MESSAGE FROM CEO
By DIEDERIK DE BOER
Since I last wrote this message for the previous Breeze edition, the world in which we conduct our business has changed drastically. The oil price has continued to slide on the back of excess production and a stagnating demand. It looks like if this situation is not going to change very soon, barring a major unforeseen geopolitical event. The result is that the energy companies are tightening their belts, postponing expansion projects and non essential maintenance on their offshore facilities, deferring exploration activities (seismic and drilling) and conserving cash. All this results in reduced demand for vessels and services by contractors that charter vessels, which in turn gives companies like ours pressure on asset utilisation and charter rates, resulting in margin reduction.
Fortunately the MEO Group is in good shape, we have a strong portfolio of long term charters and a good balance sheet. That however doesn’t mean we are immune to the current situation, we need to be smart and very careful with costs, both ships` opex and overheads. In this connection we will be rolling out a number of cost initiatives throughout the organisation, be mindful with new hiring and have a good look at each BU`s organisation versus it`s business size and outlook. We will need to find more value in sharper procurement and manage costs such as IT, communication, travel, crewing overlaps, etc.
All this should enable us to navigate through the lean times as far as market conditions are concerned. I seek understanding and cooperation from all of you to help realise these cost improvements.
However, every cloud has a silver lining, it is not all gloom and doom. We have recently secured quite a few good contract wins, particularly in the Middle East (crewboats and AHTs), Malaysia and Thailand (OSVs) , Australia (also OSVs) and a new market for us, Mexico (3 of our new crewboats). The market is still reasonably active but given the reduced demand and excess supply, we will need to market smartly and be on the ball to keep utilisation rates up and with it the returns on the capital invested in our fleet.
All our Business Units are still performing reasonably well, EOS the strongest versus budget currently. Thailand and Brunei are fairly stable but going forward we will see some utilisation challenges, in Malaysia (demand is coming off quite a bit with Petronas pushing projects out until times get better) and the same can probably be said of Indonesia. In Australia the large LNG development projects will be nearing completion by 2016, our main challenge there currently is the redeployment of our coastal support fleet. Some units may be relocated to SE Asia if charters can be secured. Middle East is currently seeing high utilisation, but going forward may also see some gaps shaping up.
” THE MEO GROUP IS IN GOOD SHAPE, WE HAVE A STRONG PORTFOLIO OF LONG TERM CHARTERS AND A GOOD BALANCE SHEET. THAT HOWEVER DOESN’T MEAN WE ARE IMMUNE TO THE CURRENT SITUATION, WE NEED TO BE SMART AND VERY CAREFUL WITH COSTS, BOTH SHIP’S OPEX AND OVERHEADS. “
Given all this, we will not compromise on Operational Excellence (OE), particularly safety and reliability. Technical problems cause downtime, OPEX blowouts and erode customer confidence.
Accidents are worse, as they may add human suffering to this list. We will continue to work very hard to prevent this and a 2015 OE improvement plan has been rolled out recently. The training centre in Batam will be relocated to Jakarta and we will set up a new training centre in the Middle East at our main facility in the UAE (Hamriya). We see focused training as a key OE building block.
We have taken delivery of the last of our OSV newbuilds (Guardian and Monarch 1 & 2), the new barges we built (deployed in EOS) and we still have a few more crewboats in the pipeline for 2015, their deployment opportunities look positive.
Our HR team is working hard on various initiatives and programs to improve our practices in this critical business area, their contributions are vital for further improved organisational strength, talent pipeline and staff retention rates.
We look forward to your ongoing dedication and passion for the “cause”, but first and foremost, Be safe!!!