The world’s largest supplier of self-propelled, self-elevating support vessels (SESVs) to the global oil, gas and renewable energy sectors announced the new 12-month contract, including options, on Friday.
To commence immediately, the undisclosed deal will put to work one of GMS’ new Mid-Size Class barges which are able to operate in water up to 55m in depth and boast crane and accommodation capacity up to 150 tons and 300 people respectively.
A separate MENA-based NOC has confirmed a 12-month extension, with a further one-year option, utilising one of GMS’ Small Class vessels (45m depth, 45 ton crane and 300 people accommodation capacity).
The agreements are timely for GMS which clearly hasn’t been immune to the headwinds buffeting the offshore sector despite being a regional heavyweight and, by geographical association, a key barometer to the health of the segment globally.
GMS has continually downgraded its secured backlog amid the on-going oil price volatility, most recently confirming $257.8m of work - $110.9 firm and $146.9 of extension options - in an “Operational and Trading Update” announcement on July 5.
This has plummeted 61% from the group’s August 2015 backlog declaration of $664m ($341.9m firm and $322.1m options).
As recently as March 1 this year, GMS reported a backlog of $443.9m ($210.2 firm/$233.7m of options) but confirmed in the July 5 statement that a MENA-based NOC had given notice of early termination of a contract involving a Large Class SESV operating as a static accommodation unit. The vessel (80m depth/400 ton crane/300 people accommodation capacity) is expected to come off charter in Q4 this year.
The contract for a Small Class vessel has also been terminated by a client, with the charter to end in the third quarter of 2016. In addition, a two-year option period on a Small Class vessel had not been exercised by the client, GMS confirmed.
Despite the setbacks, GMS remains bullish about the earning potential of its fleet of SESVs once oil prices recover eventually.
A $620m debt facility secured in Q4 last year shows that regional financiers agree GMS’ ambitious new buildings program is strategically sound; GMS took delivery of its 14th barge in the first quarter of 2016 and remains on target to increase its fleet size by 66% between 2014 and the end of this year from nine to 15 vessels.
The facility, a syndicated loan combining Islamic and conventional financing, has a term of six years and comprises a $375m term loan, a $175m committed capex facility and $70m for general working capital purposes. A further $300 million uncommitted facility was also agreed, GMS ceo Duncan Anderson said.
"The Group is pleased to announce this substantial new debt facility, which both extends the maturity of our debt profile and has been achieved with a helpful improvement in the borrowing margins compared to our previous financing arrangements,” the Scotsman said at the time.
“This is testament to the banking community's confidence in our business model and prospects in the current low oil price environment. We have the right capital structure in place to continue our strategy for delivering long-term growth."
The London Stock Exchange-listed GMS announced an adjusted net profit after tax of $84.9m for 2015, a 4% year-on-year increase.
However, it has forecast a net debt at year end of “around $435m”, up from the $389.9m reported in its 2015 results.
GMS finished at 32p (GBX 31.7500) at the close of trading in London on Friday, down 73.77% from £1.22 a year ago today - August 7, 2015.
The company, which builds and maintains its vessels in Abu Dhabi, has offices in Saudi Arabia and the UK and contracts extending as far as the North Sea, will announce its interim results for the period ending June 30, 2016 at the end of this month.