Determinants in the Lay-Up Decision: An empirical study on offshore support vessels
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- Master Thesis 
When a downturn hits the cyclical offshore service industry, shipowners attempt to improve their cash flow and the market balance by laying up vessels. The purpose of this master thesis is to evaluate how micro- and macro-level determinants affect the lay-up decision for platform supply vessels (PSV) and anchor handling tug supply vessels (AHTS) in the North Sea. This is done by investigating how vessel characteristics such as age, size, and technical specifications, along with market variables including the oil price, spot rates, and utilisation ratio, affect the probability of a vessel to be laid up and to stay in lay-up. For this analysis, panel logistic regressions and Cox proportional hazard models are specified. The results indicate that the market condition is the most important determinant in the lay-up decision for both PSVs and AHTS vessels. The lay-up probability for a vessel increases when spot day rates, the oil price, and the share of vessels that is chartered (utilisation) are lowered. However, some vessel characteristics also have a significant effect, most evidently for PSVs. In line with my expectations, older, smaller and less fuel efficient PSVs have a higher probability of being laid-up. For AHTSs, old vessels also seem to have a higher lay-up probability. Regarding size, the lay-up probability appears to be at the highest for vessels with around 20,000 brake horsepower, and then decrease for more powerful vessels. Other technical specifications, does not appear to substantially affect the lay-up decision on an aggregated level, for neither PSVs nor AHTSs. This thesis contributes to the limited research on offshore support vessels (OSV) in general, and specifically the lay-up decision. Most of the previous OSV studies concern rate formation and vessel routing, while the lay-up decision mainly has been studied for shipping in general and ignoring vessel-specific factors. The research in this thesis can also be of interest to market participants, investors and analysts to predict which vessels are most likely to be laid up.