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PROPOSAL

Private Use

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Table of contents
1, 2 2.1 2.2 2.3 2.4 3 4 5 5.1 5.2 5.3 5.4 5.4.1 5.4.2 5.4.3 5.4.4 6 6.1 6.2 7 7.1 7.2 7.3 7.4 7.5 7.6 8 8.1 9 9.1 9.2 9.3 9.4 Introduction Proposal background Investment climate Cabotage Local content Nigerias main oil and gas companies Vision Proposal Scope of service Marine logistics Facilities engineering Technical procurements Others Local presence Management Capabilities Working capital Strategy Local resource Quality Activity grouping Base office Management Contract Technical partners Marketing Vessels Offshore support vessels Types of vessels Charter Time of permanent charter Voyage or spot charter Market outlook Table daily charter rate

page
1 2 3 3 4 4 5 5 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6 6 7 7 10 9 9 11 12

iii 10 10.1 11 11.1 11.2 11.3 11.4 11.5 12 12.1 12.2 12.3 12.4 13 13.1 13.2 13.2.1 13.2.2 13.2.3 13.2.4 13.2.5 13.2.6 13.2.7 13.3 13.3.1 13.4 13.5 13 15 15.1 Commercial and economic viability Anchor handling tug and supply vessel Viability Chart (Cost Analysis) Cost Factor Running Cost Revenues ( @ Charterers Expense) Profit Analysis Pay Back Time S W O T analysis Opportunities and threats Strength and weakness SWOT matrix Summary SWOT analysis Organization Organizational chart Man power plan Man power requirement vessel Crew certification Experience Local crew Foreign crew Crew salaries and incentives Crew change Man power requirement- office Wages and incentives Base office infrastructures Registration Conclusion Intended Vessel For Purchase Survey Status Report 13 15 16 16 17 19 20 21 22 22 23 24 25 26 26 27 27 27 27 28 28 28 29 29 30 30 31 32 33 34

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PROPOSAL ON OFFSHORE SUPPORT SERVICES VESSELS.


1, INTRODUCTION

The MARITIME TRANSPORT industry is known to be very extensive, it also encompasses a very lucrative business venture in its many dimensions. One of its major sub-sectors, is the TRANSPORT SERVICE in the OIL & GAS INDUSTRY known as the OFFSHORE OIL FIELD SUPPORT SERVICES. In this sub-sector are wide range of maritime investments opportunities, which with the right footing, vital technological capabilities, good technical know-how, modern managerial expertise and adequate information networks, an INDIGENUOS marine shipping company or an oil service company, can be made a success story.

Private Use

2,

PROPOSAL BACKGROUND

The NIGERIAN OIL INDUSTRY, consisting of the Upstream and the Downstream sector; ( Exploration and production activities :- Upstream , and Distribution :Downstream ), is a dynamic and blossoming industry that is a constituent of the international acknowledged GULF OF GUINEA blocs, a source of interest to the global oil industry. It consist of several segmented, but continuously linked blocks of large and small holdings worked by various international and indigenous operators, under various forms of Petroleum Contract Agreements; Joint Ventures ( JV ), Production Service Contracts ( PSC ), Risk Service Contracts ( RSC ) and Joint Development Zones ( JDZ) The oil fields distributed in Onshore and Offshore environments pulls an aggregate production figures equivalents to the OPEC production quota of about 2 million barrels daily, equivalent to an average of USD 140 million daily industry turnover. Nigeria has a dual economy with modern segment dependent on oil earnings, overlaid by a traditional agricultural and trading economy. The oil sector , which emerged in the 1960s and was firmly established during the 1970s is now of overwhelming importance to the point of over-dependence. The country is listed among the first 10 world largest oil producing countries. Oil provides about 95% of foreign exchange earning, and 65% budgetary revenues. As a result of the global increase in the price of oil, Nigeria is benefiting from additional inflows of capital into the economy. The boost of the prices also gave rise to additional activities for the oil company operating in the country, to increase their productions. Between 2002 and 2006 there are 168 field prospects consideration or planned to come o stream with reserves totaling 18 billion barrels of oil. Nigeria and Sao Tome / Principe in a JDZ agreement for 9 deep water oil blocks in the Gulf of Guinea, a newly opened area which holds an estimated 4 billion barrels of oil. Activities within this area will expand the horizon for service providers. Trends in the industry tends towards boosting the production capacity with the focus on MARGINAL fields explorations and DEEP OFFSHORE fields developments. This developments clearly providing new challenges for the industry, while also presenting new opportunities for service providers; to enable this enhanced development targets of the Nigerian oil industry.

The market size for operators and service providers in this situation, is therefore not determined by the transactionary volume of production quota, but by the development trends in the industry that emphasizes exploration thrusts with a view to enhance the production capacity of the industry.

