Stronger chartering revenues compensate the drop in Owned Vessel revenue from COVID-19 delays
Wintermar Offshore Marine (WINS:JK) has announced results for 1Q2022. Total revenue was up 3% YOY to US$10.5 million, with stronger chartering revenues compensating for a drop in Owned Vessel revenue from COVID-19 delays.
Oil prices spiked in 1Q2022 as a result of the war in Ukraine and sanctions against Russian oil and gas. The ensuing oil shortage sparked a rise in investment in oil exploration and a resurgence in drilling programs in Asia.
The Company was impacted quite severely by a spike in Omicron infections on the fleet, which led to prolonged delays in the commencement of operations in international as well as domestic charters in 1Q2022. Owned Vessel revenues declined but this was compensated by a jump in revenues from the Chartering and Other Services Divisions.
Owned Vessel Division
Several vessels were infected with COVID-19 in 1Q2022 and had to be quarantined. Emergency crew changes were arranged, but revenues were penalized due to the resulting delays while higher costs were incurred as vessels had been fully crewed in anticipation of on-hire. Crew salary was flat YOY at US$2.1million, operations and maintenance costs rising by 40%YOY and 23%YOY respectively in preparation for new contracts. Fuel was significantly higher at US$0.67 million due to the one-off cost of international mobilization and demobilization of vessels due to different locations for on- and off-hire. This led to a 21% YOY decline in Owned Vessel revenue to US$6.6 million, while direct costs rose by 10% YOY.
During the quarter, the Company purchased an additional 4 vessels, comprising one PSV, 2 units of 5,000 BHP AHTS and 1 unit of 6,000 BHP AHTS. Two of these vessels are being modified for reactivation while the other two are finishing off existing contracts and providing some charter income. As 4 of the 6 vessels acquired since 4Q2021 were undergoing docking and reactivation in 1Q2022, there are no revenues arising whereas costs have started to incur. All these reasons led to a gross loss of US$0.58 million from the Owned Vessel Division.
Chartering and Other Services
Gross Profit from Chartering jumped by 260% YOY to US$0.37 million with the addition of three new contracts in Brunei, while Other Services Division saw a 49% increase in gross profit to US$0.38 million.
Total Gross Profit for 1Q2022 was US$0.18 million compared to US$2.1 million in 1Q2021.
Indirect Expenses and Operating Profit
The biggest contribution to a rise in Indirect Expenses was a rise in staff salaries which increased by 47% due to the annual discretionary bonuses paid out in March, and an increase in staffing. The Company also readjusted salaries in 2021 to reverse most of the salary reductions volunteered by employees when the COVID-19 started in 2020. With the increase in indirect expenses, the Company recorded an Operating Loss of US$1.18 million.
Other Income, Expenses and Net Attributable profit
Interest expenses fell by 51% YOY to US$0.36 million in line with much lower gearing while the stronger Rupiah also resulted in an FX loss of US$0.03 million. Loss in earnings of associate amounted to US$0.07 million after recording a small profit in 1Q2021 while there was a tax penalty of US$0.15 million in a subsidiary.
Net loss attributable to shareholders for 1Q2022 was US$1.8 million compared to a loss of US$0.34 million in 1Q2021. EBITDA for the quarter was US$1.7 million from US$4.3 million in 1Q2021.
Outlook for Oil and Gas exploration
After the sharp spike, releases of strategic oil reserves by the US and downward revisions to 2022 oil demand arising from COVID-19 lockdowns in China have taken some pressure off oil prices. With Brent crude oil prices settling around the US$100/barrel mark, and sanctions against Russian oil, there is still a huge incentive for oil exploration. In Asia, there is stronger demand for oil services as new drilling projects have been announced. In Indonesia, Pertamina has announced a plan to drill 29 exploration wells and 813 development wells in 2022 while private oil companies are also planning drilling campaigns.
In 2021, global offshore investment in EPC (Exploration, procurement and construction) grew by 200% YOY to US$42 billion and with the Ukraine invasion, 2022 is expected to see further growth. Below is a chart from Westwood Global Energy projecting sustained higher levels of global offshore investment.
Strategy and Outlook
The Company embarked on a capital expenditure plan in 4Q2021 and to date has acquired a total of 6 vessels ranging from 5000BHP AHTS to Platform Supply Vessels. After docking and reactivation, these vessels will be ready for operations in mid 2Q2022, in time for an anticipated pick up in demand as drilling campaigns start by mid 2022.
In Asia, there are projects starting in Thailand, Malaysia, Brunei and India which require higher value support vessels. Charter rates are still constrained in Indonesia due to low budgets set last year, but some projects which were delayed are now expected to commence operations in the coming months. We are optimistic that the long awaited recovery in drilling is underway.
Contracts on hand as at the end March 2022 totalled US$64 million.
About Wintermar Offshore Marine Group
Wintermar Offshore Marine Group (WINS.JK), developed over nearly 50 years with a track record of quality that is both a source of pride and responsibility that we are dedicated to upholding, and sails a fleet of more than 48 Offshore Support Vessels ready for long term as well as spot charters. All vessels are operated by experienced Indonesian crew, tracked by satellite systems and monitored in real-time by shore-based Vessel Teams.
Wintermar is the first shipping company in Indonesia to be certified with an Integrated Management System by Lloyd’s Register Quality Assurance, and is currently certified with ISO 9001:2015 (Quality), ISO14001:2015 (Environment) and OHSAS 18001:2007 (Occupational Health and Safety). For more information, please visit www.wintermar.com.
Ms. Pek Swan Layanto, CFA
PT Wintermar Offshore Marine Tbk
T: (62-21) 530 5201 Ext 401
Certain statements made in this publication involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. Certain statements relating to business and operations of PT Wintermar Offshore Marine Tbk and Subsidiaries (the Company) are based on management’s expectations, estimates and projections. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such statements. The information contained in this release is not intended to qualify, supplement or amend information disclosed under corporate and securities legislation of any jurisdiction applicable to the Company and should not be relied upon for the purpose of making investment decisions concerning any securities of the Company.