In International Shipping News 28/05/2015
Offshore support vessel operator Otto Marine has taken tough measures to address tough times, given the downturn in the global oil industry.
The firm has cut 30 employees across its operations since it embarked on a series of restructuring moves in January, newly appointed group chief executive Michael See told The Straits Times in a recent interview.
That represented a cut of about 30 per cent of its staff strength.
The firm has also downsized payrolls for remaining employees, excluding junior staff, by an average of 15 per cent. Its top management took the brunt of the pay cut with a 20 per cent reduction.
Otto Marine, like many other offshore players here, has been hit hard by the slump in oil prices, down by about half since last June.
Earlier this month, the firm posted a net loss of US$13.2 million (S$17.6 million) for the first quarter this year, from a loss of US$14.4 million the year before, citing the “persistent challenging market condition” for the oil and gas industry.
Contracts for about five of its vessels are being delayed by two to three months, while utilisation rates for its 60-vessel fleet for the quarter stood at only about 60 per cent, although this is expected to pick up from the second quarter.
The firm ran into financial headwinds recently as well – a creditor attempted to wind it up over about S$1.6 million in debt last month, sending its share prices to a two-week low.
But Otto Marine, which has a net debt of US$509 million as of Dec 31 last year, said it had paid up the sum in full.
Mr See acknowledged that the rest of the year “is still going to be challenging”, which is why the firm is taking the bull by the horns.
“Nobody knows how oil prices will move and, as a result, projects get slowed down.
“For now, we want to operate lean, so we can emerge stronger with the recovery (of the industry) that we look forward to.”
He said Otto Marine will be cutting back operational expenditure, but stressed that this will be done “without compromising safety and operational execution”.
The firm last month announced new appointments within the group, including that of Mr See, who was previously executive director.
Mr Garrick Stanley, formerly group chief executive, was appointed president of shipping and chartering – the group’s largest contributing segment.
The change in roles, said Mr See, was so Otto Marine could “better tackle current market conditions”.
“In the past, we can sit down here and there will be repeat orders coming in,” he recalled.
“But with today’s market conditions, (Mr Stanley) needs to be on the road, working doubly hard, visiting customers and knocking on their doors.
“Allowing him to focus on shipping and chartering offloads him from worrying about the corporate aspects of the business.”
The restructuring moves, as a whole, are expected to translate into “a couple of million US dollars in annual savings” for the company.
Amid the doom and gloom in the offshore industry, Mr See believes there could be a silver lining.
He noted that Otto Marine was able to lower operational costs, thanks to the drop in fuel prices.
“There’s also the opportunity to look for better assets, which, given the current market conditions, are now cheaper and more available.”
Otto Marine aims to own up to 85 per cent of its fleet in the next three to five years – a move which will provide it with “much better profit margins” and, at the same time, the “flexibility to return the assets in the event of a hiccup within the market”, said Mr See.
Chief financial officer Chong Sieh Jiuan said the group will focus on refinancing its loans to ensure “stronger cashflow”, especially those due this year.
Mr Stanley added that the group remains confident about riding out the challenges with its stronghold in cabotage-protected markets, such as Indonesia and Australia, as it steps up its efforts to secure new contracts.
“We’re still seeing tendering activities in the market, even though companies are taking longer to sign on the dotted line. The work is still there.”