Specifically for service providers, the opportunities are defined in the following segments: 1, 2, 3, Requirement to service existing land and shallow waters fields. Requirements to service contiguous deep offshore fields. Requirements to service new developments in marginal fields.

A profile of services in this context ranges from shipping, logistics, facility engineering to drilling and ancillary services. Variations in the requirements of each services are determined by the environments of field Onshore or Offshore and the peculiarities of the environments dynamics. Thus the picture of a dynamic, challenging and exciting sector is presented by a careful observation of the industry

2.1, INVESTMENT CLIMATE The government intention of transforming opportunities in the Petroleum sector of the economy to tangible LOCAL JOB OPPORTUNITIES, INDUSTRIAL GROWTH and WEALTH, as well as its desire to reduce over 80% of the USD 8 billon annual expenditure in the industry which flows out of Nigeria through Technical services and goods produced outside the country, has brought about the introduction of the CABOTAGE regime and the development of the LOCAL CONTENT POLICY. Both policies which are focused on the revamping of the economy, by creating an enabling environment for indigenous participation in the maritime sector and the oil and gas sector.

2.2, CABOTAGE Introduced to regulate the maritime industry, by restricting the participation of foreign vessels in our domestic trade, and to promote the developments of INDIGENUOS TONNGE, and related matters. It now offers the foreign partners the opportunity to participate through joint ownerships with local investors. 2.3, LOCAL CONTENT This policy also serves as a vehicle for the promotion of Nigerias indigenization in the petroleum industry, which is the quantum of composite value added to or created in the Nigerian economy through the utilizations of Nigerias resources and services in the oil and gas industry; that translates into the developments of indigenous capabilities, within acceptable quality, health, safety and environmental standards.

4 This policy is to increase significantly over a defined time frame the proportion of expenditure in the upstream sector, creating value addition in the economy. The federal government set a minimum target; of 30% local content in any oil and gas project by 2003; increasing to 45% by 2006 and 70% by 2010. Translating these targets into monetary terms, assuming the average annual expenditure of 10 billion USD, means that potentially 3.0, 4.5 and 7.0 billion USD would be spent in 2003, 2006 and 2010 respectively on local products and services. While this targets might look rather too ambitious and probably too unattainable within the allocated time frames, it would be appreciated that achieving even 20% local content translates to an annual expenditure of 2.0 billion USD on local products and services; which you will agree with me is quite SIGNIFICANT. This stands to correct the adverse effect of the over dependence on foreign capacity on the economy. The above throws more light on the wide horizon of opportunities open to us as indigenous oil service company.

2.4,

NIGERIAS MAIN OIL & GAS COMPANY

Shell, Exxon Mobil, Total / elf, Chevron Texaco Addax Esso Conoco.

3,

VISION

Our VISION is to participate in this huge and still emerging markets as a serious player, not only for profit but also for a long-term goal of establishing a concern with capabilities to provide the highest quality of service and leadership in our chosen sector.

4,

PROPOSAL

Our PROPOSAL is to set up an oil service company, to service the oil industry in Nigeria and possibly the other markets in the gulf of Guinea.

5,

SCOPE OF SERVICE
The SCOPE of service though not limited, will cover the following activities:

5.1,

MARINE LOGISTICS :- Marine transportation, freight forwarding and Supplies. FACILITY ENGINEERING :- Civil, mechanical, construction and underwater Engineering. TECHNICAL PROCUREMENT :- Marine, safety ,technical and tool Procurement. OTHERS :- Hydrography, drilling ancillaries and environmental engineering.

5.2,

5.3,

5.4,

The structure of the company will be designed to achieve within the afore mentioned scope the vision outlined. While the following defined the envisioned system. 5.5, Local presence as well as liaison with alliance partners, selected providers of the highest quality of services for our market. A management structure that accommodates these impute.

5.6,

5.7,

An equipment acquisition program at the core of company planning to enable; the development of exclusive singular capabilities. The need to maintain adequate working capital and all session flow in sustenance of growth program.

5.8,

6,

STRATEGY

The STRATEGY for achieving our objectives will evolve the deployments of a combination of two major elements. 6.1, LOCAL RESOURCE : As in contract, knowledge of the market, influence and technical / managerial expertise. QUALITY : Use of high quality technology and equipments sourced from International alliance to achieve competitive edge and innovation.

6.2,

7,

ACTIVITY GROUPING

An outline of the activity grouping in the strategy is an follows. 7.1, BASE OFFICE : Set up a strategic physical presence in the country. An office located in Port Harcourt is most preferred. MANAGEMENT : Assemble over time a highly efficient local team made up of seasoned and tested professionals to implement the company programs. CONTRACTS : Harness local resources outside the management for contracts influence and build into a powerful penetrating force and tool.

