A renewed emphasis on reducing operating costs for oilfields while maximising production is expected to lift the outlook for oil services firms later this year.
Low oil prices, which have been a fixture for more than two years, had slowed spending from oil majors and eased demand to offshore support vessels.
Abu Dhabi-based Gulf Marine Services (GMS) said it anticipated clients returning their focus on production targets.
“We anticipate that most, if not all, of the work lost due to cancellations or the non-renewal of contracts in 2016 will be retendered this year,” said Duncan Anderson, the chief executive of GMS.
The company, which provides offshore vessels for the oil, gas and renewables sectors, reported a 60.8 per cent drop in profit to US$29.4 million last year compared with $75m in 2015. Revenue fell 22 per cent to $179.4m, with utilisation decreasing to 70 per cent from 98 per cent the previous year.
The waning demand was shown in the company’s backlog, which fell by more than half to $209.2m.
“We expected our fleet utilisation and charter rates for [2016] to be affected by the low oil price environment, reflecting some clients’ focus on cost savings rather than production,” said Mr Anderson.
However, business is expected to pick up this year as a result of a revival of markets such as Saudi Arabia.
“We react to the clients’ needs, and we’re seeing an increase in tender activity compared to previous years,” he said.
“The tender activity in Saudi Arabia is the best it’s ever been.”
Saudi Arabia is looking for jackup rigs for brownfield projects or oil assets that are already in production and require maintenance.
“It’s all about getting more oil and making wells more efficient,” said Mr Anderson.
However, he said the UAE market remains depressed as a result of the reorganisation in the national oil company, Adnoc, which has delayed tenders. “Though we know that tenders from the UAE will happen, we don’t have the same amount of optimism as we do for Saudi Arabia,” he said.
The UAE’s Topaz Energy swung to a loss of $2.4m last year as pressure increased in the Mena region, resulting in an overall fleet utilisation of 60 per cent. Revenue dropped more than 21 per cent to $282.1m.
“Our 2016 results are reflective of the prolonged downturn in the energy sector, which is a consequence of an unpredictable oil price and minimal capital expenditure spending by oil companies, which is now at a 10-year low,” said Rene Kofod-Olsen, the chief executive of Topaz.
The company said vessels were changing hands at “highly distressed levels” routinely involving sellers that are facing bankruptcy.
“We expect 2017 also to be challenging, although we anticipate some recovery in the second half of the year in our markets,” said Mr Kofod-Olsen.
lgraves@thenational.ae
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