Losses mounting at Swire Pacific OffshoreCompany News // October 20, 2015
The board of Swire Pacific Limited has confirmed that the company’s marine services division will make a significant loss this year. Swire Pacific Offshore is the principal component of Swire Pacific’s marine services division.
In a trading update released late last week, the company said its marine services division is expected to make a loss of in the order of HK$1 billion in 2015, compared with a profit of HK$1.1 billion in 2014. This will have an adverse effect on the consolidated profit attributable to the shareholders of Swire Pacific for 2015.
“Oil prices declined substantially in the second half of 2014 and have remained low since then,” said Swire Pacific Limited. “This has adversely affected the offshore oil exploration market. Oil majors and national oil companies have cut back their exploration and production plans. Projects have been delayed or abandoned. All of this, and an oversupply of tonnage seeking work in a weak market, has adversely affected the business of the Swire Pacific Offshore.”
The company started to make a loss in the first half of 2015, when results were also adversely affected by an impairment charge arising from cancellation of contracts with a Brazilian shipyard for the construction four platform supply vessels. Its loss in the first half of 2015 was HK$169 million. The marine services division as a whole made a loss of HK$156 million in the period.
Since publication of Swire Pacific’s interim report for 2015 in August, a review of Swire Pacific offshore has been undertaken. As a result of that review and having regard to the outlook for the offshore oil services industry assuming that oil prices will not recover for some time, the company has concluded that the book value of Swire Pacific Offshore’s fleet will be subject to significant impairment charges. The trading outlook for the remainder of 2015 has also deteriorated more than was expected in August and further impairment charges are expected arising from cancellation of the shipbuilding contracts.