7.2,

7.3,

7.4. TECHNICAL PARTNERS : Simultaneously identify and develop foreign alliance within the service scope.

7.5,

MARKETING : Initiate the process for aggressive delivery of quality service to the market. VESSELS : Source and initialize trading with suitable vessels etc, that matches the market requirements. Our focus will be vessels in the class of offshore supply vessels, crew boats and anchor handling vessels.

7.6,

8,

OFFSHORE SUPPORT VESSELS

A profitable area of investment in the oil and gas service providing sector. These encompasses all vessels so designed to provide the needed logistics and supporting services as required in the oil and gas offshore locations and some locations within the inland waterways; services from Explorations, Drilling , Production and to the Exportation of the BLACK GOLD. These vessels are so designed to indicate the type of operations she will be engaged in or she will be deployed for; these explains why their names differs from one vessel to another, as names follows the peculiarity in their designs and operations. These vessels are more of purpose built while some are converted to suit the operational requirements.

7 8.1,

TYPES OF VESSELS :

The types of vessels deployed in the back-up services of oil industries include among others the following. Crew Boat Fast Crew Supply Boat Platform Supply Boat Anchor Handling Tug & Supply Vessel Survey Vessel Platform Maintenance Vessel Line Handling Vessel Hose Handling Vessel Utility Vessel Diving Support Vessel Jack up Barges Jack up Rig Semi Submersible Rig Pipe Laying Barge Offshore Maintenance Barge Shallow draft- water or fuel barge Floating Storage & Offloading Floating Production, Storage & Offloading Submersible Platform Transporter.

9,

CHARTER

In the oil and gas industry, the oil prospecting companies charter the various vessels used in carrying out all the required logistics and support services. The support vessels ( AHTS , PSV, CB and PMV ) are obviously chartered in the greatest numbers, and different oil prospecting companies adopt different polices, mainly to carry out the marine support operations at the best possible price. From Explorations to Explorations. Like in other parts of the world, the chartering business in transacted in USD, while in the industry the preferred mode of payment scheduled is by direct credit into a domicile account in a local bank or a foreign bank, or by a split payment by percentage into a local and a foreign account. ( The percentage is as directed by the vessel owner ) Chartering are always in two distinguished forms as spelt out in the BIMCO or other forms of customized charter party agreement. TIME OR PERMANENT CHARTER VOYAGE OR SPOT CHARTER.

9.1,

TIME OR PERMANENT CHARTER

This form of charter usually last between 1 5 years, in which case the vessel is chartered or employed for a definite period of time. Under this type of charter agreements the charter rate are fixed. However the charter party agreement is subject to a review and renewal at the expiration of the agreements stated time frames, but negotiable on terms profitable and mutually agreeable to both parties. The vessels usually chartered on this type of agreements are : Platform maintenance vessels Diving support vessels Line handling vessels Hose handling vessels Crew boats Anchor handling tugs & supply vessels Supply vessels. Drilling Rigs Semi submersible Rigs.

9 This type of charters are by mostly the major oil prospecting companies, who runs extensive drilling programs together with numbers of platforms and production activities. i.e. Shell, Exxon Mobil, Chevron, Agip and Elf.

9.2,

VOYAGE OR SPOT CHARTER

This the common and second most popular forms of charter in the oil and gas vessel sector. Under this charter a vessel is chartered for a voyage or specified number of voyages, The charter rates are very competitive and quit higher than the rates in the Time or permanent charter. Vessels commonly chartered under this agreements are : Anchor handling tug and supply vessels Crew boats Fast crew boats Utility boats Jack up Barges Survey vessels, and the other range of vessels used in the industry.

Table 9.4 indicates the daily charter rates as applicable to the oil and gas industry. And other factors that also contribute to attract a higher day rate are the level of outstanding technological innovations in the design and operations of the vessel. In Nigeria oil and gas sector, the offshore vessel utilization rate remain under the transportation support services sector, and has been on a high rise since 2004, through absorbing new tonnages and more second hand tonnages with an impressive daily charter rates. In the best case, the spot and term rates still remain at the same average level till mid 2005, which increased at the last quarter of the year. 9.3, MARKET OUTLOOK

The market of offshore support vessels is a relative static market. A few global players of any significance are determining the marke. While a few regional companies with similar services and quality is present in the West Africa market. The definition of the primary markets is based on the demand openness of the regional markets and the range of other competitors and market players. The primary market is Nigeria, while other market opportunities are in Gabon, Angola, Equatorial Guinea and Cameroon will be exploited.

