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Mermaid posts tripled year-on-year profits on ‘defensive’ shallow water plays

27th November 2014

Mermaid Maritime has announced that net profit tripled from USD 15.4m in FY2013 to USD 45.3m in FY2014

Mermaid Maritime has announced that net profit tripled from USD 15.4m in FY2013 to USD 45.3m in FY2014
'Shallow water fields are more defensive and oil price volatility has a lower impact on these fields as break-even points are much lower' - Mermaid CEO

The group operates one of the youngest shallow water subsea fleets globally and this places Mermaid in an advantageous position due to customer preferences for newer vessels.

“The group delivered an outstanding performance for FY2014,” said Chalermchai Mahagitsiri, chief executive officer of Mermaid.

“The encouraging financial performance is testimony of our resilient business model as our operations have exposure to mostly shallow water fields and to the production phase of the oil and gas supply chain. Shallow water fields are more defensive and oil price volatility has a lower impact on these fields as break-even points are much lower.”

As both of the group’s subsea and drilling services are used mainly in the production phase of the oil and gas supply chain, the group is less exposed to any possible CAPEX cuts and as demand remained relatively intact throughout the year.

This has allowed the group to enjoy strong demand for its services and this is evidenced by the charter-in of additional subsea vessels and a very healthy current order book of USD 470m.

Total service income of the group was USD 313.0m, 16.1 per cent increase for FY2014. Gross profit increased 13.5 per cent to USD 57.5m, primarily due to higher revenue growth that outpaced the increase in cost of services.

The strong performance was primarily boosted by the profit contribution from the associate company, Asia Offshore Drilling (AOD), and also due to growth in gross profit contributions from the group’s own subsea and the drilling segments.

The share of profit from AOD increased six folds to USD 31.1m from USD 4.4m in FY2013, as AOD I, AOD II and AOD III were fully operational in FY2014 as compared to only AOD I being operational in FY2013 given that AOD II and AOD III were still under construction in FY2013.

“In addition, we also enjoy a presence in cabotage and restricted regions that are benefiting from a concerted local expansion effort,” said Mahagitsiri.

“The utilisation rate in our Middle East operations has been satisfactory and we believe the production in the Middle East will stand relatively strong, providing a cushion for our operations there.”

Mermaid’s subsea business reported service income growth of 15.9 per cent to USD 289.1m, primarily supported by the Saudi Aramco project, other projects in the Middle East region and healthy growth from projects in Indonesia. This segment’s operating profit increased 6.3 per cent to USD 23.8m and could have been higher but for one vessel being on standby for crane modification and engine improvement in FY2014 which has now been resolved.

Its drilling business registered service income growth of 18.2 per cent to USD 27.8m, as all the revenue was generated by MTR-2 that enjoyed a utilisation rate of 98 per cent in FY2014 as compared to 43 per cent in FY2013. MTR-1 was on standby for FY2014. The higher utilisation of MTR-2 helped to reverse the lossmaking situation in FY2013, as operating profit of USD 4.4m was generated in FY2014.

“Our order book of USD 470 million will also bring in steady revenue. Moreover, our new builds are currently under construction in China and is scheduled join our fleet in 2016, adding further credence to our growth story,” added Mahagitsiri.

“We have faith in our business strategy and in our execution capabilities. We have made, and we will continue to make solid steps towards the mission of becoming a premium service provider to the oil and gas industry and to consistently deliver enhanced returns to shareholders.

“We continue to maintain a healthy balance sheet with low gearing and we are in a commanding position to make most of any opportune situation that may arise.”

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