Maridive in nosedive as profit turns to loss

What's Down: Maridive & Oil Services, the Egyptian marine and offshore services company, looks like a sinking prospect for investors right now and in the foreseable future.

Maridive & Oil Services, an Egyptian marine and offshore services company, looks like a sinking prospect for investors just now.

The company reported a fourth-quarter net loss of US$2 million last year, compared with a net profit of $8m in the previous quarter, and a net profit of $10m for the same period a year earlier.

Fourth-quarter profit was “substantially below” what had been expected by analysts at Naeem, an Egyptian brokerage, which has downgraded the stock from “hold” to “sell”.

Revenue was up 23 per cent year on year, but again this was significantly below market estimates.

Maridive’s fourth-quarter results reflect its ongoing deployment of pipe-laying barges for construction projects with Aramco at the Manifa offshore oilfield in Saudi Arabia, and Indian Oil & Natural Gas.

However, the company’s inability to win new offshore construction-services contracts is now “very concerning”, Naeem analysts say.

The current backlog for this year and beyond is less than $90m. It mainly comprises the remaining work on the Indian project that is planned for completion this May.

After that, Maridive has nothing material on its books in offshore construction-services contracts.

The fear is that this dearth of new business might force Maridive to deploy its soon-to be-idle barges on short-term charters at sharply lower daily rates. This could be damaging to its earnings this year and next.

“We accordingly recommend investors to sell the share given the extreme risk from deteriorating offshore construction services backlog,” Naeem said in a note.

Maridive shares closed down 3.73 per cent at $1.55 yesterday. The stock has risen 9.93 per cent so far this year.

By selling now, investors risk red faces if Maridive is able to land a large new contract in the near future.

However, given lead times to start contracts from contract-signing, even if the company signs a large contract now it is unlikely that the barge or barges could begin work before the end of the year.

Therefore, the earnings outlook is depressing, despite the upward trend in oil prices.