Wintermar sees steep fall in revenues and profitCompany News // May 1, 2015
Wintermar Offshore Marine says first quarter revenue was down 39 per cent year on year to US$29.2 million, and was negatively impacted by severe cutbacks in oil and gas spending following the collapse in oil prices and uncertainty about the oil price outlook.
"After the steep drop in oil prices since late 2014, oil and gas companies all over the world have been cutting back on expenditures," said Wintermar. "Over the first three months of 2015, oil and gas companies announced drastic cost cutting plans. As a result, most oil exploration projects have been postponed indefinitely and some ongoing projects were stopped. Rig utilization fell across the board, but particularly in the North Sea and US. In Indonesia, oil companies initiated drastic cost reduction plans which led to postponement of projects and renegotiation of existing contract, whilst some rigs that had been working were even terminated.
"Amidst this very challenging environment, revenues from our owned vessels segment fell as a result of termination of rigs and the postponement of exploration projects, which affected our high tier vessels more than the low and mid tier. Oil company clients also asked to renegotiate rates. Overall fleet utilization fell from 70 per cent in the first quarter of 2014 to 61 per cent in the first quarter of 2015.
"To mitigate this sharp downturn, we were able to deploy our high tier vessels on spot contracts in regional markets, albeit at lower gross margins. Depreciation, which makes up nearly 50 per cent of owned vessel direct expenses, is not a variable cost. Therefore as utilization rates fell, the gross margins for owned vessels fell to 23.4 per cent, leading to a 73 per cent drop in gross profit from owned vessels to US$4.8 million from US$16.5 million in the same period last year.
Chartering division revenues declined by 60 per cent year on year as many projects were postponed or terminated by oil and gas companies as a reaction to the volatile oil price situation in the first quarter.
"The first quarter was exceptionally dismal, as oil companies started to cut costs and postpone activity due to global uncertainty stemming from the massive fall in oil prices," said the company. "Exploration work was the first to be postponed, while production continues but with rate negotiations as the global oil and gas industry continues to be plagued by oversupply and uncertainty," noting that, because of the low oil price, approved expenditure on upstream oil and gas projects in Indonesia has been revised down from US$22.2 billion to US$19.9 billion.