-Owned Vessel Division-
Continuing the uptrend in offshore activity for 1Q2020 which began in 2019, the Company earned a positive gross margin of 7% in the Owned Vessel Division compared to losses in the past 4 quarters. High tier vessels were again in demand, in particular the Platform Supply Vessel type, which improved to 90% utilization in the month of
-Chartering and Other Services-
Chartering Revenue for 1Q2020 was 22% lower than a year ago at
The Management's continued drive for efficiency has produced results, as indirect expenses fell by 12% YOY to
-Other Income, Expenses and Net Attributable profit-
Interest Expenses fell 16% YOY to
The Company turned a profit of
-Oil and Gas Industry-
The Coronavirus pandemic has caused major disruptions to the world. The necessary lock down measures taken by many countries all over the world to protect human life also caused the worst contraction in economic activity in recent history. Air and road traffic was brought to a standstill in 2Q2020 as a result of the strict travel restrictions being imposed all over the world. As oil demand collapsed, storage capacity in the
It is estimated that oil demand hit bottom in
However, because of the sharp decline in capex that has already occurred in the past few years, researchers are now projecting an oil supply shortfall of 5 million bpd by 2023. There is therefore more optimism that offshore production will have to meet this shortfall.
Oil prices are projected to stay around
-Outlook for Offshore Support Vessels (OSV)-
Many oil companies have announced cuts to their capital expenditure projections for 2020, which is estimated to be 20-24% lower in 2020 compared to 2019. The majority of the announced cuts are in the
For owners of Offshore support Vessels (OSV), 2020 was supposed to be a recovery year as utilization and rates both started to rise. However, COVID-19 has put a halt on that. The recovery is now likely to be delayed by a year. In
In the short term, there will be lower utilization and some downward pressure on charter rates. The OSV industry has already reduced costs significantly and charter rates have not really recovered from the lowest point last year. Therefore, we do not expect a sharp decline in charter rates as a result of the COVID-19 impact because many companies are already operating at low or even negative margins. It is also expected that offshore oil production will benefit from lower shale output as demand recovers over the next two years, which will underpin OSV demand in the coming year.
-COVID-19 Response and Impact-
Wintermar is committed to prioritizing the health and safety of all staff and clients. As the COVID-19 pandemic started to impact the world, management activated the Business Continuity Plan in mid-March. This was to ensure that business operations were undisrupted while at the same time taking measures to ensure the health and well-being of all personnel and clients. Starting with socialization across our fleet and office on sanitization and hygiene practices, new procedures were implemented, including daily temperature taking, frequent cleaning and disinfecting of premises, provision of hand sanitisers, masks, and PPE, as well as social distancing. For office staff, we implemented Team A & B segregation with half the office "Working From Home" ("WFH") on alternate days. By the
Due to the strict travel restrictions put into place globally, there was an impact on the crew change schedule and delivery of spare parts. There were widespread flight cancellations, port closures, quarantine requirements and some charterer regulations prohibiting new crew from going on board during COVID-19. As a result, some of the crew who were scheduled to be relieved had no choice but to stay on board for longer. Crew which were allowed to go on board had to serve a 14 day quarantine prior to boarding the vessels. So far, because most of our vessels work in remote areas and not many are carrying passengers, the crew are able to mitigate the risk of COVID through various procedures of social distancing and frequent disinfection. Sourcing of some spare parts required for maintenance and docking were also affected due to disruptions in logistical services which caused some operational delays.
A COVID-19 task force has been tasked with coordinating all procedures and responses for the Company. The team meets regularly to monitor and adapt to the changing situation. Procedures for temperature taking, frequent disinfecting and distancing were put in place on board the fleet. There will be continued monitoring of procedures and more work to ensure that our shore teams and crew are well cared for during this time while ensuring no disruptions to clients' operations.
In terms of business operations, Wintermar is affected by an international oil company who has terminated their exploration and development work in
-Strategy and Outlook-
Wintermar had already experienced a turnaround in 1Q2020 and expectations were for a continued improvement in profitability for 2020. Unfortunately, the COVID-19 pandemic has caused a sharp contraction in oil demand resulting in cuts in capital expenditure by the oil producers.
Management expects that utilization rates will decline in 2Q and perhaps stay low for the rest of 2020 as short term contracts which expire in this period are unlikely to be renewed.
Learning from recent experience in the 2015 downturn, the Company has been quick to implement cost cutting measures in the past month. Some of these include reduction of crew on idle vessels, usage of shore power connection, cutting back on subscriptions for communications services for non operational vessels as well as postponement of non essential expense and a hiring freeze.
There will be more effort to improve efficiency through streamlining processes to reduce paperwork and increase automation.
There have been some postponement of drilling projects from 2020 to 2021 as oil companies have been unwilling to commit while the outlook on oil prices remains unpredictable. However, the worst month for oil consumption and demand seems to be behind us in April. As countries start to loosen travel restrictions, there are signs that consumer preferences have shifted towards private vehicles instead of mass transport, which has a bigger impact on road fuel demand. It is likely that by the third quarter, there will be a better understanding of how economies will resume activities post COVID-19 and demand for oil is predicted to recover to 2019 levels by end of 2021.
Wintermar's major lenders have been very supportive during this time. The Company is in the final stages of rescheduling loan repayments with major lenders which will provide better matching of cash outflows with the current scenario.
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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