JAKARTA, July 31, 2015 - (ACN Newswire) - WINS revenue fell 38% to US$53.8 million for 1H2015 compared to 1H2014, impacted by aggressive cost cutting in the oil and gas industry globally, which also decreased vessel utilization and margins in 2Q2015.
Our high tier fleet which was more exposed to exploration and development projects in Indonesia suffered disproportionately as exploration projects were the worst hit. Through mobilizing our international marketing network, we were able to deploy some vessels in regional markets, which mitigated the slide in utilization. However, overseas spot contracts typically provide lower margins as there are additional costs to fulfill other regulatory requirements as well as agency fees and broker commissions.
Our Owned Vessel utilization for 1H2015 was 61% compared to 73% in 1H2014, whilst gross margins for the division fell to 20.5% compared to 53% the previous year.
There was a scarcity of contracts being tendered in 2Q2015. The whole industry contracted globally and sentiment was at its low in line with the lack of visibility on oil price trends. Therefore revenues and gross profit from our Chartering Division were also badly affected, falling 55% and 59% YOY respectively.
Direct Expenses Beban-beban Langsung
As a result of the sharp downturn, the management embarked on a cost reduction program. This included cold-stacking of lower tier vessels which had been earmarked for sale, while warm-stacking mid and high tier vessels to reduce crew and fuel expenses.
As a result of these initiatives total direct expenses for Owned Vessels fell 15% in 1H2015 as compared to the preceding semester, 2H2014.
Indirect expenses and operating profit Total indirect expenses were down 20% YOY from US$6.96 million in 1H2014 to US$5.55 million in 1H2015, primarily from a 24% fall in staff expenses.
Due to the capital intensive nature of our business, there is a limit to the scope of cost reduction possible without affecting the quality of the assets and service that we provide. Therefore operating profit was still 88% lower at US$3.23 million compared to the previous year. Operational gearing is high and any recovery in revenues when the industry recovers will flow through to our bottom line.
Net Income and EBITDA
Although indirect expenses fell 20% and total other expenses fell by 30% to US$4.59 million compared to US$6.55 million in 1H2014, these cost savings were insufficient to offset the sharp drop in revenues experienced this year. For the first half of 2015, the Company recorded a net loss attributable to shareholders of US$ 0.66 million compared to a profit of US$12.82 million in 1H2014.
EBITDA for 1H2015 was US$17.05 million compared to US$39.4 million in the same period the previous year.
Assets and Gearing
Interest expenses fell by 16% to US$4.92 million as there were no new loans disbursed in 1H2015 whereas we repaid US$18.6 million in loan principal during the first half 2015. Net gearing was 60% as at 30th June 2015 compared to end December 2014 was 67%.
There were no new vessels acquired in the first half but we have taken delivery of a new 6000 BHP AHTS vessel in July 2015. This vessel will be marketed in Indonesia as wellas regionally. We have 2 more vessels to be delivered before the end of the year. This represents a scaled down capex plan of US$31 million for the year. Bank financing for these three vessels has been secured.
As expected, the gloomy outlook for oil and gas has taken a huge toll on the progress of oil exploration in Indonesia. According to SKK Migas data, there has been a very dismal realization rate of exploration activities in the first semester 2015, which dampens the total activity for the full year. Only 17% of planned exploration wells were drilled and the full year projection is expected to reach only 45% of the original target. However, because activity in the first half was so poor, these projections for the full year 2015 indicate a higher level of activity in 2H 2015 compared to the first half for these projected realization levels to be achieved. In recent weeks, we have seen a slight improvement in tendering activity, albeit still very muted compared to last year. Barring another unforeseen oil price shock in the near term, we are optimistic that the worst may be behind us.
There are many factors influencing the future of the oil price: OPEC's stance on production, shale oil output, new improved technologies for oil extraction, the removal of economic sanctions on Iran, global economic activity, and increasingly, geopolitical factors. All these make for difficult forecasting of oil prices.
2015 will be a bleak year for oil and gas, as oversupply of offshore vessels is causing price competition. As oil prices trend towards a new equilibrium, we expect some activity to return, especially for projects in the development stage.
At the present time, global sentiment for oil and gas still remains weak, and it may take months for the over supply to be absorbed. What is clear is that the first half of 2015 has delivered a sharp blow to future oil production capacity because of the widespread and severe budget cuts in exploration. It is increasingly likely that there will be a supply squeeze in a couple of years' time as global demand recovers from the current depressed levels.
In recent weeks there has been a small resurgence of enquiries and requests for proposals for offshore vessels in Indonesia. We are seeing some signs that some delayed projects will begin activities again in 2016, especially in the development projects with target production dates which may not be achieved if the delays are extended.
As the costs of oil services has now fallen sharply, some oil companies are starting to initiate new projects which may now be sustainable at lower oil prices.
The Company continues to be on a cost reduction mode, while at the same time focusing on improving operational efficiency. The downturn has also provided an opportunity to be more selective in crew retention and performance evaluation. Our marketing team is working hard to find new markets and clients for our vessels. We are also leveraging on our partners' networks to do joint marketing thus improving access to new regional markets.
Total contracts on hand as at end June 2015 amount to US$150 million.
Ms Pek Swan Layanto
PT Wintermar Offshore Marine Tbk
Tel +62 21 530 5201 Ext 401
Source: PT Wintermar Offshore Marine Tbk
Sectors: Gas & Oil, Daily Finance, Logistics & Supply Chain
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