Ceo Vincent Siaw says the rate cuts, which add $78.4m to the Bangkok-based company’s order backlog, were necessary to “remain competitive in this challenging business environment”.
Siaw said the Singapore Stock Exchange-listed company would also initiate a second round of “cost efficiencies, centralisation and consolidation of its business” to remain viable.
Mermaid has secured an extension to 31 December for its jack-up rig AOD III which is owned by its associate Asia Offshore Drilling Ltd (AOD). The unit has been in service for the same Middle East client since 2013. In late July, the client agreed to three year contract extensions for Mermaid’s AOD I and AOD II rigs – expiring June 2019 and July 2019 respectively – adding an expected $225m in contract backlog.
AOD owns the three jack-up rigs in a partnership venture between Mermaid (33.76% stake) and Seadrill Limited (66.24%).
Meanwhile, Mermaid’s joint-venture company, Zamil Mermaid Offshore Services Company (ZMOS), has retained its “strategic” long-term offshore inspection, repair and maintenance services contract by reducing rates to “ensure service continuity”. It says the reduction in rates was part of a cost reduction initiative driven by the undisclosed client.
The five year contract, awarded in the fourth quarter of 2012, expires in late 2017 but has a two year option which could see it extended to Q4 2019.
Mermaid, who says its portion of the contract value is “estimated to be no less than $70m”, provides a suite of diving services using one of its DP2 dive support vessels along with remotely operated vehicles and specialised diving equipment.
Siaw warned the reduced rates would have had a “material adverse effect” on share earnings “assuming that the contract rate adjustment had commenced and been completed within the most recent financial year”. Mermaid’s last financial year ended 31 December, 2015.
“To mitigate the reduction in rates, Mermaid has also initiated a second round of cost efficiencies, centralisation and consolidation of its business in order to improve its cost base and make it more efficient and competitive during this period while maintaining its operating excellence and safety performance,” Siaw said.
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