Companies engaged in supplying offshore services, an essential corner of the oil sector here in Louisiana, should be preparing for the potential increase in bankruptcies as the worst crude market downturn in decades spreads. More than half of the public companies in the offshore supply-vessel industry face a high probability of restructuring or bankruptcy, according to research conducted by the consulting firm AlixPartners.

Supply vessels are a lifeline to the rigs, hauling everything from people to pipes to food. Moreover, they’re custom-made for the oil industry and depend on the rigs for work; when the rigs slow down, so too does this custom-made supply chain.

There are now more than five supply vessels for each offshore drilling rig, up from roughly three vessels per rig in 2008. With the falling demand, companies have been forced to make hard changes

Close to home, one of Louisiana’s largest offshore supply companies is set to have more than 30 OSVs fleet stacked by year-end as the slump in oil prices continues to wreak havoc on the offshore market. The 30 stacked vessels will represent about half of the company’s OSVs. It’s fleet currently consists of 59 OSVs, but that is expected to increase to 61 vessels if scheduled deliveries in Q4 go according to plan.

Back in April, the company reported 18 new generation OSVs stacked in its Q1 results. At the time, the company said the lay-ups were part of aggressive cost cutting measures undertaken in response to soft market conditions. Other measures included company-wide headcount reductions and across-the-board pay-cuts for shore-side personnel. The company reported that for the third quarter of 2015, revenues were $116.3 million, a decrease of $50.6 million, or 30.3%, from the same period last year.

Following an early December 2015 statement from the Organization of Petroleum Exporting Countries, that it was essentially lifting its production target for crude, we should prepare for oil prices to remain lower for longer than previously expected. According to Transocean Ltd., the world’s largest supplier of offshore drilling rigs, the challenging offshore market is expected to last into 2017.

AlixPartners looked at 33 publicly traded companies as part of their study, and found that the amount of debt those companies carry compared with earnings before interest, taxes, depreciation and amortization, which is known as leverage, climbed over the year end in June – often a precursor to restructuring or bankruptcy.