OSV oversupply overstated, the market is tightening, MMA Offshore says

Oversupply of offshore vessels in the market is overstated, and the market is tightening, Australian OSV player MMA said Thursday. The company also expects an increase in demand for its services in its key regions of operations.

In a statement prepared for its AGM of shareholders, MMA said its returns on assets, while significantly below the company’s historical average, are gradually improving. The company is seeing higher utilization and increasing charter rates, particularly in the multi-purpose and platform supply vessel segments.

In its FY 2019 highlights, the company reported a 50 percent increase in EBITDA which was $27.8 million, and 72% vessel utilization (up from 68% pct last year), with higher weighting to larger vessels.
“These trends support our view that the offshore vessel market is in the early stages of a recovery,“ MMA said.

“On the supply side, our view is that the market is tightening and that the oversupply of vessels is overstated, with many vessels which have been laid up during the downturn facing prohibitive reactivation costs and lower demand due to their age and condition. Industry experts predict that a large portion of the laid-up fleet will not return to service,” MMA said.

According to MMA, which owns 30+ offshore support vessels, the company is seeing signs of the market improving with increased tendering activity and longer contract durations, fewer available vessels, and improved rates in some regions and vessel segments.

“At a macro level, the fundamentals for a continued recovery remain positive. We are seeing a significant number of oil and gas projects being sanctioned globally, with this trend expected to continue. Importantly, a large number of projects are scheduled for development in our key regions of operation, which will translate into increased demand for offshore services and vessels in our markets,” MMA said.

Also, the company has been working to grow return on assets, with its growth strategy based on expansion higher-margin services offering such as specialized offshore services, Subsea, and Project Logistics. For this reason, MMA has recently acquired Neptune Marine Services.

Related: MMA cheers Neptune takeover as key step in subsea expansion strategy

“The recent acquisition of the business of Neptune Marine Services, which completed earlier this month, is a key platform in our strategy to expand our subsea business. The acquisition will enable us to package a range of subsea services on the back of our vessels, enabling us to capture additional margin as we move up the value chain,” MMA said.

According to MMA, the acquisition is expected to deliver a number of strategic benefits including an improved service offering to both Neptune’s and MMA’s clients, increased asset utilization, increased return on assets as well as revenue and cost synergies associated with combining the two businesses.

“With the acquisition undertaken at a low point in the cycle, we expect the combined business to benefit from increased offshore and subsea investment as the market continues to improve. With the acquisition now complete, our focus is on integrating the two businesses to ensure that we gain the maximum benefit from the acquisition,” MMA said.

In related MMA Offshore news, the company last Friday said it had been awarded three contracts for its vessels, with the total revenue across the contracts estimated at $38 million for the firm contract periods only. Read more on that MMA Offshore’s new contracts here.

Offshore Energy Today Staff

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