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Comment on the Maritime News
January-March 2003
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OIL AND SHIPPING HAVE LESS
INFLUENCE IN EUROPE THAN IN THE U.S.
The EU is in the process of eliminating all single-hull
tankers from European waters by 2010, only six years from now. By
contrast, the influence of the oil and shipping industries in Washington ensured
that the Oil Pollution Act of 1990 (OPA90) allowed them 25 years to do the same
thing. As a result, single-hull tankers looking for a market will still be
trading to the U.S. after they can no longer trade to Europe. Note also
that OPA90 does not apply to tankers calling at LOOP or lightering in the Gulf,
with the result that the largest single-hull tankers in the world still come to
the U.S. daily and will continue so to do indefinitely. OPA90 also doesn't
apply to vessels under 5,000 GT and the Europeans will include small vessels in
their phase-out. Tim Colton,
March 28,
2003.
GD CONTINUED TO
OUTPERFORM NG IN 2002. The "big two" both
published their results for 2002 on March 24. The figures for their
shipbuilding operations are summarized below. The reason for the big jump
in the NG figures in 2002 is that 2001 didn't include the full value of the
acquisition of either Litton or Newport News. There are no new surprises
in the management discussion: GD was unhappy with the TOTE contract, NG with the
Polar Tankers contract. No revelations concerning the outcome of the
American Classic Voyages fiasco, either: I guess we're never going to be told
the full story.
Not much comment is needed. GD is clearly doing better than NG - higher profit margin, higher revenue per employee, higher asset turnover. It's interesting that NG has almost twice the assets per employee that GD has but still only generates about 72% of the revenue per employee. And now NG is hurling more and more CapEx money at both Ingalls and Avondale, telling Mississippi legislators that it needs to do this to stay competitive with GD. One of these years they may work out that it's not the facilities that are the problem, it's the management. Tim Colton, March 27, 2003.
|
Year |
Total Revenue ($mm) |
Operating Profit ($mm) |
Profit as a % of Revenue |
Total Assets ($mm) |
Annual Dep'n ($mm) |
Cap Ex ($mm) |
Total Employees |
Asset Turnover |
Revenue per Employee ($) |
Assets per Employee ($) |
CapEx per Employee ($) |
| General Dynamics Marine Systems (EB + BIW + NASSCO + AMSEA) | |||||||||||
| 2001 | 3,612 | 310 | 8.6% | 1,731 | 52 | 119 | 18,900 | 2.1 | 191,000 | 91,600 |
6,300 |
| 2002 | 3,650 | 287 | 7.9% | 1,933 | 60 | 81 | 19,000 | 1.9 | 192,000 | 101,700 |
4,300 |
| Northrop Grumman Ships (Ship Systems [Ingalls + Avondale] + Newport News) | |||||||||||
| 2001 | 1,880 | 19 | 1.0% | 6,040 | 82 | 44 | 32,500 | n/a | n/a | n/a |
n/a |
| 2002 | 4,712 | 306 | 6.5% | 6,532 | 147 | 76 | 34,000 | 0.7 | 139,000 | 192,100 |
2,200 |
INGALLS' UNIONS
GOT A PRETTY GOOD DEAL. Under the new four-year
agreement between Ingalls Shipbuilding and its unions the current journeyman
rate goes from $16.37 to $18.32 in three increments - $0.55 now, $0.65 after 16
months and $0.75 after a second 16 months. In addition, every employee
will get a single lump-sum payment of $3,000 now. The health care plan has
been improved in a number of ways, with increases in employee contributions that
are equivalent to about $0.21 an hour now, another $0.21 after the first 16
months and another $0.16 after the second 16 months.
According to Census data, the average wage for the whole shipbuilding industry is now over $17.00, so this deal puts Ingalls just about at the average level. But, Mississippi has the lowest cost of living of any state in the Union: shipyard workers in other regions might well expect to get paid more than those in Mississippi. So does this contract create a problem for other unionized shipbuilders? Tim Colton, March 15, 2003.
HORIZON LINES'
HORIZON SEEMS TO BE PRETTY CLOSE. A
discussion of the Carlyle Group's acquisition of CSX Lines can be found in the
Position Papers section. Click
here. Tim Colton, March 13,
2003, extensively amended March 14, 2003.
TEXT OF MATSON
ANNOUNCEMENT. Following is the complete text of
the memo dated February 28, 2003, "To All Matson Employees" from Jin Andresick,
President, and Brad Mulholland, Vice Chairman, of Matson Navigation.
Tim Colton, March 12,
2003.
Operating Cost Factors Cause Matson to Reconsider Investment in New Vessels
During the mid to late 1990s Matson adopted a vessel operating practice called "continue to operate" (CTO), which, as the words suggest, was primarily a "stay the course" strategy until the company could justify a vessel replacement program. The economic value of such a program had to overcome continuing lackluster performance of the Hawaii economy, ever increasing expenses across all segments without productivity offsets, and eroding profitability in the Hawaii service due to increased competition. As a consequence of running older tonnage, Matson's Hawaii service levels gradually began to deteriorate and it was felt that Matson could no longer push off the use of new vessels.
