthouse Tender 93. Linkspan/Jetty 9. Livestock Carrier 95. LNG Carrier 9. LPG Carrier 97. Maintenance Platform, semi Submersible 98. Mechanical Lift Dock 99. Mooring Buoy 1. Mooring Vessel 11. Multi-Purpose Ship 1. Navy 13. Offshore Construction Vessel, jack up 1. Offshore Support Vessel 15. Offshore Tug/Supply Ship 1. Oil Well Service Vessel 17. Ore Carrier 18. Ore/Oil Carrier 19. 11. Activities, Inland Waterways 111. Pallet Vessel 11. Passenger Ship 113. Passenger Ship, Inland Waterways 11. Passenger/Container Ship 115. Passenger/Cruise 11. Passenger/Ro-Ro Ship (Vehicles) 117. Passenger/Ro-Ro Ship (Vehicles), Inland 118. Passenger/Ro-Ro Ship (Vehicles/Rail) 119. Pipe Burying Vessel 1. PipelayVessel 11. Pollution Control Vessel 1. Pontoon (Function Unknown) 13. Products Tank Barge, non propelled 1. Products Tanker 15. PSV/OSV 1. Pusher Tug 17. Rail Vehicles Carrier 18. Reefer 19. Refrigerated Fish Carrier 13. Replenishment Tanker 131. Rock Laying Ship 13. Ro-Lo 133. Ro-Ro 13. Ro-Ro/General Cargo 135. Ro-Ro/Heavylift 13. Safety Standby 137. Salvage Ship 138. Search & Rescue Vessel 139. Seismic Survey 1. Self-elevating platform 11. Semi-Sub Heavy Lift Vessel 1. Semi-Submersible 13. SheerlegsPontoon 1. Shuttle Tanker 15. Sludge Carrier 1. Spent Nuclear Fuel Carrier 17. Storage Tanker 18. Subsea & Construction Support 19. Suction Dredger 15. + another types 3
11/11/13 Shipbuilding Value Value of global shipbuilding production The big picture by segment 5 15 Number of vessels 7 Fishing Vessels Governmental Offshore Construction Offshore S&S Tugs & Workboats Cruise & Passenger 5 Offshore E&P Cargo Carrier Number of Ships 1 % 8 % % 8 1 3 % 5 1 % 5 7 9 11 13 YTD % 5 7 9 11 13 YTD
11/11/13 The big picture by owner region Number of vessels 5 / NA 7 1 % America Europe 8 % Asia Number of Ships 5 9 15 % 1 3 % 5 1 % 5 7 9 11 13 YTD % 5 7 9 11 13 YTD The big picture by yard countries 5 15 Number of vessels 7 Germany Italy Netherlands Japan 5 Number of Ships 1 % 8 % % 1 1 3 % 5 1 % 5 7 9 11 13 YTD % 5 7 9 11 13 YTD 5
11/11/13 Target markets Target markets for Norwegian yards Norwegian yards Orders by vessel type Number of vessels 1 1 1 % Ferries Seismic Survey 1 8 Fishing Vessels Anchor Handling 1 8 % Supply & Support Construction & Subsea 1 Number of Ships % 1 8 % % 5 7 9 11 13 YTD % 5 7 9 11 13 YTD
11/11/13 Norwegian yards Orders by owner region 5-13 YTD 8 7 Majority build for European owners: ~9% 5 Norwegian owners: ~75% 3 1 Europe CSV PSV AHTS Vessel Types Fish Seismic Ferries Asia America / Owner regions Target markets for yards in AHTS > 8 bhp PSV > 3 dwt Construction & Subsea (CSV) > 8 m Construction / Construction Support Oil Well Intervention Not including the heavy/large end Seismic Survey > 8 st Ferries -18 m European owners only Fishing vessels > m European owners only Not including Vessels built in US (Jones Act) Vessels built in Brazil (Local Content) 7
11/11/13 Global target markets for yards in 1 1 1 1 Number of vessels Seismic Survey 3 Fishing Vessels Ferries Anchor Handling 5 Construction & Subsea Supply & Support Number of Ships 1 % 8 % % 15 8 15 1 % 5 % 5 7 9 11 13 % 5 7 9 11 13 YTD NOTE: Not including US or Brazilian yards Global target markets by owner region Number of vessels 1 / NA 3 1 % America 1 Asia Europe 5 8 % 1 Number of Ships 1 % 1 8 15 1 % 5 % 5 7 9 11 13 % 5 7 9 11 13 NOTE: Not including US or Brazilian yards 8
11/11/13 Market shares Market shares for Norwegian yards Target markets PSV > 3 dwt - Market shares Yard countries 5 7 9 11 13 Malaysia Sri Lanka Vietnam Indonesia Japan Poland Netherlands Owner regions 5 7 9 11 13 18 / NA America Europe Asia 1 % 8 % % % % % 5 7 9 11 13 Malaysia Sri Lanka Vietnam Indonesia Japan Poland Netherlands is dominating and growing Low building costs Poor merchant markets Growing offshore market in Asia Fewer orders from European owners NOTE: Not including US or Brazilian yards 9
11/11/13 AHTS > 8 bhp - Market shares Yard countries 5 7 9 11 13 Vietnam Poland India Japan Italy Germany Indonesia Owner regions 5 7 9 11 13 19 / NA America Europe Asia 1 % 8 % % % % % 5 7 9 11 13 Vietnam Poland India Japan Italy Germany Indonesia Still a poor market after the boom also growing in this market Medium sized vessels in Asia (8-1 ) NOTE: Not including US or Brazilian yards CSV > 8 m - Market shares Yard countries 5 7 9 11 13 Canada Malaysia Poland Finland Netherlands Indonesia Owner regions 5 7 9 11 13 / NA America Asia Europe 1 % 8 % % % % % 5 7 9 11 13 Canada Malaysia Poland Finland Netherlands Indonesia is still dominating Increased attention from Asian owners Asian yards increasing shares () Mainly CSVs 8-119 m in Asia Trend towards larger vessels likely NOTE: Not including US or Brazilian yards 1
