Mermaid Maritime looks to Middle East for new business

“Rival new-build saturation diving vessels continue to enter the market in 2018, with two such vessels entering our regional markets between Q1 and Q3 targeting Middle East, India and Far East regions,” the subsea and offshore drilling services company said in a results presentation.

Although oil prices have been trending upwards recently and in January marked another month of increase with Brent Crude rising over 7% month-on-month to an average of over $69 per barrel on the spot market, Mermaid still saw relatively low vessel utilisation rates.

While fleet utilisation of 39% in the fourth quarter of 2017 was higher than the preceding third quarter’s 22%, it was lower than the 44% rate seen in the corresponding period of the previous year.

The same pattern was seen among Mermaid’s major assets, with its four major vessels Mermaid Commander, Mermaid Asiana, Mermaid Endurer and Mermaid Sapphire seeing average utilisation of 59% in the fourth quarter, which was higher than the preceding quarter’s 42% but lower than the previous corresponding period’s 72%.

This has prompted a move to reposition key assets during the year, with the latter two vessels already repositioned in the Middle East, Mermaid said. The overall reduction in the amount of subsea work available has driven a need to refocus to achieve higher utilisation rates, it added.

“Utilization of key owned assets, namely our large sat diving vessels is the high priority. Cost cutting and consolidation will continue throughout the year in an effort to maintain a cost base low enough for us to win work in these challenging times,” Mermaid said.

In line with this, the vessels Mermaid Challenger, Barakuda, MTR-1 and MTR-2 have been cold stacked to reduce costs and put on the market to be sold. Meanwhile Mermaid is trying to reactivate some of its other cold-stacked vessels, such as the Siam, and to commit them to long-term bareboat charters with non-competing companies, however these moves would need to be financially viable, while reducing capex to the essentials and preserving cash where possible, the group reiterated.

It also warned that “offshore/subsea vessel companies are still expected to struggle financially in 2018 given the lack of construction and IRM (inspection, repair and maintenance) work available, increased subsea tonnage entering the market and the consequential pressure on rates”.

Having said this however, Mermaid noted that it is “exploring options to purchase distressed assets where appropriate, in preference to subcontracting in equipment and personnel”.

Meanwhile, Mermaid said all its three jack-up drilling rigs AOD I, AOD II and AOD III remain on contract in the Middle East until 2019 thus reducing downside risk as market recovers.

Looking ahead, Mermaid expected to leverage on its reputation and stability to gain access to more markets and to cross-sell services across regions. “Recent successes in entering new countries in Southeast Asia and the Middle East, and in winning vessel-enabled survey work in the GCC countries will be built upon,” it said.

The group last year won contracts in Malaysia, Indonesia and Qatar among others. Mermaid also plans to widen geographical coverage and expand into other markets such as North Sea, West Africa, and the Persian Gulf;

Its strategy going forward will leverage on the more defensive nature of the shallow water segment which is less affected by lower oil prices, with several conventional projects to be carried-out in Mermaid’s home markets during the year.

Meanwhile IRM work will remain a focus, with the addition of Integrated service packages, building on previous successes in cross-selling other services such as standalone ROV and survey work, and manpower support to other vessel owners;

Mermaid’s offering of an integrated range of subsea services with a revamped highly specialized workforce will lead the company into “a new era of subsea Installation engineering”, it concluded.

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