Not the preferred exposure given our market outlook Siem Offshore Inc. is a strong Norwegian Offshore Supply player with operations in Brazil, West Africa, Gulf of Mexico and the North Sea. The company provides exposure towards the high-end AHTS, PSV and OSCV/MRSV segment with a total fleet of 33 vessels and ten newbuildings. The major driver for SIOFFs revenues is the global offshore E&P spending. Petroleum companies investments is driven by the level of the oil price, and demand for OSVs is positively affected by the number of offshore rigs, platforms and subsea wells. Since the financial crises demand has picked up, but the market continues to be dominated by oversupply. In 2013 global E&P spending is set to increase by 13%, with a high number of rig deliveries. Offshore activity in deepwater areas is the main contributor to this growth, as these operations are complex, driving vessel demand. Brazil and West Africa stands out as the regions with the highest expected growth, and SIOFF provides exposure towards both these markets. Petroleum companies prefer flexibility and quality of operations, and we therefore see a premium of dayrates and utilization going forward. On the other hand we see a strong supply growth, which will limit the upside potential of dayrates. The AHTS and OSCV/MRSV segment is best positioned as there are entry barriers limiting supply growth. However this is not the case for the PSV segment, and SIOFFs fleet of PSVs will experience limited earning growth. SIOFFs financial risk is modest as the balance sheet remains helalthy. Cash reserves is above USD 100m and only Farstad Shipping has a lower financial gearing. Based on our estimated value we see the company as fairly priced, providing a limited upside potential. This is supported by the relative valuation, where SIOFF looks somewhat expensive based on 2013 multiples.
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