11/11/13 Seismic > 8 st - Market shares Yard countries 1 5 7 9 11 13 Germany UAE Japan Owner regions 1 5 7 9 11 13 1 / NA America Europe Asia 1 % 8 % % % % % 5 7 9 11 13 Germany UAE Japan Norwegian owners order 5% Norwegian yards have 5% share Since 1: 1. Mitsubishi (PGS). Kleven(Sanco, Rieber) 3. Ulstein(Polarcus) NOTE: Not including US or Brazilian yards Ferries -18 m - Market shares 1 Yard countries 5 7 9 11 13 Ukraine Finland Croatia Australia Italy Turkey Poland Greece 1 Owner regions 5 7 9 11 13 Europe 1 % 8 % % % % % 5 7 9 11 13 Ukraine Finland Croatia Australia Italy Turkey Poland Greece Over European yards since 5 Poland and leading 1-13 No orders for after 8 Turkey an increasing threat Greece is building only for Greece NOTE: European owners only 11
11/11/13 Fishing vessels > m - Market shares 1,,8,,, Yard countries, 5 7 9 11 13 Lithuania Chile Croatia Vietnam France Denmark Turkey 1,,8,,, Owner regions, 5 7 9 11 13 Europe 3 1 % 8 % % % % % 5 7 9 11 13 Lithuania Chile Croatia Vietnam France Denmark Turkey Majority ordered by (5%+) Many yards and very fragmented mainly building for Norwegian owners also going abroad Turkey increasing their share NOTE: European owners only Market shares by yard country based on value 1 % Turkey 8 % Japan % % Poland India Netherlands Indonesia % % 5 7 9 11 13 NOTE: Not including US or Brazilian yards, European owners only for Fish and Ferries 1
11/11/13 Market outlook Offshore market drivers Oil price as key market driver Number of vessels 8 $/bbl 1 7 Offshore contracting Oil Price 1 5 Connection between oil price, exploration, number of profitable fields and the need for offshore vessels 8 3 1 198 1985 199 1995 5 1 13
11/11/13 A lot of opinions around future oil price $/bbl 18 1 1 1 1 Oil Price Actual Barcleys Capital Bernstein Research JBC Energy Barcap IEA OPEC IHS DNB Capital Economics? 8 Shale oil / gas? Onshore? Iraq? Renewables? GDP growth? 198 199 1 Offshore and deepwater development Mn boepd Mn boepd 7 8 18 1 Offshore Onshore Deep Shallow 1 5 1 1 8 3 1 197 198 199 1 197 198 199 1 1
11/11/13 1 Offshore fields start-ups and discoveries Average water depth m 1 8 Discoveries Start-ups 8-1: % of oil and gas offshore discoveries in deepwater (boe) 198 1985 199 1995 5 1 Source: Clarksons Offshore E&P spending is increasing $ billion 35 1 % Shallow (>1'WD) 9 % 3 Deepwater (>1'WD) 8 % 3 5 15 1 5 5 1 15 7 % % 5 % % 3 % % 1 % % 5 1 15 Source: Douglas Westwood 15
11/11/13 Long term floater demand outstrip supply 31 Rig years 5 5 35 Rig demand forecast (left axis) Rig demand actuals (left axis) Rig supply (left axis) Number of Floater wells (right axis) Number of floater wells 1 1 1 3 5 8 15 1 5 5 1 15 Source: Rystad, IHS Petrodata, RS Platou 18 new floaters needed by 3 Mtoe 5 5 18 35 9 3 5 7 15 1 77 5 Current active fleet Units under construction for int. market Units under construction for Brazil Units to be retired (older than ) Additional demand by Total projected demand Source: Platou, Rystad, IHS Petrodata 1
11/11/13 North Sea AHTS / rig ratio 1,8 1, AHTS/active drilling units Historical Average 1,3 1, 1, 1,8,,, 5 7 1 1 15 Source: Arctic Securities & ODS Petrodata Market outlook for FPSOs 3 Canada SA mer < 1 m 1-15 m > 15 m SWA/M. East Meditteranean Australia/NZ GOM Demand for FPUs is sky-rocketing 1-1 FPSO orders next 5 years Around projects in total N. Europe W. Africa SEA Brazil Number of units 13-1 3 5 Source: IMA Studies 17
11/11/13 Subsea* markets Vessel Days 1 Increased adoption of subsea technology 9 Strong ultra-deepwater growth 1+ 8 Shallow water must not be disregarded 7 Field development driving growth Increased IMR demand 5 3 1 5 1 15 Source: Rystad * Vessels between 9 and 1 m Market outlook Newbuilding markets 18
11/11/13 Summary Very difficult to predict the next peak! Some markets will take a short term hit: Oversupply a risk for PSVs Temporary slowdown for CSVs markets are picking up: The market for AHTS will return, but when? Growth in seismic demand Replacement need for ferries and fishing vessels Solid long term fundamentals for offshore Tougher competition for Norwegian yards Will also depend on merchant markets Still, the market is moving in our direction Number of vessels by contract year 35 Fishing Vessels* > m Ferries* > m 3 Seismic > 8 st CSV > 8 m AHTS > 1 bhp 5 PSV > 3 dwt Vessels for advanced marine operations 5 1 15 15 1 5 * European owners only Thank you! 19