Operational and Trading Update

RNS Number : 2395D

Gulf Marine Services PLC

05 July 2016

 

Gulf Marine Services PLC

("Gulf Marine Services", "GMS", "the Company" or "the Group")

OPERATIONAL AND TRADING UPDATE

Gulf Marine Services (LSE: GMS), the leading provider of advanced self-propelled self-elevating support vessels (SESVs) serving the offshore oil, gas and renewable energy sectors, today publishes an operational and trading update. 

In March 2016, GMS reported that its clients in the Middle East were seeking cost efficiencies as a result of the challenging low oil price environment.  This continues to be the case and a notice of early termination has now been received for a Large Class SESV operating as a static accommodation unit for a national oil company (NOC) in the MENA region.  The vessel is expected to come off charter in Q4 2016.   The contract for a Small Class vessel has also been terminated by a client, with this charter ending in Q3 2016.  In addition, a two-year option period on a Small Class vessel has not been exercised by the client.    

The current secured backlog, reflecting the above charter updates, is US$ 257.8 million (as shown in the table below). 

Secured backlog1  (US$ millions)	Firm	Options	Total
	110.9	146.9	257.8

 Financial Position

Managing its cost base appropriately will continue to be a focus for the Group and GMS has already implemented a series of cost-saving initiatives. The Group also announces that it has agreed an amendment to its bank facility agreement that permits the maximum net leverage ratio to be 5 times EBITDA up to 1 July 2018. 

The Group is now expecting 2016 EBITDA to be US$ 100 - 110 million, equivalent to an EBITDA margin in the high 50% range, with 2016 earnings per share of 14.5 - 15.5 cents expected. 

The new build programme is nearing completion.  Year end net debt is expected to be approximately US$ 435 million and reducing thereafter.  

Duncan Anderson, Chief Executive Officer of GMS, said:  

"As previously announced, our NOC clients in the Middle East are implementing cost-saving measures in light of the current challenges facing the industry.  This has involved corporate restructuring across their own businesses and the pursuit of supply chain efficiencies.  We expect the need to sustain production will, in due course, result in the resumption of higher levels of opex activities, though the timing of this is not easy to predict.  As a MENA-based business GMS is well-placed to engage in the upturn in opportunities when they arise.

"The European market shows greater stability, and a number of opportunities in other countries in the MENA region outside of the UAE and elsewhere are under discussion.    

"While current trading conditions are difficult, and somewhat unpredictable at a regional level, our focus remains on maximising vessel utilisation and I am confident that our state-of-the-art fleet and leading operational expertise will prevail, giving us a real competitive edge over other market participants. Delivering cost efficiencies for our clients through our low cost, flexible and efficient vessels should open up more opportunities as markets stabilise and start to improve."

For further information please contact:

Gulf Marine Services PLC	Bell Pottinger
Duncan Anderson	Henry Lerwill
John Brown	Tel: [phone]
Tel: [phone]
Anne Toomey Tel: [phone]

1 Secured backlog consists of firm contracts and options held by clients.  The backlog includes the contract changes indicated in this announcement; it does not include other possible charter rate changes currently under review with clients as these discussions have not yet been concluded. 

Notes to Editors:

Gulf Marine Services PLC, a company listed on the London Stock Exchange, was founded in Abu Dhabi in 1977 and has become the leading provider of advanced self-propelled self-elevating support vessels (SESVs) in the world.  The fleet serves the oil, gas and renewable energy industries from its offices in the United Arab Emirates, Saudi Arabia and the United Kingdom.  The Group's assets are capable of serving clients' requirements across the globe, including the Middle East, South East Asia, West Africa and Europe.

GMS' current new build programme to increase the fleet size by 66% to 15 vessels is almost complete, with the final vessel scheduled for delivery at the end of 2016.   Further additions to the fleet will be driven by our assessment of market demand.         

The Group's SESV fleet, which currently comprises 14 vessels, is technically advanced and amongst the youngest in the industry, with an average age of seven years. The SESVs are four-legged vessels and are self-propelled, which means they do not require tugs or similar support vessels for moves between locations in the field; this makes them significantly more cost-effective and time-efficient than conventional offshore support vessels without self-propulsion.  They have a large deck space, crane capacity and accommodation facilities that can be adapted to the requirements of the Group's clients.

These vessels support GMS' clients in a broad range of offshore oil and gas platform refurbishment and maintenance activities, well intervention work and offshore wind turbine maintenance work (which are opex-led activities) and offshore oil and gas platform installation and offshore wind turbine installation (which are capex-led activities).

The fleet is categorised by size into Large Class vessels (operating in water depth of up to 80m, with crane capacity of up to 400 tonnes and accommodation for up to 300 people) and Small Class vessels (operating in water depth of up to 45m, with crane capacity of up to 45 tonnes and accommodation for up to 300 people).  A new third class, the Mid-Size Class vessels (operating in water depth up to 55m, with crane capacity of up to 150 tonnes and accommodation for up to 300 people) was added to the fleet in 2015.

Demand for GMS' vessels is predominantly driven by their premium capabilities as well as market growth, underpinned by the need to maintain ageing oil and gas infrastructure and the increasing use of enhanced oil recovery techniques to offset declining production profiles.

www.gmsuae.com 

Disclaimer

The content of the Gulf Marine Services PLC website should not be considered to form a part of or be incorporated into this announcement.

Cautionary note regarding forward-looking statements

This announcement includes statements that are forward-looking in nature. All statements other than statements of historical fact are capable of interpretation as forward-looking statements. These statements may generally, but not always, be identified by the use of words such as 'will', 'should', 'expects', 'is expected to', 'aims', 'should', 'may', 'objective', 'is likely to', 'intends', 'believes', 'anticipates', 'plans', 'we see' or similar expressions. By their nature these forward-looking statements involve numerous assumptions, risk and uncertainty, both general and specific, as they relate to events and depend on circumstances that might occur in the future.

Accordingly, the actual results, operations, performance or achievements of the Company and its subsidiaries may be materially different from any future results, operations, performance or achievements expressed or implied by such forward-looking statements, due to known and unknown risks, uncertainties and other factors. Other than in accordance with the Company's obligations under the Listing Rules of the United Kingdom Listing Authority and the Disclosure Rules and Transparency Rules (DTR) of the Financial Conduct Authority, the Company undertakes no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. No part of this announcement constitutes, or shall be taken to constitute, an invitation or inducement to invest the Company or any other entity, and must not be relied upon in any way in connection with any investment decision.  All written and oral forward-looking statements attributable to the Company or to persons acting on the Company's behalf are expressly qualified in their entirety by the cautionary statements referred to above.  

 

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