9.4,

DAILY CHARTER RATE

( in USD / day ) as at May 2006.

s /no

TYPE OF VESSEL

BHP

NATURE OF OPERATIONS
Anchor running, rig positioning, rig moves / barge towing and supply operations. Supply of heavy drilling pipes, drilling fluids, Drilling bulks and other drilling materials. Repairs and maintenance of offshore sub sea Installations and platforms. Crew / field runs and supply of light weight Offshore locations materials. Fast crew / field runs of light weight cargos And equipment on tine basis. Diving for underwater installation , and well Head maintenance and SBM maintenance. Berthing and unberthing of crude oil export Tanker. Rout and environmental survey operations Offshore platform maintenance and repairs. Maintenance and repair of offshore units Pipe laying, platform and jacket installations

Day rate Time charter

Day rate Spot charter

Anchor Handling Tug and supply vessels

AHTS

6000 - 12000

6,000 12,000

12,000 25,000 6,000 12,000

2 Platform supply vessels

PSV

3000 - 5000

5,000 8,000

3 Platform maintenance
vessels

PMV

3500 - 7000

5,000 12,000

8,000 15,000

4 Crew boat

CB

1500 - 2000

2,500 4,500

5,000 7,000

5 Fast crew supply boat

FCSB

2500 - 3500

4,500 6,000

6,000 8,000

6 Diving support vessels

DSV

3500 - 4500

5,000 7,000

7,000 9,000

7 Mooring / Hose handling


vessel

4500 - 6500

5,000 6,500 4,500 6,000 35,000 25,000 45,000

6,500 8,000 6,000 8,000 45,000 60,000 35,000 45,000 60,000 80,000

8 Survey vessels 9 Jack up Barges 10 Offshore Crane Barge 11 Pipe Laying Barge

2500 - 3500 5000 10000 grt 5000 10000 grt 5000 10000 grt

Private Use

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10,

COMMERCIAL AND ECONOMIC VIABILITY.

The specific decision to invest in a maritime asset, such as a VESSEL in the oil and gas industries, is dictated by factors other than prestige and share pursuit of social goals. The main objectives among others is the profit motives ( PM factor ). In view of justifying the huge financial investment on such an equipment, the maximizations, and optimizations of performances, efficiency and profitability is the ultimate goal of the business. The financial goal or the target of optimizing profitability is predicated on the company wide long-term and short team strategic objectives. In view of the financial feasibility of the investment, I will use accurate and reliable datas put together on three specific cost items as follows. And based on several assumptions and estimates, projections are established for a period of 5 years. 1, Cost of vessel 2, 3, Average daily charter rate of vessel Average monthly operational cost ( OPEX ).

This datas are presented in net profit and estimated over 5 years period, as the payback period of the initial capital invested. We shall consider for an example the purchase, operations and maintenance of the following vessel: ( Second hand tonnage ).

1, Anchor Handling Tug and supply Vessel. ( AHTS )

Each investment items shall be looked into by using a FINANCIAL MANAGEMENT METHOD- to analyze the parameters and to find Valuation and the Investors rate of returns spread over 1.5 year and asset value; by using a COST AND BENEFIT ANALYSIS. ( As in the BLUE PAGES ) For the purpose of this Proposal, I will use VALUE as the observed value of the asset in the market place. The value which is freely determined by the supply and demand forces in the market place, where buyers and sellers negotiate a mutually acceptable price for an asset. The market value of the asset will help us determine the value of the asset: through VALUATION process. Which is the process of assigning a

12 value to an asset by calculating the present value of its expected future cash flow using the investors required rate of return as the discount rate. The basic security valuation model can be defined by use of a mathematical equation as follows. n Ct V = sum up ------------------t=1 ( 1 + R )t Ct t V = = = Cash flow to be received in year t . Number of years to final maturity. The intrinsic value or present value of an asset producing expected Future cash flows, Ct, in year 1 through n. Sum up the present value of the asset. The investors required rate of returns.

Sum up R

= =

R - The investors required rate of return, which is the minimum rate of return necessary to attract an investor to purchase or hold a security; considers the investors opportunity cost of making an investment, i.e. if an investment is made the, investor must forgo the return available from the next best investment. This forgone returns is an opportunity cost of undertaking the investment and consequently is the investors rate of return. We invest with le intentions of achieving a rate of return sufficient enough to warrant making the investment. The investors rate of return ( R ) is determined by the level of the risk premium that the investors think is necessary to compensate for the risks assumed in owing the asset. This is expressed in the equation bellow.

= Rf + RP,

where:

R Rf RP

= = =

The investors required rate of return. The risk free return. The risk premium.

