Deadline set for Offshore Inland’s $269K debt – Pensacola News Journal

Joseph Baucum , jbaucum@pnj.com Published 8:49 p.m. CT May 11, 2017 | Updated 12 hours ago

The Pensacola City Council has amended the port's lease with Offshore Inland. The amendment sets a provisional deadline to pay more than $269,000 of debt.(Photo: News Journal file photo)

A provisional deadline has been set for a prime tenant of the Port of Pensacola to settle its nearly $270,000 debtwith the city.

The Pensacola City Council on Thursday unanimously approved amending the Warehouse 1 lease agreement between the port and Offshore Inland Marine & Oilfield Services. The amendment mandates the company pay its entire outstanding balance of $269,247 on dockage and wharfage fees to the city by Sept. 30.

If Offshore Inland fails to pay the balance by the due date, the City Council could terminate the lease or renegotiate a new deadline. If the lease is terminated, the company would have to vacate the port and surrender all equipment and personal property to the city within 30 days.

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Offshore Inland's original lease for Warehouse 1 dates back to summer 2010. It has usedthe warehouse as an offshore and subsea service center. As part of the process to site new wells and platforms, major oil companies hire specialized ships for services such as surveying and dive support. To conduct the projects, the vessels require a massive amount of equipment.

Those materials are delivered to Offshore Inland'scenter at the port, where the ships can retrieve the items and deposit them after the work has finished. The center also acts as a maintenance and repair facility, where vessels'machinery can be tested, certified and recalibrated.

The company has paid its lease on the warehouse, but its debt stems from outstandingcharges from the ships docking at the port and the cargo moving through the facility.

Amy Miller, port director, said the company's operations accounted for 65 percent of the port's revenue before the collapse of the oil market. Returns on oil typically hovered from $90 to $100 a barrel before the late 2014 crash.

She said a healthy market for the company's work at the port would necessitate a barrel price of at least $70. On Thursday, Brent Crude, the international standard, opened at $50.28 per barrel.

The lease amendment also addresses an additional $363,000 in unpaid dockage and wharfage fees potentially owed by Offshore Inland. The city could forgive aportion of that if the company completes improvements to Warehouse 1.

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The company funded out-of-pocket upgrades to the site after the city received a $2 million grant in 2013 through the state's Economic Development Transportation Fund. City Administrator Eric Olson said the city stopped the companybecause the upgrades were not conducted in accordance with the city's procedures for bidding out work. The improvements also possibly failed to comply with the terms of the grant.

The city is still in the process of accepting bids from contractors to finish the project. Because it is unclear if the company's work satisfies the stipulations of the grant, it remains to be seen how much of it couldbe reimbursed. Until then, the$363,000 debt will be held in abeyance. The lease amendment states that after the improvements are completed, the city will determine how much of Offshore Inland's expenses will be reimbursed.

"Grants are closely regulated," Olson said. "You have to spend the money in a certain way. So we had to back it up and put the project out to bid. Improvements that have been made will be accounted for, and we'll settle up when it's all completed."

In a separate resolution on Thursday, the City Council also unanimously authorized terminating the Warehouse 9 lease agreement between Offshore Inland and the port.

The company previously partnered with Houston-based pipeline manufacturer DeepFlex to establisha manufacturing site at the warehouse. Mayor Ashton Hayward announced in 2014 that the partnership would generate 200 jobs and $50 million in capital investment.

But the oil market collapse stalled construction on the site. In December 2015, Offshore Inlandsued DeepFlex for breach of contract.The First Judicial Circuit of Florida later granted Offshore Inland to right to reclaim the facility, but ithad to occupy the building by the end of May 2016.

The company was later granted an extension to occupy the building by the end of this month. Olson said the company attempted to find a new partner for the warehouse but was unsuccessful.

Under the terms of the lease termination, the city assumes possession of the warehouse's capital improvements. Offshore Inland retains its equipment and personal property on the premises, but must clear the materials from the site within 15 days of the lease termination. The company must also pay all fees from rent and taxes due under the lease prior to its termination.

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Deadline set for Offshore Inland's $269K debt - Pensacola News Journal