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OSV utilisation picking up but rates still under pressure: Wintermar

Activity in the Indonesian offshore industry has been picking up in the second quarter, with utilisation rates rising, however, charter rates have been under pressure due to intense competition, said Wintermar Offshore Marine in a press release.

These improvements in the second quarter led to total revenue rising to $14.6 m from $13m in the first quarter, reflecting a gradual return of offshore activity, the Indonesian-based OSV player said.

But more demand from drilling activity has been accompanied by lower charter rates, resulting in higher revenues but lower gross margins.

Wintermar noted that ship owners are competing for longer term contracts of over 12 months to three years as some upstream projects have started up again.

Wintermar's owned vessels fleet saw utilisation pick up to 56% in the second quarter from 49% in the preceding quarter, benefitting from the commencement of some projects in Indonesia.

As a result, revenue from this segment also rose 16% from the preceding quarter to $10.9m.

However, in line with the downturn in demand for OSVs, the chartering division saw a revenue fall and operating profit fall by two-thirds year-on-year to $600,000.

"The severe decline in demand for OSVs causing more intense price competition", led to first half revenue plunging 43% to $27.7m year-on-year and net loss widening to  $8.7m from $600,000 previously, Wintermar said.

It warned that oil prices continue to fluctuate in a range between $45 to $55 per barrel although lower costs of drilling stemming from reduced costs of support services has significantly lowered the break-even costs of most projects, resulting in more projects being commissioned even at these lower oil prices.

"The market will favour low cost and efficient support services," Wintermar believes. As a result, "the new paradigm for the Offshore Support Industry is to seek cost efficiencies while maintaining high standards of safety and quality," it added.

The Indonesian OSV player also noted that the new Gross Split Scheme in Indonesia will favour contractors who can offer high quality at low cost, and it would continue to work towards productivity gains through more dynamic fleet monitoring and active management of crew and fleet and was also looking into improving IT systems to achieve better efficiencies.

Wintermar noted that there are several longer term projects still in the process of tendering and it was actively involved in this process.

"As the outlook for oil prices seems to be returning to stability, we expect a gradual recovery in revenue at lower margins. Therefore cost control and productivity will remain priorities for our management team," Wintermar concluded.

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