The risk free rate of return rewards us for deferring consumption, and not for assuming risk, that is, it reflects the basic fact that we invest today to be able to make more on the investment latter. The risk free rate is used only as the required rate of return or discount rate, for risk less investments. The risk premium ( RP ),is the

13 additional return we must expect to receive for assuming risk. As the risk level increase, so will be additional expected returns. The above are presented below thus: ANCHOR HANDLING TUG & SUPPLY VESSEL AHTS

10.1,

* * *

Cost of vessel Average daily charter rate Average monthly operational cost

USD USD USD

2mn 12,000 29,700

Charter rate

- Daily $ 12,000

Monthly $ 305,000

Annually $ 3,660,000

OPERATING COST Crew / labour cost Insurance / survey Maintenance / repair cost Fuel cost Water cost Berthing cost Victual ling cost Overhead cost Miscellaneous cost Total

$ $

$ $ $ $

12,000 10,000 2,000 3,500 2,200 29,700

$ $ $

144,000 85,000 120,000

$ $ $ $

24,000 42,000 26,400 441,400

11,
11.1,

VIABILITY CHART (COST ANALYSIS)


COST FACTOR

Cost factors are the basis for the financial calculation. This section will highlight all the typical cost items attached to the vessel. Prior to the purchase of the vessel a better understanding of the investments cost item (vessel), is required in relations to the under listed factors; upon which the subject could be calculated to the nearest possible cost. Of interest shall be but not limited to the followings: 1, Vessels fuel consumptions / speed 2, Docking history and records 3, Maintenance records and procedures

14 4, Reputations of the last owners 5, State of the shipboard equipments 6, Class and insurance status. For the purpose of this calculation, we shall use an ANCHOR HANDLING TUG & SUPPLY VESSEL. Vessel Spec :BHP : 8000 BP : 100 T Plus Cost of vessel : USD 2.0 m Average Daily charter rate : USD 12,000.( lowest possible rate ) Projected productivity / utilization days : Projected idle days : Period in formants : 305 days. 60 days monthly & annually.

In reference to the pointers in page 34, indicating the factors used for the analysis of the investments prospects; as :
1, The constant use of the HIGHEST possible cost parameters of items, e.g. Vessel and operating cost. 2, The use of the AVERAGE / LOWEST daily charter rate. 3, The assumptions that the company will be operating in the most hostile and competitive disadvantage Environment.

The financial feasibility of the investment items and as well as the developments scenarios of the vessel will be assessed. Based on several assumptions and estimations of the under listed factors, projections are established for a period of 1 year, spread over 5 years. First, a short overview is given of the investment cost which will be followed by estimated revenues. Finally the financial framework will be discussed as a basis for the financial analysis. This will conclude whether the project is financially feasible. Also pf note is the detailed overview regarding the operational expense ( OPEX ) and capital expense ( CAPEX ).

11.2, 1, 2, 3,

RUNNING COST

Crew Salaries / PPE / Medical / Feeding Maintenance / Repair / Spare parts Insurance / Survey

15 4, Office administrative expense 5, Overhead expense 6, Miscellaneous expense.

**CREW SALARY: The vessel when on charter runs for 24/7, ( in port or at sea ). The wages estimate for crew and staffs presented bellow represents the present level of salaries as applicable to the sector, in addition to the salaries are operational incentives for the vessel personnel; ( rates are not fixed and is differs from company to company and also based on managements discretions ). Captain Ch / mate Ch / engineer 2nd engineer Oiler Bosun AB Cook Steward. ( Local ) ,, ,, ,, ,, ,, ,, ,, ,, 1 1 1 1 1 1 2 1 1 Total 320,000 150,000 250,000 120,000 45,000 60,000 45,000 ( 90,000 ) 45,000 30,000 1,110.000 ( @ 135 to 1 USD )

= USD 8,222.

** PPE / MEDICAL : The standard practice in the industry; are, all shipboard personnel are provided with PPE ( personal protective equipments ): 1 pair of safety shoes or safety boots 2,- pairs of coveralls 1 - hard hat 1 eye goggle 1 Hand gloves Note : the hand gloves and the eye goggles are supplied on wear and tear basis. While provisions for Medical services, are on retainership basis with an approved medical centre. PPE Medical x 10 crew = = USD 421 USD 1,778 annually annually.

** FEEDING : There are only two cost scenarios ( vessel on charter and vessel off hire ). Feeding cost when vessel is on charter is approx Feeding cost when vessel is off- hire is approx USD 10 per man per day. USD 8 pre man per day USD 3,000 monthly USD 36,000 annually

Feeding per month when vessel is on charter for 10 crew will be :

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In case charterers personnel are carried onboard ( as passengers ). The charterers are charged for boarding and lodging at minimum USD 55 , on each passenger.

** MAINTENANCE / REPAIR / SPARES : The cost on these subjects varies from vessel to vessel, and is based on the status of the shipboard equipment / machineries. Associated items are more of consumables, except in a breakdown repair situation. Preventive maintenance are subject to the requirements and provisions of the company and vessel plan maintenance schedule. For the purpose of this calculation ( in extreme cases ), standards used when if no detail cost are available, are to set aside about 5% of the value of the investment items, as annual maintenance cost. = = USD 10,000 USD 120,000 monthly annually

** INSURANCE / SURVEY : For P & I, Hull and Machinery insurance, classification society and flag state surveys ( annual, intermediate, special and docking survey ), an estimated annual cost projected are : = = USD 7083 USD monthly

85,000 annually.

