Perhaps there’s no testimony more evident of Edison Chouest Offshore’s position as a global maritime giant than a lessor’s glowing remarks after the Galliano-based company signed on as a tenant at the famously ambitious-but-dithering Acu Superport.
ECO, it was said, is “an important anchor that will attract the entire chain of products and services” in maritime and oil-exploration industries to the Brazilian port. Chouest’s commitment distinguished a “new stage” at the multi-billion-dollar international gateway, which had been marred with construction delays and underwhelming success in business recruitment.
The spokesman was Eduardo Parente, CEO of the logistics firm Prumo, the restructured company managing the South American port since a U.S. investment firm last summer purchased controlling stock from its embattled Brazilian billionaire founder.
Chouest committed to a 15-year lease of 60 acres, including a 1,400-foot pier able to accommodate 12 ships, and further agreed to spend $431 million to construct the facility.
So perhaps the busiest servicer of deep-water Gulf of Mexico energy extraction is entrenching in Brazil, a nation that lays claim to an amount of subsalt crude that could, in estimation, make it one of the most oil-rich countries in the world – reportedly more than 100 billion barrels in reserves and government proclamations that the nation would produce 5.3 million barrels per day by 2020. For context, Gulf production averaged 1.8 million bpd at its modern peak in 2009.
The massive potential has so far largely been masked by lax development attributable to the state-run company Petrobras, dry wells and the cost of reaching the deposits, The Washington Post reported earlier this year, but it remains a mostly untapped spring that will likely beckon oil majors to partner with Petrobras and major servicers, like Chouest, to fulfill their needs.
Petrobras, with whom Chouest has some service work, already announced it would spend up to $148 billion on exploration in production through 2017 and stated its need for offshore supply vessels will jump from 220 last year to 420 by 2020.
Company spokesman Lonnie Thibodeaux did not respond to multiple voicemails left at his office or an email seeking comment for this story. If he had, he may have said something along the lines of: “The ability to design, build, own and operate diverse, high-capacity and technologically superior vessels has made ECO an unrivaled leader in the maritime industry,” as the company’s website boasts.
Fifty-four years ago, Edison Chouest founded the company Edison Chouest Boat Rental in Galliano. Edison was a commercial trawler, and when he purchased a 65-foot shrimp boat, he inherited a six-month supply contract with a rig owned by Exxon, The Associated Press reported following Edison’s death in 1998.
In 1975, the company’s first shipyard, North American Shipbuilders, delivered the Kirt Chouest. The harbor tug was the first self-built entry into the Chouest fleet, according to the website shipbuildinghistory.com. Growth was gradual until the 1990s, when the company began to emerge as the major service provider it has unequivocally become.
Today, the family-run company now helmed by Edison’s son Gary operates a fleet of nearly 250 vessels – ranging 87 to 360 feet in length – in oilfields globally. The fleet is versatile, capable of supporting construction, drilling, heavy lifting, sub-sea work and intervention.
Aside from being one of the world’s leading seafarers, Chouest is one of 11 large shipbuilders remaining in the United States following a period of closures and consolidation. ECO owns four shipyards along the Gulf Coast and one in Brazil.
The company employs roughly 10,000 people, according to a human resources estimate provided to the Tri-Parish Times last year.
“Building up Edison Chouest has involved thousands of man-hours and a
lot of risk,” Gary Chouest said when he accepted the Riviera Maritime Media Lifetime Achievement Award in London in 2012. “We have taken a lot of gambles and had plenty of long nights.”
Tulane professor Eric Smith, associate director of the university’s Energy Institute, said the company’s growth is the product of a long-standing commitment to innovation, workforce training and reliable, world-class service offered to its Big Oil partners like Shell, Chevron, Murphy Oil, ExxonMobil, Petrobras and others.
“They’re very large, and they’re very private,” Smith said. “What they’ve done for the period I’ve been familiar with them is build really, really good boats.”
Chouest, Smith said, typically takes an order from an oil major and builds exactly to the customer’s need. Prior to the shipbuilding, though, the company secures contracts to operating the vessels for the majors, completing tasks like towing rigs or shuffling people or supplies to platforms. A reputation for providing unique boats and a first-class crew helps Chouest renew many of its operations contracts with partners, Smith said.
Chouest was among the first service companies to institute a training facility in 2002 when the company opened a facility to teach operators dynamic positioning and other high-skill trades. So they taught workers how to operate computer-controlled, anchorless vessels and other specialized ships the company was innovating for U.S. markets.
Chouest constructed the first U.S. Antarctic icebreaking research vessel, the first dynamically positioned vessel in the U.S. fleet and the world’s first floating production system installation vessel, all at North American Shipbuilding, according to the company website. Not only were they building unique vessels to accommodate specific needs; they were training the workforce to man them.
“They were doing that when there were relatively few of these sorts of vessels in the Gulf. Now there’s lots of them in the Gulf,” Smith said. “But I think their training facility – I was only in it one time – but I would put it up against anything in Norway, where they sort of invented this technology.”