Primarily because of price and delivery consideration, Matson selected Kvaerner Philadelphia Shipyard, Inc., (KPSI), to begin its fleet replacement program. Even though this investment in two new ships was marginal from a financial perspective, after several months of presentations it was recommended to Matson's Board that we move forward with the understanding that alternatives of either vessel ownership and operation, or time charters, would remain open until delivery.
The cost model for the proposed operation of the Kvaerner vessels contained many assumptions, but justification was driven primarily by operating cost savings. During a series of meetings with representatives of our offshore unions beginning in 2001, these assumptions were discussed; however, labor cost savings vital to the project were not achieved and the investment no longer can be financially justified.
Changes since the original cost model was developed have raised the labor costs even higher. Clearly, the project to acquire and operate new ships is now even more uneconomic and can no longer be viewed as a reasonable investment. The company has, therefore, determined that the ships are not affordable under the present cost model and has requested that Kvaerner seek another buyer. This allows Matson the option to time-charter the ships, which lends itself to several, lower cost crewing options.
Matson cannot afford to make investments that do not return its cost of capital. We will take all prudent steps to ensure that we best position our company for the future. We will be communicating our efforts in this area to you as we proceed but wanted to share with you where we are at currently. we appreciate your understanding as we position our company for the future.
FELS FINANCES ANOTHER
JACK-UP FOR ENSCO. There's
no doubt that FELS builds a fine jack-up: they are the world leader in this
sector. ENSCO's decision to buy from FELS must have been made easier,
however, by the unusual financing provided by FELS. The shipbuilder, or,
presumably some related entity in the Keppel Group, will own 75% of the $105mm
rig: ENSCO has until two years after delivery, i.e., about four years from now,
to buy them out. And if they need to take a bit longer, what would be the
problem?
Given that FELS' parent, Keppel Group, is 51% owned by the Government of Singapore, does this arrangement constitute a subsidy? It certainly un-levels the playing field: what other rigbuilder could offer a deal like this? Tim Colton, March 7, 2003.
TEXT OF THE CAPPS
BILL. Following is the complete text of H.R.
880, which would, among other things, accelerate the phase-out of single-hull
tankers. Tim Colton, March 6,
2003.
H. R. 880
IN THE HOUSE OF REPRESENTATIVES
Mrs. CAPPS (for herself, Mr. FARR, Mr. ALLEN, Ms. SOLIS, Mr. BLUMENAUER, Mrs. DAVIS of California, Mr. BROWN of Ohio, Ms. WOOLSEY, Mr. SCHIFF, Mr. TOWNS, Mr. ENGEL, Mr. THOMPSON of California, Ms. NORTON, Ms. MCCARTHY of Missouri, Mr. SANDERS, Ms. LEE, Mr. STARK, and Mr. GRIJALVA) introduced the following bill; which was referred to the Committee on Transportation and Infrastructure, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned
A BILL
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
This Act may be cited as the `Stop Oil Spills Act of 2003' or the `SOS Act of 2003'.
Section 3703a of title 46, United States Code, is amended--
(1) by striking `2015' each place it appears and inserting `2007'; and
(2) in subsection (c) by amending paragraph (4) to read as follows:
`(4) Except as provided in subsection (b) of this section, a vessel that has a single hull, double bottom, or double sides may not operate after January 1, 2007.'.
(a) IN GENERAL- Subsection (f) of section 4611 of the Internal Revenue Code of 1986 (relating to application of Oil Spill Liability Trust Fund Financing Rate) is amended by adding at the end the following new paragraph:
`(3) RESTORATION OF TAX WITH RESPECT TO OIL TRANSPORTED ON SINGLE HULL OIL TANKERS- Notwithstanding paragraphs (1) and (2), beginning on the expiration of the 180-day period beginning on the date of the enactment of the Stop Oil Spills Act of 2003, the Oil Spill Liability Trust Fund financing rate under subsection (c) shall apply to--
`(A) crude oil and petroleum products entered into the United States for consumption, use, or warehousing if, at the time of entry, such oil or products are being transported on a single hull tanker; and
`(B) domestic crude oil exported from the United States on a single hull tanker.'.
(b) EFFECTIVE DATE- The amendment made by this section shall take effect on the expiration of the 180-day period beginning on the date of the enactment of this Act.
(a) IN GENERAL- Chapter 37 of title 46, United States Code, is amended by adding at the end the following:
`Sec. 3720. Restrictions on operation of single hull tankers
`A tanker that has a single hull shall not be used to transsport oil on navigable waters of the United States located within 100 miles of a coastline of
the United States, unless--
`(1) the vessel is traveling in the first or last 100 miles of a voyage from or to a port; and
`(2) while departing from or arriving at such port, respectively, the vessel is accompanied by oil spill response vessels.'.
