Marine Services Singapore Government

Copy of an article from Splash 24/7 Maritime industry magazine 12/12/16. http://splash247.com/barely-hanging-on/
Singapore offshore: Barely hanging on

December 12th, 2016 Splash 24/7 Asia, Contributions, Offshore 0 comments
It’s been one of the worst years in memory for anyone in Singapore connected to oil and gas.
On November 25 the Singapore government stepped in with a $1.1bn package to protect the nation’s hard hit offshore marine sector. For thousands of citizens made redundant from the sector the move came too late. Arguably, no other industry in Singapore has been more hard hit than offshore this year.
The measures include boosting International Enterprise (IE) Singapore’s finance scheme and the reintroduction of government backed bridging loans.
The bridging loan scheme will help Singapore-based companies borrow S$5m each for a tenure of up to six years to finance their operations and bridge short-term cash flow gaps. In addition, IE’s existing Internationalisation Finance Scheme (IFS), which provides project/asset financing support for companies, will be enhanced, the release stated.
For bridging loans, the maximum loan quantum for each borrower group will be S$15m, while for IFS it will be raised to S$70m per borrower group from the current S$30m. The government will take on 70 per cent of the riskshare for both measures.
Shipyards, contractors, the struggling offshore sector, exploration and production companies, oil and gas equipment and services companies and suppliers, can all apply for these schemes.
The minister for trade and industry S Iswaran commented: “While there has been a general slowdown in economic growth, the impact has been uneven. The marine and offshore engineering industry, in particular, is facing a deep and prolonged downturn due to cyclical and structural forces. Consequently, the industry’s financing challenges have intensified in recent months. Some industry consolidation is inevitable as companies restructure.”
The move by many Asian governments – including in China, South Korea and Taiwan – stepping in to support shipping lines and shipyards in recent months has proved controversial with many suggesting the state interventions will only serve to lengthen the shipping and offshore downturn. A survey carried in the most recent issue of Maritime CEO magazine found that 76% of the more than 600 respondents were against government interventions into the sector.
Ferocious storm
“We are navigating a storm like we have never seen before and the end is not in sight.” That’s the words of respected offshore broker Mike Meade. Meade who heads up M3 Marine, a Singapore brokerage and consultancy focusing on offshore, is also a regular commentator on the sector for Splash.
On the capital side of the business M3 has seen too many ships being built with no buyers and values dropping off 40%+. On the chartering side the brokerage saw the utilisation of assets plummet along with charter rates.
Meade observes that distress sales are now coming in thick and fast as there are no willing buyers at reasonable market values.
“This is the start of what I can see as real pain for some owners, especially those with older equipment,” Meade says. The definition of older equipment has swiftly moved from 20 years down to 10 with some new equipment out of China being sold at distress levels, he warns.
Singapore has been rocked by many offshore firms seeking judicial management this year – including Technics Oil & Gas, Swiber Holdings and Swissco.
Meade saw the downfall of Swiber Holdings, an oilfield services company which filed for judicial management in July, a long way off. He describes the demise of the firm as Emperor’s New Clothes syndrome.
“The knock on effect of Swiber is the negative sentiment it has brought to the market, especially to those undercapitalised and over leveraged companies out of Singapore and to some extent Norway, which was already evident,” Meade says.
Swiber sets the news agenda
Swiber’s messy decline – initially going for liquidation then pulling an about turn and opting for judicial management – set investment circles on high alert. The company is now under investigation by the authorities for its financial disclosures in the run up to its downfall.
Swissco followed suit last month after reached what it described as an “impasse” with lenders.
“A significant gap persists between the group’s aim of sustaining its business in the long term and the position of these lenders,” Swissco explained.
Swissco, originally an OSV operator, diversified into rigs in mid-2014 just ahead of global oil prices plunging. Swissco is weighed down by $147.5m in debts with just $1.2m in cash, unable to make key repayments.
When Swiber filed for judicial management in July it sent many other Singapore offshore stocks into a tailspin.
“The OSV market and marine service provider market is becoming increasingly messy and under financial pressure. This step by Swissco will place increasing pressure on the likes of Ezion Holdings and Triyards, both of which have interests in Swissco. I don’t think it is going to be too long before we start getting a domino effect in Southeast Asia with companies soon to collapse under the financial strains,” says Splash offshore columnist Andre Wheeler.
Splash Chat dishes the dirt
Speakers at this August on our live Q&A on Splash Chat told readers Swiber’s fall was widely seen ahead of time by Singapore’s offshore community.
“Swiber was a train wreck in slow motion,” commented Venkatraman Sheshashayee, CEO of Miclyn Express Offshore.
“The reality is the balance sheets of these companies cannot meet their debt / bond commitments. Working capital was used to grow bad businesses and with reduced revenues they don’t have the cash to survive let alone pay debt,” said M3’s Meade.
A survey carried by Singapore’s Business Times four months ago showed the precarious financial state of many of Singapore’s offshore listed firms.
Business Times drew on data released as of August 19 on Bloomberg, latest company results, and analyst reports.
Of the 14 companies on the list, 12 has short-term debt of over S$100m ($73.5m), 10 had negative/low cash flow, and nearly all were highly geared.
