--COVID-19 Pandemic Impact
After a strong first quarter where the Company made a profit, the combined effect of the global "lockdowns" caused by the COVID-19 pandemic and the breakdown in
When the COVID-19 pandemic escalated, the global economic impact was swift and severe. This uncertainty led to cancellations and delays in offshore drilling operations globally.
Travel restrictions imposed domestically as well as globally also impacted our ability to carry out crew changes. This meant that the crew who had completed their contracts were not allowed to travel home while relievers could not start work.
The Company implemented COVID-19 protocols to protect the health and safety of our staff and crew, including full Work From Home procedures from late
By early
--Owned Vessel Division
Stating COVID-19 as the reason for being unable to continue with safe operations, some clients postponed commencement or even terminated their drilling projects since
Revenue from Owned Vessels for 1H2020 declined by 7% YOY largely due to a 26% quarterly drop in revenue in 2Q2020 compared to 1Q2020. Despite the lower revenue, the gross loss from the Owned Vessels Division reduced by 42% YOY in 1H2020 compared to 1H2019. This can be attributed to the Company's efforts to streamline the fleet and operational structure, which contributed to a reduction of 16% YOY in depreciation and 26% in maintenance costs.
Operational costs however, rose by 22% YOY to
--Chartering and Other Services
As economic activity shut down globally in 2Q2020, chartering revenues fell sharply by 42% to
The Company booked a gross loss of
--Indirect Expenses and Operating Loss
The success of the cost efficiency measures arising from the reorganization of the fleet can be seen in the 19% reduction in indirect expenses. The largest component of indirect expenses, which is staff costs, has fallen by 19% YOY to
Over the past 18 months, the Company has sold 7 vessels and laid up 6 older vessels and streamlined the shore team structure. The repositioning of the Company's fleet to focus on mid and high tier vessels which has been in process over the past two years has resulted in a leaner shore base with lower overheads.
The Operating loss for 1H2020 fell 16% to
--Other Income, Expenses and Net Attributable profit
In line with the reduction of debt, interest expenses fell 17% YOY to
For 1H2020, the Company booked a net loss attributable to shareholders of
EBITDA was lower at
--Oil and Gas Industry
The second quarter of 2020 made history as oil prices became negative for the first time, as the lack of demand caused inventory build up, while the lack of US Oil storage capacity caused WTI Oil prices to sink to a negative
The unprecedented scale of the simultaneous shut down of cities and countries has triggered an oversupply of oil which will take months to be drawn down. For the full year 2020, most researchers predict oil demand to be 9% below that of 2019. Equilibrium in demand and supply of oil is expected to be reached only in 2021.
According to Clarkson research, at the start of 2020 there were 65 fields scheduled to commence this year but after the outbreak of COVID-19, most were delayed and only 28 projects are still expected to continue this year, with others delayed till 2021.
The worst hit sector is
--Outlook for Offshore Support Vessels (OSV)
2020 was supposed to be a year of recovery as utilization rates picked up and charter rates were starting to rise and the beginning of the year. The offshore vessel industry had been enjoying a better equilibrium due to high scrapping activity in the past few years. Due to poor charter rates, there has been hardly any new building orders in DP vessels in the past years.
COVID-19 related project postponements arising from May this year will cause lower utilization rates for the rest of 2020, resulting in more financial stress for the industry. It will again require resilience for OSV companies to weather the next few months.
Because of the poor charter rates and reluctance of banks to finance OSVs, there is unlikely to be any new supply of OSVs in the coming year. This bodes well for a recovery in the industry when the oil market reaches a balance again in 2021. Some researchers also suggest a shortage of oil is likely from 2023 due to the lack of investment in reserves over the past few years.
There are still ongoing drilling projects being tendered in
--Strategy and Outlook
During 2Q2020, management has already put in place several measures to reduce costs through down manning vessels, a freeze on new hires and postponing non essential expenses. To improve revenue, the Marketing team has fixed some spot contracts to mitigate the impact of contracts which had been postponed or terminated due to COVID-19.
As cash flows were impacted by delays in invoicing and slowing accounts receivables from the lockdown measures, management approached bankers and were successful in securing a rescheduling of principal repayments. With the agreement of major lenders,
Management efforts in the past few years to expand internationally have repositioned Wintermar. The Company is now ranked 7th in the
Contracts on hand as at end
About
Wintermar is the first shipping company in
Contact:
Ms. Pek Swan Layanto, CFA Investor RelationsPT Wintermar Offshore Marine Tbk Tel: +62-21 530 5201 Ext 401 Email: investor_relations@wintermar.com
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