Will the Vanguard Semi-Submersible Ultra Heavy Lift Ship Keep Dockwise Afloat?

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October 26, 2011

Dockwise Vanguard Type 0 Heavy lift transport ship

By Richard Spilman

Taking shape in the Hyundai shipyard in Ulsan, Korea is an engineering marvel. The Dockwise Vanguard, previously referred to as the Type-O design, is the largest and most advanced heavy lift vessel ever built.   At 275 meters (902 feet) long and 70 meters (230 feet) wide, the Vanguard can lift 110,000 tonnes and travel across oceans at 14 knots.  Virtually all of the space on deck is clear and available for cargo, and perhaps most remarkable of all, the ship lacks anything that would conventionally be referred to as a bow.

The Vanguard will have 50% greater lifting capacity and 70% greater deck area than the largest heavy lift ship now in service, the Blue Marlin, also owned by Dockwise, which can lift 73,000 tonnes.   Dockwise currently operates 19 heavy lift ships – the world’s largest fleet of semi-submersible vessels of various sizes and types.

The Vanguard, the Blue Marlin and the rest of the Dockwise fleet are ships designed to carry other ships, drilling rigs or anything else too large or heavy to be easily transported on a conventional ship.  They are semi-submersible heavy lift ships, which is to say that the ships are designed to be ballasted down so that their main decks go underwater, allowing their cargo to be floated aboard. The ships’ ballast tanks are then pumped out, the ship floats higher in the water, lifting its cargo, and is ready to sail wherever in the world the cargo needs to be transported.  In 2008, the Blue Marlin safely carried BP’s 60,000 tonne semi-submersible production rig, Thunder Horse, over 15,000 nautical miles from Okpo, Korea to Corpus Christi, Texas.

The new Dockwise Vanguard will give the firm the ability to transport even larger and heavier cargoes, including entire Floating Production Storage and Offloading units (FPSOs.)  The Dockwise Vanguard is expected to be delivered toward the end of 2012.  Two cargoes have already been booked for the new ship. The first will be carrying the Jack St. Malo platform hull from Korea to the US Gulf of Mexico for Chevron, immediately after the ship leaves the shipyard.  Two weeks ago, a second contract was announced, to carry the Goliat FPSO from Korea to northern Norway.

Dockwise currently has a record backlog, which is fortunate, as the global economic downturn and the Deepwater Horizon oil spill, which slowed new offshore construction, have both created challenges to Dockwise’s strategic plan.  Recently, Dockwise had to re-negotiate a covenant with its lender syndicate, temporarily waiving the leverage ratio – net debt over EBITDA (Earning Before Interest, Taxes Depreciation, and Amortization) for the period March 2012 until September 2013.  The Dockwise Vanguard is expected to cost roughly $240 million and was financed through debt and a $100 million rights offering.

The past several years have been challenging for company so dependent on transporting drill rigs and other over-sized equipment for the international oil companies.  Dockwise itself has also undergone major changes.

Dockwise was formed in 1993 through a merger between Wijsmuller Heavy Transport and Dock Express Shipping.  In 2001, Dockwise merged with Offshore Heavy Transport.  In 2006, the company was sold to Delphi Acquisition Holding I BV, a private equity investment vehicle of funds managed by 3i Investments.  In 2007 Dockwise merged with Sealift Ltd., another heavy lift operator. Also in 2007, Dockwise acquired two design and engineering companies and was listed on the Oslo Stock exchange.

Dockwise’s revenues have grown steadily, rising from US$ 252 million in 2006 to US$ 478 million in 2009 before leveling off in 2010 to US$439 million.   Earnings, however, have not been as robust.  Earnings in 2006 were US$ 61 million, as compared to US$37 million in 2009 and US$ 17 million in 2010.

Now, as the Dockwise Vanguard nears completion, the question remains – will international oil exploration recover sufficiently to keep Dockwise’s fleet gainfully employed and will the Vanguard give it the competitive advantage in moving the really large cargoes across the oceans of the world?

Dockwise is optimistic.  Andre Goedee, the chief executive, comments, “We have been particularly encouraged by clients’ reaction since we announced this investment decision. It is our expectation based on latest discussions with clients that we will surpass our initial revenue assumptions for the first year of operations. Clients have grasped the game changing potential of the vessel and made a valuable contribution to our thinking around the detailed design.”

Rick Spilman is a writer and naval architect with a background in ship design and operations and a BSE from the University of Michigan. He also earned an MBA at the Wharton School of Business at the University of Pennsylvania. He is the host of the Old Salt Blog.

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