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Bourbon Diversifies into Ethane Transport

INEOS
The Ingenuity, operated by Evergas (soon to be part of Bourbon) for American petchem firm INEOS

By MarEx 2016-03-30 03:59:54

Bourbon Offshore has announced the purchase of 100 percent of Singapore-based Greenship Gas, a gas transportation holding company previously belonging to JACCAR Holdings, Bourbon's majority shareholder. 

Bourbon cited difficult market conditions in offshore for the decision to branch out into shipping; it also said that "the direction taken by its customers towards the energy transition that is underway is driving BOURBON to seek the diversification of its activities to . . . open real growth prospects."

For $320 million, Bourbon has obtained Greenship and its young fleet of 17 vessels (average age 3.5 years), plus gas transportation services company Evergas and affiliated firm Greenship Gas Manager.

Evergas operates a fleet totaling to nearly 30 specialized vessels, including ethylene, ethane, propane and natural gas carriers. In its announcement, Bourbon highlighted that Evergas holds more than half of the global market share in ethane carriers – including the largest of the type, INEOS’ Dragon-class ships, which INEOS charters from Evergas to carry American ethane from Pennsylvania to Europe.

In addition to shipowning and operating assets, Bourbon has purchased 80 percent of gas carrier vessel design firm JHW Engineering and Contracting, a joint venture between JACCAR, Watts Gallop Group and shipowner Hartmann Reederei. JHW has recently designed and contracted for the construction of five of what will become the world’s new largest ethane carriers, three times the size of INEOS’ vessels, for use by a separate JACCAR-Hartmann venture on U.S.-to-Asia runs. 

In an investor presentation TuesdayBourbon chairman Jacques de Chateauvieux (also the owner of JACCAR Holdings) outlined the new strategy to enter midstream gas transport, saying that for Bourbon, “no growth is not an option.” The presentation highlights the opportunity in an abundant U.S. natural gas liquids supply, and the competitiveness of American ethane as a feedstock for Asian ethylene plants. 

JACCAR has financed $100 million of Bourbon’s purchase with a seller's credit, with no interest for three years, and Bourbon expects the balance to be paid with a bridge loan, also for three years. Once the transaction is completed, Bourbon said it would resell 80 percent of the ownership of Greenship’s vessels, enabling it to repay the bridge loan; in a sale-charterback structure resembling that for its existing offshore fleet, Bourbon will continue to operate Greenship’s vessels for at least another decade. 

The acquisition news follows reports last week that Mr. de Chateauvieux was considering buying the outstanding shares of Bourbon and taking it private. JACCAR controls 55 percent and Jacques’ brother Henri holds eight percent, putting their combined stake at nearly two thirds of the firm. In statements to media, Jacques de Chateauvieux denied the reports of a planned delisting.

Bourbon's financial performance has exceeded that of many of its peers in the offshore sector, due in part to relatively high utilization – Bourbon says that its young fleet, its 95 percent-plus uptime and its sector-leading safety record are behind its relatively solid sales performance – and in part to its ability to avoid a costly accounting writedown on the value of its ships. Idled vessels and capital impairments have sharply reduced many other offshore firms’ profit margins.