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!!!