KUCHING: Sealink International Bhd expects the charter rates for new offshore supply vessel (OSV) contracts to be soft in view of the current excess supply of such vessels.
Anticipating the award of some new vessel contracts later this year, Sealink chief executive officer-cum-deputy managing director Yong Kiam Sam said in line with decreased charter rates presently experienced, all of the oil and gas service companies, including Sealink, would have to reduce their operational costs.
“The oil and gas industry went into a grinding halt due to the tumble in the crude oil price from US$100 per barrel in July 2014 to approximately US$55 per barrel at the end of 2014.
“Oil majors are currently adjusting their processes and reducing their production costs through capital and operational expenditure rationalisation, delaying of projects, renegotiation and early termination of contracts and downsizing their current operations,” he added.
Quoting a RHB-OSK Research report, Yong said Petronas, which previously committed to the RM300bil capital expenditure for 2011 to 2015, had been reducing its capital and operating expenditure by 15% to 20% due to the unstable crude oil price.
Currently, the national oil company has been awarding short-term contracts for vessels but delaying several contracts to save costs and improve budget flexibility in view of the uncertainity in crude oil price.
“In view of the current low crude oil price, many projects will be shelved in the short term. The long-term plan to develop deeper water exploration and production activities will take a back seat until crude oil prices stabilise at a higher level,” Yong said in the newly released company 2014 annual report.
Yong is of the opinion that crude oil price should trend higher in the long term but in the short term, the price would be range bound due to the global supply, especially from the oil producers in the United States.
He said the oil and gas industry was currently entering an unprecedented phase whereby the majority of the oil and gas produced was not from the Organisation of Petroleum Exporting Countries (Opec) member countries, which previously helped to stablise global crude oil price.
“However, they (Opec member countries) are not expected to reduce their production this time round as they are currently only contributing approximately 30% of the total oil and gas supply globally, and are not willing to give up their current market share by cutting back on their production,” he added.
Sealink is Miri-based integrated service provider which builds, owns and operates a diverse fleet of offshore marine support vessels serving maining the global offshore oil and gas exploration and production industry.
Yong said despite the oversupply of OSV last year, Sealink managed to maintain the utilisation of its vessels, with its chartering division recorded the highest ever revenue of RM121mil while its pre-tax profit grew by 48% to RM30.8mil from RM20.8mil in 2013.
“The major reason for the increase in revenue was mainly from the (charter of) two multipurpose anchor handling tug support vessels and the fleet modernisation exercise undertaken by Sealink over the past few years.”