(b) CLERICAL AMENDMENT- The table of sections at the beginning of chapter 37 of title 46, United States Code, is amended by adding at the end the following:
`3720. Restrictions on operation of single hull tankers.'.
(c) APPLICATION- The amendments made by this section shall take effect 180 days after the date of the enactment of this Act.
WHAT'S AN X-CRAFT?
No, the Navy's not going to start building 3-man
submarines. Today's X-Craft is a 50-knot sealift ship that can cross the
Atlantic if it slows down to 20 knots. If you hadn't heard about it
until this week's announcement of a $60mm contract award to Titan Corp. and
Nichols Brother Boatbuilders, there's an effective short briefing on the ASNE
web site - find it at
http://www.navalengineers.org/Sections/Flagship/xcraft.pdf .
Tim Colton, February 27,
2003.
ENSCO'S OSV FLEET.
Listed below, by type and horsepower, is the OSV fleet
that Tidewater just bought from ENSCO. The average age of ENSCO's fleet is
20 years, so Tidewater just increased the average age of its fleet. Why is
Tidewater buying a bunch of old boats instead of building new ones, apart, of
course, from the fact that, at less than $3mm each, these boats were cheap?
Tim Colton, February 20,
2003.
| Vessel | Type | GT | Age | Length | Speed | B Pull | HP | Shipbuilder |
| ENSCO KODIAK I | AHTS | 455 | 18 | 225 | 15 | 150 | 12,280 | Halter Marine, Inc., New Orleans LA |
| ENSCO TITAN | AHTS | 462 | 26 | 230 | 17 | 125 | 9,000 | Halter Marine, Inc., Moss Point MS |
| ENSCO TROJAN | AHTS | 488 | 26 | 229 | 17 | 110 | 7,240 | Halter Marine, Inc., Moss Point MS |
| ENSCO ATLAS | AHTS | 289 | 18 | 195 | 12 | 65 | 6,140 | Marine Fabricators, Inc., Green Cove Springs FL |
| ENSCO REPUBLIC | AHTS | 296 | 19 | 198 | 12 | 75 | 6,140 | Moss Point Marine, Inc., Escatawpa MS |
| ENSCO ADMIRAL | DP Supply | 287 | 17 | 231 | 13 | 3,000 | Moss Point Marine, Inc., Escatawpa MS | |
| ENSCO CAPTAIN | DP Supply | 287 | 18 | 231 | 13 | 3,000 | Moss Point Marine, Inc., Escatawpa MS | |
| ENSCO COMMANDER | DP Supply | 287 | 17 | 231 | 13 | 3,000 | Moss Point Marine, Inc., Escatawpa MS | |
| ENSCO NAVIGATOR | DP Supply | 287 | 17 | 231 | 13 | 3,000 | Moss Point Marine, Inc., Escatawpa MS | |
| ENSCO PILOT | DP Supply | 287 | 17 | 231 | 13 | 3,000 | Moss Point Marine, Inc., Escatawpa MS | |
| ENSCO PRESIDENT | DP Supply | 287 | 16 | 231 | 13 | 3,000 | Moss Point Marine, Inc., Escatawpa MS | |
| ENSCO CLIPPER | Supply | 293 | 20 | 173 | 12 | 3,000 | Moss Point Marine, Inc., Escatawpa MS | |
| ENSCO MONITOR | Supply | 285 | 22 | 180 | 13 | 3,000 | Quality Equipment, Inc., Houma LA | |
| ENSCO TARTAN | Supply | 293 | 20 | 180 | 12 | 3,000 | Moss Point Marine, Inc., Escatawpa MS | |
| ENSCO COASTER | Supply | 295 | 19 | 180 | 12 | 2,250 | Rockport Yacht & Supply Co., Rockport TX | |
| ENSCO MARINER | Supply | 282 | 19 | 180 | 12 | 2,250 | Halter Marine, Inc., Moss Point MS | |
| ENSCO MASTER | Supply | 282 | 17 | 180 | 12 | 2,250 | Moss Point Marine, Inc., Escatawpa MS | |
| ENSCO CARRIER | Supply | 290 | 22 | 180 | 13 | 2,000 | Halter Marine, Inc., Moss Point MS | |
| ENSCO CRUISER | Supply | 274 | 22 | 184 | 12 | 2,000 | Houma Welders Inc., Harvey LA | |
| ENSCO CUTTER | Supply | 294 | 19 | 180 | 13 | 2,000 | Champion Shipyards, Inc., Pass Christian MS | |
| ENSCO GALLEON | Supply | 288 | 22 | 184 | 12 | 2,000 | Blount Marine Corp., Warren RI | |
| ENSCO RAM | Supply | 271 | 19 | 166 | 13 |