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, provides the following operational update for the period 1 January 2018 to 21 May 2018, ahead of its AGM today.
GMS announced two charter awards in the MENA region during the period: a 24-month contract for a Mid-Size Class vessel and a 16-month contract extension for a Small Class vessel.
These awards have helped the secured backlog (comprising firm and extension options) to increase to US$ 181.2 million as at 30 April 2018 (31 December 2017: US$ 171.9 million). A Large Class vessel also recently commenced a 26-month charter for renewables work in Europe, and will be joined later this quarter by another Large Class vessel for a 15-month charter to the same client. (All the above contract lengths include option periods.)
Levels of enquiries and tenders are continuing to increase in the Group's principal markets. All of GMS' Large and Mid-Size Class vessels are now contracted. The utilisation1 rate for the core fleet of 13 SESVs was 64% for Q1 2018. Utilisation for the fleet is expected to improve over 2018 through a combination of several vessels being already mobilised onto new charters and a continued recovery in demand.
The Group's net debt level (being bank borrowings less cash) at 30 April 2018 was US$ 398.2 million (31 December 2017: US$ 372.8 million) with increased working capital requirements and expenditure incurred on mobilising vessels for new contracts. The Board's view of trading for 2018 remains unchanged, with an improvement on our 2017 results expected as market conditions gradually recover. Net debt levels will reduce as the operating cash flows begin to reflect the improved fleet utilisation together with minimal capital expenditure commitments.
Duncan Anderson, Chief Executive Officer of GMS, said: "It has been a busy start to the year operationally, with six of our core fleet of 13 SESVs being deployed onto new charters in the first half of 2018. Against the background of continuing relative strength in the oil price, we are making satisfactory progress in recovering our utilisation levels and strengthening our relationships with key strategic clients in the wider MENA region.
We would hope to see a progressive improvement in charter rates as market capacity begins to tighten in 2019 and beyond, and a more substantial improvement in our results, benefitting from our high operational gearing.
"We are very proud to have two vessels commencing work in Europe in Q2 2018 to support the construction of Hornsea Project One, the world's largest offshore wind farm development.
"Our SESV fleet is one of the youngest in the industry, with an average age of just seven years, a significant advantage in the current environment where clients are often excluding older tonnage from tender activities. I am confident that our expertise and reputation for providing meaningful cost efficiencies for our clients makes GMS well-placed to capitalise on a market recovery."
Source: Gulf Marine Services