Because the company is privately held, it is not required to and does not release financial information for public dissemination. Estimated valuations of the company’s worth, however, start with the words multi and billion.
“Chouest is unusual in that private companies usually don’t get this big, but they’re able to generate enough cash flow to keep up the pace,” said Smith, adding that he thought the publicly traded company Tidewater is a fair point of comparison in terms of value. “Tidewater is a public company, and (Chouest) is a private company, but you’re talking about the same number of zeros.”
Tidewater, based in Houston, claims a fleet of more than 320 vessels working internationally. The company sold its Houma-based shipbuilding subsidiary, Quality Shipyards, to Leevac last year in conjunction with scaled down supply operations in the Gulf of Mexico.
Tidewater had a shareholders’ equity, or net worth, of $2.6 billion as of Dec. 31, 2013, according to the online financial database YCharts. The company generated $1.2 billion in revenue in the 2013 fiscal year, according to its annual report to shareholders.
Hornbeck Offshore, another publicly traded Texas-based marine transportation company, is also relatively comparable to Chouest, Smith said.
The company reported $548 million in revenue last year and as of Dec. 31, 2013 it had more than half a billion dollars in working capital, according to its annual report. Hornbeck’s shareholders’ equity at the end of the ’14 first quarter was $1.3 billion.
Hornbeck, which does have a lease at Port Fourchon, anticipates its fleet will reach 70 vessels by the end of next year, a number less than a third of what Chouest currently deploys. Hornbeck’s ships operate in the Gulf, Brazil, Mexico and the Middle East.
Further, Hornbeck was technically Lafourche Parish’s top taxpayer last year, contributing $3.6 million in local revenue, according to the parish assessor’s office.
But that’s because ECO’s ventures are fractured. The Edison Chouest subsidiary Nautical Solutions ranked third on the parish’s top-taxpayer list in 2013, paying a $2.6 million bill on $19.3 million in assessed value. Tenth on the list was another ECO holding, Offshore Service Vessel, which paid a $1.3 million bill on a $10.2-million assessment.
ECO has leveraged some money for political influence, spending $2.2 million for Congressional lobbying services related to the sea-transport industry since 2002, according to the nonprofit campaign finance tracker opensecrets.org.
To congressional candidates, it has pledged nearly $1.2 million since 1990, mostly to Republicans but also to Democrats, and overwhelmingly to incumbents. The top recipient of ECO donations in the ongoing midterm cycle is Maryland Democrat Elijah Cummings ($38,900), followed by Don Young, R-Alaska, and Duncan Hunter, R-California. The company has supported Louisiana’s Democratic senior Sen. Mary Landrieu ($23,700) more than her Republican challenger Rep. Bill Cassidy ($13,000).
More than 90 percent of deep-water Gulf of Mexico oilrigs are serviced out of Port Fourchon, and more than three-quarters of those are serviced from one of Chouest’s many Fourchon locations, Thibodeaux said in a press release last year.
The company began at Fourchon in 1996 with C-Port. Its terminal affiliates, support companies and other subsidiaries there now include C-Port 2, Martin Terminal, Chouest Shorebase Services, CLNG, Fourchon Heavy Lift, Galliano Marine Service, Offshore Support Services and C-Terminal.
“Their facilities generate about 33 percent of the revenue that the (Greater Lafourche) Port Commission gets from leases,” GLPC Executive Director Chett Chiasson said, noting that the port uses public money to develop port infrastructure and tenants spend their own money developing their leases. “They have invested hundreds of millions of dollars into the port commission’s property. The money that they put into the facilities makes their facilities world class.”
C-Port and C-Port 2 are the only Fourchon facilities that currently offer covered slips, Chiasson pointed out, and C-Port 3, with six covered slips targeting deep-water service, is due online later this year. Design has begun for C-Port 4, which could include up to 9 covered slips, Thibodeaux said last July.
“They helped develop Port Fourchon,” Smith said, pointing to the covered slips at C-Port and C-Port 2 as the factor that distinguishes the company from its other Gulf competitors. “You can back one of these big supply boats in to that slip, and hoses are available to refuel it, provide fresh water. Big overhead gantry cranes lower cargo in containers onto the deck. They can turn a boat around in a few hours, whereas doing it the conventional way might take a couple of days.
“I think Chouest is basically the go-to guy for that type of technology.”
ECO’s shipbuilding capacity has ramped up in the past decade. It opened Gulf Ship in Mississippi and Estaleiro Navship in Brazil in 2006, obtained Tampa Ship in Florida in 2009 and opened LaShip (formerly Chouest-owned North American Fabricators) in Houma in 2010. Chouest also holds Larose’s North American Shipbuilding, which opened 40 years ago.
“This is an incredibly active period in our company’s history,” Thibodeaux told The Associated Press in 2006 as ECO worked to expand its fleet to include a series of 278-foot platform supply vessels.