** OFFICE ADMIN / OVERHEAD / MISCELLANOUSE EXPENSE : An estimate annual / monthly projection cost are: = = USD USD 7,700 92,400 monthly annually

11.3,

REVENUES

( @ CHARTERERS EXPENSE ).

This gives us a brief overview of the expected turnover of the vessel when she is operating at maximum output. 1, 2, 3, 4, 5, 6, Vessel charter daily rate Fuel Lubrication oil Water ( fresh water ) Berthing charges Feeding ( for charterers personnel, if carried onboard ). **DAILY CHARTER RATE:
Given the present market situation and the current market price of the vessel, assuming a daily charter rate of USD 8000 ( being the lowest average market rate now ). Estimated annual turnover : = = USD USD 12,000 x 305 annually

3,660,000

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** Additional source of revenues : A, BOARDING AND LODGING :- In case the vessel is meant to carry some charterers personnel onboard as passengers. A rate of between 30 % to 45 % mark up is charged on each passenger carried. B, FUEL, LUB OIL AND FRESH WATER :- If the ship owners are to supply Fuel / Lub oil and Fresh water for the operation of the vessel, the charterers are charged a mark-up rate of 15 %. C, AGENCY FEE :- A 25 % handling charges, are charged by the ships owner for any agency duties carried out.

11.4,

PROFIT ANALYSIS ( projected ).

The profit and loss account is used to compute the net income or deficit during the entire durations of the project. It associates the revenues with the direct cost that are needed to achieve these revenues.

** REVENUE :

** Sales Revenue

= =

USD USD

12,000 / day 305,000 / month = USD 3,660,000

** Total annual Rv / 365 days ** Operational Expense ( annual ): . Salaries / PPE / Medical / Feeding . Maintenance / Repairs / Spares . Insurance / Survey . Admin / Overhead . Contingency ** Total Expenditure ( annual ) ** Net Profit Before Tax **Bank Loan Repayment, (annual)

= = = = = = = =

USD USD USD USD USD USD USD USD

46,421 120,000 85,000 92,400 97,579 441,400 3,218,600 1,633,332

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**Profit After Tax **Corporate Income Tax @ 30% ** Net Profit After Tax = = = USD USD USD 1,585,268 475,580 1,109,688

11.5,

PAY BACK TIME :

This is the simplest financial decision for making investment project decisions. ( go-or-no-go decision). The Payback Time calculates the period of time in which the initial investment is recouped by the next revenue as generated by the project. Usually one can distinguish 2 types of payback time system, i.e. the simple payback time and the discounted payback time. The later takes into account the present value of tomorrows revenues, based on the discount rate and therefore considered the realistic of the two. The projected payback time in this project in review is approx 1.5 years.

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Quarterly Sheet 3000000 2000000 1000000 0 Q1 -1000000 -2000000 -3000000 Q2 Q3 Q4 Q5 Q6 Quarterly Sheet

12,

S W O T ANALYSIS

In highlighting the strategic marketing conception of the provision of offshore support vessels, the demand side takes a prominent place, and the approach will entails the followings: 1, 2, 3, We must have a customers- focus, We must also have to focus on defendable competitive advantage of our product. We have to ensure that the basis of these advantages are aimed on the long term Interests of the our customers.

In the SWOT analysis, we shall be using a number of strategic possibilities to formulate the future of the company. These are as follows: S W O Strength Weakness Opportunities

20 T 12.1, Threats

OPPORTUNITIES AND THREATS:

This which is the conclusion from the from the external factors that will be affecting the company is outlined as in the table below
Table 14.1.1. FACTORS FROM s/no EXTERNAL ENVIR-T 1 Customers 2 3 4 5 Vessel features Perception vessels Competition Economy

OPPORTUNINTIES Sufficient market, and extensive secondary Market opportunities. Favor for local company Proven vessels Cabotage ( old tonnage indigenous comp) Strong growth economy and oil / gas comp

6 7 8 9 10 11 12

Technology Demographic Government Size of market Potential competence Substitute products Intensity of compete-n

One of its kind ( multi purpose ) Local content policy Interesting market in and outside Nig (Continuously growing). Seasoned professional management Competitive day rates

THREATS Protectionism, erratic Demand. New tonnage ( Inter Comp ) Economy depending On oil product price / Fluctuation in prices. Communities Weak governmental Regulations. Regulatory cost of Going in / out of Nig. Protected markets Cheap local vessels -

12.2,

STRENGHT AND WEAKNESS

A defendable competitive advantages is based on the strength of the products features and the structure if the company. Using the value chain it enables us to determine the strength and the weakness of the company. In the value chain , 2 types of value adding activities can be determined. 1, The PRIMARY ACTIVITIES: - Which are the activities involve in the Production process and sales. 2, The SECONDARY ACTIVITIES: - Which are the supporting activities.

