Oil downturn continues to buffet MMA

MMA Offshore has posted a $378 million loss for the 2017 financial year on the back of a huge impairment and the halving of revenue from its oil and gas-focused vessel operations.

The loss was driven in large part by a $312 million impairment, the lion’s share of which was taken against vessel values.

That is a substantial amount for a company that reported assets of $633 million at the end of the financial year, and the impairment follows a $120 million write-down in 2015.

Revenue was also well down.

Making a like-for-like comparison of MMA’s continuing business units, revenue was down 46.5 per cent to $221.8 million.

The calculation is complicated as the company sold two of its businesses in the past 12 months, with Toll Group buying MMA’s Dampier supply base, and a 50 per cent share of the Broome supply base.

About 20 vessels from the MMA fleet were sold.

MMA’s numbers indicate a net loss from its continuing operations of $66.7 million, with vessel utilisation at 52 per cent across the year down from 59 per cent in 2016.

Overall earnings before interest, tax, depreciation and amortisation was $21.7 million.

MMA chairman Tony Howarth said the market had been challenging through the past 12 months, but sentiment was improving.

“The oil market appears to be rebalancing and we have seen global inventories begin to reduce in recent months,” he said.

“However, we expect ongoing volatility for some time.

“Global exploration and production spending, which has been drastically cut over the past three years, is insufficient to offset reserve depletion and meet future demand growth.

“The International Energy Agency recently forecasted a global supply shortage by 2020 if underinvestment continues.

“Whilst it will take some time for the vessel market to come into balance, the early signs are encouraging for a market recovery.

“During the year, MMA made the strategic decision to dispose of its supply base assets to focus on the core offshore vessel business.

“The net proceeds from the sale, which amounted to $49.5 million, were used to reduce debt.

“MMA is also in the process of disposing of a number of non-core vessels from the fleet, streamlining the business to focus on the segments where MMA can extract the most value going forward.

“MMA’s banking syndicate remain supportive, notwithstanding the challenging market conditions being faced by the offshore vessel industry.

“In February 2017, MMA agreed a number of amendments to its banking facility including a reduced amortisation profile and an extension of the term of the facility to enable MMA to trade through the current market downturn.

“Following the sale of the supply bases, there are no further amortisation payments required until the expiry of the facility in September 2019.”

Shares in MMA fell 7.9 per cent to 17.5 cents each at the time of writing.