The 12 companies highlighted as having high short-term debt levels are ASL Marine, Ausgroup, Ezra Holdings, Ezion Holdings, KS Energy, Mencast, Marco Polo, Nam Cheong, Pacific Radiance, Vallianz and Vard Holdings.
“[T]ime may just not be on the side of many small and mid-cap industry players,” the report warned.
Since then the Singapore Exchange (SGX) has been cluttered with frenzied announcements from other offshore names trying to defend the state of their stretched balance sheets.
Pacific Richfield carved up
This July Seacor Marine bought 11 AHTS vessels from Singapore’s Pacific Richfield, according to brokers Fearnley Offshore Supply.
Pacific Richfield put its entire 40-strong fleet up for sale at the end of last November as part of what it termed as a “restructuring exercise”, while brokers in Singapore described the move at the time as a distressed asset sale.
The vessels bought by Seacor will be gradually reactivated from present layup status and renamed with a Seacor prefix.
“We expect Seacor to mobilise some of the vessels to Middle East and West Africa,” the broker anticipated.
Indonesian national Rony Sudjaka founded Pacific Richfield in 1989. Sudjaka’s father worked in Hong Kong at the old Taikoo Shipyard from 1926, before moving back to Indonesia to do contracting work.
Sudjaka himself, now 80, has been in the OSV business for more than half a century.
Meanwhile, at the end of October Singapore offshore shipbuilder and vessel owner ASL Marine Holdings applied to the Singapore Exchange for a one month extension to both hold its AGM and release its latest set of quarterly results, a sure sign of difficulties.
Similar in business scope to ASL, Otto Marine has been taken over this year and delisted. Ocean International Capital, owned by Datuk Seri Yaw Chee Siew, Otto’s executive chairman and controlling shareholder, took over Otto and delisted the company in September.
Elsewhere, under pressure Ezra Holdings received a fillip at the end of September when Japanese shipping major Nippon Yusen Kaisha (NYK) came in for a 25% stake in Emas Chiyoda Subsea, joining Ezra and Japan’s Chiyoda Corporation.
“NYK’s participation in this JV will enable us to tap into the Japanese market and NYK’s wealth of experience in vessel operations around the world,” commented Lionel Lee, group CEO and managing director of Ezra, a man who has to had to fight off plenty of investor disdain this year.
Other partnerships have floundered however. In October, for instance, Sovcomflot and Singapore’s Swire Pacific Offshore ended a three-vessel joint venture established in 2006, resulting in the Russian company acquiring two multi-purpose icebreaking platform supply vessels from Swire.
Sovcomflot has acquired the Pacific Endeavour and Pacific Enterprise, Swire’s contribution to the JV, and now exclusively owns, operates and manages all three vessels previously part of the joint venture.
Bright spots
There have been some brighter spots however. Take May 30 and the delivery of a first vessel for Tasik Subsea, a new subsea services company set up by former Hallin Marine boss John Giddens and M3 Marine’s Meade. The pair were on hand in China to watch the diving support vessel Southern Star slide down the slipway. The vessel now goes on a five-year bareboat charter.
During the launch ceremony, Giddens commented: “At the outset we decided to build a technically advanced, cost effective vessel whilst working closely with the charterer from the start. Those decisions have been vindicated by the economic challenges that face our industry today as a result of low oil prices and the general slowdown in the marine industry.”
Then there is the news of Shel Hutton and his 2014 founded company, Ultra Deep Solutions (UDS).
UDS now has four vessels on order and is looking to sign another three to four contracts in the coming 12 months. This includes subsea vessels not just dive support ones.
“UDS,” Hutton insists, “will have one of the youngest fleets in the world at the lowest cost.”
Singapore-listed Atlantic Navigation, meanwhile, place orders earlier this year with a Chinese shipyard for seven newbuild offshore vessels to support five-year charters it has won from a Middle Eastern national oil company. The order consists of five utility and two AHTS vessels, which will all be deployed in the Arabian Gulf upon delivery, scheduled for the third quarter of 2017.
One of the prominent names in our Splash Chat offshore discussion mentioned earlier was Miclyn Express Offshore’s (MEO) Venkatraman Sheshashayee (better known simply as Shesh). In the top job since April last year Shesh is determined to forge MEO into a top 10 OSV global player.
“We are determined to achieve our strategic vision,” he tells Splash, “to become a globally reputed group, in the world’s top ten, measured by fleet size, EBITDA and RoI, as well as by safety performance and operational uptime. We hope to become a market leader in crewboats, a preferred partner in project solutions, and the provider of choice of general and specialised offshore support vessels.”
Finally in this slight chink of light for Singapore’s beleaguered offshore scene, mighty Navig8 Group established its own fleet of offshore support vessels through the acquisition this April of Singapore-headquartered RKOffshore Management (RKOM).
RKOM owns 19 anchor handling tug support (AHTS) vessels, plus two newbuildings. It has another AHTS and a diving support vessel under management.
“We believe current dynamics within the energy exploration and production industry have created a unique opportunity for Navig8 to extend its commercial and technical services to the offshore energy sector,” said Nicolas Busch, CEO of Navig8 Group.
No yard solace
The clamour continues to rise to get the republic’s top two yards – fierce rivals Keppel and Sembcorp – to merge.
Both have been hard hit by low oil prices as well as the massive corruption scandal surrounding Petrobras in Brazil. The pair have shed thousands upon thousands of jobs in the past 18 months. With offshore orders plummeting both companies have had to rely on more repair work to fill berths.
In other key yard news pertaining to these two dominant brands in the sector, Sembcorp Marine this year completed buying out local firm, PPL Shipyard. Sembcorp Marine also divested itself of its 30% stake in China’s Cosco Shipyard Group.

It might be that MRM just have to hold on as best they can.