Primary Processes: Internal logistics Operational Processes External logistics Marketing & sales Services. Supporting Activities: Infrastructure of the organization

21 Human resources management Technology and Purchases. Using the value chain, a checklist can be produced to determine the possible STRENGHT and WEAKNESS of the company and its operations.
Table 12..2.1. FACTORS RFOM THE s/no EXTERNAL ENVIRONM-T 1 Innovations 2 3 Production Access to capital STRENGHT New types of vessels in the Market. Low cost man-power. Comparatively. WEAKNESS Low industrial environment. Low technical knowledge. No local access to against Good conditions. ( Banks on Recapitalization). Sales network opportunities In the sport market. Aged vessels. -

4 5 6 7

Management Marketing Product Market

Seasoned professional Management. Direct sales / marketing. Huge investment in exploration By oil companies.

12.3,

SWOT

MATRIX factors in strength /

In analyzing SWOT further we shall plot the potential weakness as against the factors in opportunities / threats.
Table 12.3.1 S W O T Analysis OPPORTUNITIES THREATS STRENGHT Growth Defense

WEAKNESS Improves Problems

The strategies from the cell combinations of Opportunities and Strengths, will contain a defendable competitive advantage. This combinations have to be exploited as much as possible. For each of the combinations in this way strategies can be defined. Improvement strategies for opportunities and weakness, Defense strategies for threats and problems when weakness and threats are combined.

Table 12.3.2

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O - OPPORTUNITIES 1 2 3 4 5 6 Market potentials Investment in oil and gas Positive economic outlook Vessel known in the market Competitive prices Favors local companies 1 2 3 4 5 6 T - THREATS Strong market players present Erratic demand Quality workforce Weak government, corruption Communities Market protectionism

1 2 3

Low cost man power New type vessels Seasoned professional management

1 2 3 4 5 6

No technical knowledge No industrial environment No committed workforce Financial banking system Sport market focused Aged vessels W WEAKNESS

STRENGHT

12.4,

SUMMARY OF S W O T ANALYSIS

1,

GROWTH strategies : O 1, 2, 4. S 1, 2, 3. O2 S3 - Price / quality focused marketing strategies. - Compete in regional market intensely.

2,

IMPROVEMENT strategies : O1 O4 O6 O1 W5 W5 W 3, 4 W6 Exploit the home market. Use relations and expand home market. Focus on training of local workforce. Expend the sale market.

3,

DEFENSE strategies : S 1, 2, 3 T3 S3 T5 S2 T2 S2 T6 Price competition with regional players. Enter niche market; security. Use surplus of capital for period of slow growth. Try to enter protected market, and protect your market.

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13,

ORGANISATION

13.1, ORGANISATIONAL CHART

MANAGING DIRECTOR

OPERATIONS MANAGER

CAPTAIN

OPERATIONS OFFICER

SECRETARY

CHIEF MATE

CHIEF ENGINEER

DRIVER

CLEANER / MESSENGER

SECURITY / GATEMEN

DECK HANDS

ENGINE ROOM TEAM

COOK, STEWARD ROOM BOY.

24 13.2, MANPOWER PLAN

The company manpower requirements to effectively manage the operations of the companys fleet, ( shipboard management and shore base management ) shall include but not limited to the following: MANPOWER REQUIREMENT VESSEL

13.2.1,

Vessels on charter to various oil companies in the oil and gas sector, runs for 24 hrs of the day; either in the port or at the oil field locations. The personnel requirements necessary to carry out such task varies from vessels to vessels, this in a large extent takes its bearing from the type of vessel and from the nature of operations she is deployed to. Quality crew and quality ships are functions of quality management, as it is on the managements that the onus to provide quality crew and ships falls. In line with the requirements of any vessels flag state, which stipulates the minimum number of crew the vessel should be operated with; there are however some operational requirements which makes provision for the numbers of crews to be increased with respect to the safety requirements of the vessel. ( This gives the vessel adequate hands to deal with any emergency situation that may arise in the course of her operation offshore.)

13.2.2,

CREW CERTIFICATION

All crew documents shall be to the standards as provided by IMO in STCW 95 and shall be so relevant to the operations and the capacity of the vessel the crew will be deployed to. Shall also be from a recognized institution or organizations and as suitable and acceptable for operations off the cost of West Africa and near continental or unlimited sea areas.

13.2.3,

EXPERIENCE

Crew shall have a considerable numbers of years of experience in the operations of offshore service vessels.

13.2.4,

LOCAL CREW :

Presently Nigeria have qualified offshore oil and gas service vessels crew, available and relatively cheaper when compared to the foreign crew.

