Gulf Marine Services seeking to amend covenantsCompany News // August 3, 2017
Gulf Marine Services PLC, which provides self-propelled self-elevating support vessels to the offshore oil, gas and renewable energy sectors, says it is seeking to amend the terms of its covenants.
The company said it is in "constructive dialogue" with its banking syndicate on appropriate covenant amendments following the deferment of potential contract awards. The company said its board remains confident of the banks' continued support.
An earlier operational update on 16 May 2017 noted that the actual timing of contract awards is dependent on its clients' operational requirements. "As certain potential contract awards and commencement dates have been delayed, the group is now expecting 2017 EBITDA to be US$58-68 million (equivalent to an EBITDA margin above 50%), with this guidance subject to the precise timing of contract awards," GMS said. "The group continues to generate positive operating cashflows, with net debt anticipated to be US$360-370.0 million at the end of 2017. Net income in 2017 is expected to be US$1.0-10 million."
Overall the group is continuing to see good levels of tender activity and is progressing a number of opportunities, but is encountering some delays in contract awards and commencement dates.
Discussions with a client regarding two new contracts for SESVs in the MENA region are well advanced and the group is anticipating that these will be finalised shortly. The contracts, which are currently expected to commence at the end of Q1 2018, are for a Large Class vessel with a charter period of eight months (including options) and a Mid-Size Class vessel with a charter period of eight months (including options).
A contract extension has been confirmed for one of the Group's Mid-Size Class vessels currently operating in the MENA region, the extension period is for five months (including options) to the end of 2017.
A contract extension to the end of Q1 2018 has also been agreed for a Small Class vessel in the MENA region. As scheduled, a Large Class vessel has commenced a previously announced 18-month charter (including options) in Europe.
A Large Class vessel, operating in Europe, will complete a two-year firm charter period at the end of Q3 2017. Two additional 12-month extension options are unlikely to be exercised by the client. This vessel will be utilised on a previously announced long-term contract for a renewable energy client in Europe commencing in Q2 2018.
Duncan Anderson, Chief Executive Officer of GMS, said: "Demand for our Large Class and Mid-Size Class vessels is good, with the strategic reshaping of our fleet through our newbuild programme investment in these larger vessels proving prescient.
"While we are seeing good levels of tender activity in Europe and parts of the Middle East, these are taking longer to convert into contracts than has been typically the norm. The precise timing of contract awards is inevitably subject to our clients' own operational requirements, and in the current environment can be delayed as a consequence of a protracted tender evaluation and award process.
"Discussions are progressing with a number of clients about our cantilever innovation, reinforcing our view that the cantilever has the potential to deliver significant cost efficiencies in a broader range of work scopes for our SESVs.
"We are confident we have the right business model and strategy in place to ensure we are in the best possible position to secure new contracts as the market environment improves."