Gulf Marine Services feels the pinch in depressed market

The net profit figure includes a $14 million writedown of the assessed value of three of the company’s 14 vessels, which it views as 'non-core' to its operations.

Gulf Marine Services said profit fell in the first six months of the year and is expected to be down by as much as 38 per cent this year, as the oil services market it serves remains depressed.

The Abu Dhabi company, which leases vessels to the offshore oil, gas and wind turbine industry for maintenance and other purposes, reported revenues 12 per cent higher at US$110 million for the six months to the end of June, but net profit down 28 per cent at $21m amid tight business conditions.

The net profit figure includes a $14m writedown of the assessed value of three of the company’s 14 vessels, which it views as “non-core” to its operations.

“Oil prices have recovered by more than 50 per cent since January, [but] this has not been matched by a recovery in demand for our services,” said Duncan Anderson, the GMS chief executive.

“The market outlook remains uncertain, mainly as a result of budgetary constraints applied by our clients that are leading to shorter-term contracts,” he said, adding that GMS expects earnings before interest, tax, depreciation and amortization (Ebidta) to come in at between $100m and $110m for the full year, compared with $138m for last year.

Ebitda for the first six months was up 18 per cent at $71m, but does not reflect the asset value write-off.

There are some signs that the market is starting to improve, Mr Anderson said.

“The actual amount of work out there is picking up … [and we’re] seeing tender opportunities in the Mena region and Europe for clients focused on production,” he said.

About two-thirds of GMS’s business has been dependent on regional national oil companies in recent years and they have been sharply cutting costs and postponing activity.

But GMS has been casting a wider net and has added new middle-sized vessels to capture more business.

“We were one of the first to undertake decommissioning activity in the North Sea, and when oil prices are low there is a drive on to decommission or do life-extension projects for oil fields there,” said Mr Anderson.

Two of GMS’s 14 vessels are in the North Sea working on such projects.

The company also is tendering for business in South-East Asia for the first time.

On cost-cutting, chief finance officer John Brown said: “We have gone through a whole series of initiatives and expect annualised cost savings going forward of 10 per cent on [general and administrative expenses] and 15 per cent on operating expenses.”

The company is 49 per cent-owned by Abu Dhabi private equity firm Gulf Capital, with the rest owned by diverse shareholders via a listing on the London Stock Exchange.

GMS shares were up 4.95 pence – nearly 12 per cent – at 47.45 pence on Wednesday, having risen from a record low around 30 pence in July. They are still well down on their peaks above 160 pence before oil prices started to crash in mid-2014.

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