25 13.2.5, FOREIGN CREW

The requirements for foreign crew is gradually becoming unpopular, this is as a result of the availability of experienced qualified local crew, high rates of wages coupled with the cost of flying them in / out and the high cost of maintaining them here in Nigeria. The crew requirements in line with our proposed vessel or vessels, shall be as listed below. It will be on the interest of the company to commence operations with standard crew, capable of swapping from one vessel to another , i.e. capable of undertaking the different types and nature of operations of all the vessels in the company fleet.

Anchor Handling Tug & Supply Vessel :


Captain Chief mate Chief Engineer 2nd Engineer Oiler Bosun Ab Cook Steward 1 1 1 1 1 1 2 1 1

13.2.6,

CREW SALARIES AND INCENTIVES :

The wages below represents the present average salaries for merchant marine seamen onboard oil and gas support service vessels in Nigeria. These are relatively cheap when compared to what is been paid to foreign seamen.
* * * * * * * * * * Captain Chief mate Chief engineer 2nd engineer Electrician Oiler Bosun Ab Cook Steward 320,000 150,000 250,000 120,000 75,000 45,000 60,000 45,000 45,000 30,000

All in Naira.

INCENTIVES- (a):- ( Subject to the management discretions ), Though some soft packages are provided for those vessel that are engaged in the most difficult task and operations, i.e. Those on Anchor Handling vessels , are given some monetary incentives for operations like:- Anchor running , Rig moves, and Towing operations. ( b ) : Foreign operation or voyages :- For any voyage outside the territorial waters of Nigeria, the crews are always given some allowance, payable at the end of the

26 voyage, or if the operations is for a longer period, the personnel get paid onboard at the end of every month.

13.2.7,

CREW CHANGES

Crew rotations ( Rota ) or changes have over the year been a subject of concern to the oil prospecting companies. Each company have adopted a procedure they deemed suitable to their individual working environments and needs. Except otherwise when been prompted to comply by the applicable requirements of the host oil clients; all vessels operating company operate under different types of crew change systems. However due consideration shall is always given to the companys financial status and the numbers of vessels in the company fleet. The under listed are the commonly used system as at present: 3 months on 2 months on 6 weeks on 4 weeks on 2 weeks on 1 month off 1 month off 3 weeks off 2 weeks off 2 weeks off.

In our case we shall adopt the 3months on and 1 month off system, pending when the company is buoyant enough to accommodate any other system.

13.3,

MANPOWER REQUIREMENT

- OFFICE.

As earlier mentioned that the onus of providing a quality ship / crew lies on quality management; the requirements for base operation management personnel shall be limited to a minimum numbers of resource personnel in the management of offshore oil field support vessels operations will be in key positions to keep the system running at a minimum cost in attempt to achieve maximum profit with less overhead. With reference to the organizational charts, the following personnel shall be require to handle the day to day running of the company from inception.

Base Operation Manpower :

Total - 6 1 1 1 1 1 1 2

Operations manager Operations Officer Account officer Secretary Driver Cleaner / Messenger Security / Gate man ( If required )

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The requirements for additional personnel will be subject to the increase in the numbers of vessels.

13.3.1,

WAGES / INCENTIVES :

Base personnel remunerations shall be relative to and subject to the level of education and class of certificates / competency and years of experience. Incentives are subject to managements discretions. Operations Manger Operations officer Account officer Secretary Driver Cleaner / Messenger Security / Gate man To be discussed 50,000 35,000 25,000 15,000 10,000 15,000 ( optional ).

13.4,

BASE OFFICE INFRASTRUCTURE

To enhance the vessels operation and the provisions of the logistics supports for the companys vessel operation offshore, a reasonably furnished complex, presentable and good enough to accommodate the operations managements personnel will be of an added value. Also to complement the above are the followings: Good furnitures and office fittings Generator set Vehicle for operations movements.

13.5,

REGISTRATION

Whatever legal entity to be chosen, the company will be registered by the following: Corporate affairs commission DPR ( NNPC ) Special category NMA ( Cabotage compliant permit ) NPA. Waterways operational permits.

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14,

CONCLUSION

With the Nigerian government vision / commitments to promote local indigenous company by signing the LOCAL CONTENT POLICY and THE CABOTAGE BILL into law, there has been no better times for indigenous enterprise in the oil and gas sector. The projected acquisition is obviously feasible in the sense that Nigeria and the rest of the Africa offshore oil and gas sector is at its peak period. The tight market being currently experienced in the sectors shipping services is as a result of the increasing offshore activities, which has necessitated the increase in the demand for offshore support vessels. A minimum of 40% profitability margin in projects, guarantees very competitive returns on investment globally. Thus a project of this nature recommends itself, to investors in the medium and long term basis.

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Intended Vessel for Purchase