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Severe offshore downturn hits Wintermar Q1 profit

Severe offshore downturn hits Wintermar Q1 profit
Indonesia’s Wintermar Offshore Marine saw its profit plunged in the first quarter amid the severe downturn of the offshore industry, but it has chosen to stay positive and believed in a “strong recovery” within a couple of years.

In its first quarter ended 31 March 2015, Wintermar recorded a profit of $76,123, a plunge of 99% compared to the gain of $7.96m in the corresponding period of 2014.

First quarter revenue went down by 39% year-on-year to $29.25m as a result of termination of rigs and postponement of exploration projects, affecting the company’s high-tier vessels more than the low and mid-tier.

Wintermar admitted that oil company clients have asked to renegotiate rates, leading to fleet utilisation falling to 61% in the first quarter compared to 70% a year ago.

To mitigate this sharp downturn, Wintermar deployed its high-tier vessels on spot contracts in regional markets, albeit at lower gross margins.

“In Indonesia, oil companies initiated drastic cost reduction plans which led to postponement of projects and renegotiation of existing contracts, whilst some rigs that had been working were even terminated,” Wintermar said.

But the company remains optimistic that once oil prices stabilise to a new equilibrium, oil and gas companies will resume upstream projects.

“The positive outcome of such a swift and severe downturn… in the industry this past quarter is that many aging rigs and vessels have been laid up and permanently removed from global supply,” it said.

“The dramatic fall in daily rates of up to 50% in some segments of rigs and OSVs will also bring down operating costs for oil companies when they resume drilling operations and recontract with subcontractors.

“The cyclical nature of the oil and gas industry is such that we could see a strong recovery again within a couple of years’ time,” it added.

Looking ahead, Wintermar is expecting continued weakness in the second quarter. But if oil prices firm up, activity would return by the end of the year or early 2016.

At the end of March 2015, Wintermar’s total contracts on hand amounted to $142m.

TAGS: Offshore