The company’s U.S. shipyards have delivered more than 20 vessels at least 278 feet in length since 2007. Prior to that, the company had built six ships of that size, though it has consistently built ships larger than 200 feet since the ‘90s.
While adding to its fleet that assists oil exploration in warm climates, Chouest has also been a leading innovator of anchor handling tug supply icebreakers for Alaskan drilling. In 2009 the company delivered to Shell the Aiviq, a $200 million icebreaker that at 360-feet long, was the largest ever built at an ECO shipyard.
Chouest will break its length record soon, however. At LaShip it will construct a 478-foot-long offshore construction vessel featuring the innovative X-BOW hull designed by the Norwegian company Ulstein Verft, the company announced late last year.
“I think, basically, they exceed the services that the majors expect,” Smith said. “They don’t sell anything particularly cheap, but they provide first-class equipment and well-trained crews. … Basically, they are experts at providing equipment that is tailor made to the application that the client has in mind.”
Last July, the company announced a new campaign to construct nearly 50 new vessels for operation in the Gulf, the Artic and Brazil.
The OCV was not included in the company’s new-build announcement queue. That lineup was highlighted by 17 orders of a 312-feet diesel-electric platform supply vessel, with options for 20 more, and it included 15 other vessels at least 303 feet in length.
Also commissioned were two icebreaking vessels, which would bring Chouest’s icebreaking fleet to six and make it the largest “designer, builder, owner and operator of icebreaking vessels in the U.S. industry,” Thibodeaux said at the time.
Not everything has been positive for the sprawling enterprise.
Capt. Wren Thomas III and his chief engineer were kidnapped by Nigerian pirates from the ECO supply vessel the C-Retriever last October. They were held hostage for more than two weeks before a peaceful, undisclosed agreement was reached.
Two years earlier, three Chouest employees were kidnapped from the C-Endeavor off Nigeria’s coast.
Thomas’ crew was able to hold off the siege for hours, but the absence of a secure refuge on board and the lack of piracy training offered by his employers made the hostage-taking inevitable, he relayed to the maritime news website gCaptain in an interview earlier this year.
“This perilous situation, which has already seen Americans kidnapped by Nigerian pirates, is erupting in a region filled with illegal activity ranging from fuel theft, corruption, and unscrupulous business deals,” wrote Rob Almeida, the website’s chief marketer and the writer who conducted the Thomas interview. The website is a popular destination for mariners. “Companies profiting from the rich Nigerian oil market have an obligation to protect those working for them and this account should serve as a call to action for mariners, owners and field operators alike to heed the lessons learned and take corrective action.”
And in Alaskan waters, a Shell-drilling rig grounded in December 2012 during a failed tow by Chouest’s Aiviq.
A U.S. Coast Guard investigation, which found Shell decided to relocate the rig in order to avoid paying property taxes in Alaska, said the Aiviq’s crew lacked experience in the rough Alaskan waters, failed to report previous problems with the vessel to the Coast Guard and demonstrated negligence in operating the vessel. Because company employees did not report previous issues to the Coast Guard, ECO could be in violation of the law.
The Aiviq also had “mechanical issues and design deficiencies,” according to the Coast Guard, which said in April it planned to continue its investigation.
Company officials have not commented publicly on the acts of piracy or on the Coast Guard’s investigation.
In terms of regulation, it seems that the dust has settled in the Gulf of Mexico since the 2010 BP Deepwater Horizon well blowout that killed 11 people and discharged between 2.45 million and 4 million barrels of oil into the Gulf and onto coastal land. The fallout, of course, will likely take decades before it is fully understood.
Industry spokespeople after the spill decried a moratorium on Gulf development and regulatory uncertainties after the moratorium was lifted as impediments to extracting domestic energy and a potentially booming economy. Those criticisms have largely dissipated, ceding instead to a welcoming of predictability and to a reality that has more rigs in the deep-water Gulf now than there were before the blowout.
“Now, more than ever before, we are realizing the economic and energy potential of America’s Gulf and the future is even more promising,” said Lori LeBlanc, director of the offshore committee of Louisiana Mid-Continent Oil and Gas Association, a trade group. “The Gulf continues to be attractive for energy companies due to political stability, proximity to Gulf Coast refineries and the strong pipeline and production infrastructure in the region.”
More than $3.7 billion in high bids have been accepted by the federal government over the past three years for leases in the central Gulf of Mexico. Gulf waters hold an estimated 49.6 billion barrels of oil in reserves, according to the Bureau of Ocean Energy Management.
Numbers like these bode well for Edison Chouest, with their claim to support more than three in four production sites in the deep-water Gulf. But business is elsewhere, too. The company is expanding the portion of its fleet fit for Alaskan waters. It is active in the North Sea and in West Africa. Because Fourchon could be sought as a base of operation for deep-water production off Mexico due to a lack of suitable ports there, Chouest could be well-positioned to service that market.
Now, by bolstering its Brazilian presence with a $400-plus million investment in what should be a major port near one of the world’s largest oil deposits, the leading deep-water service company’s trajectory has again risen.