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5 Things To Know About Mermaid Maritime (SGX: DU4), A 40-Year Subsea and Offshore Oil & Gas Specialist

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Mermaid Maritime

With over 40 years of track record, Mermaid Maritime (SGX: DU4) specialises in subsea and offshore drilling services, primarily to the oil and gas industry. Its services are crucial for the installation, maintenance, and decommissioning of offshore infrastructure.

Mermaid Maritime operates primarily in Southeast Asia, the Middle East and Africa. As oil and gas fields reach their end-of-life, Mermaid Maritime is in a good position to capture decommissioning projects, as well as exploit the transition into renewable energy projects.

In Southeast Asia, Mermaid Maritime is seeing an increase in decommissioning projects, especially in Thailand. Over in the Middle East, Mermaid Maritime is capitalising on the vast oil and gas reserves and infrastructure development projects.

Meanwhile, Mermaid Maritime is exploring more opportunities in both East and West Africa, while also looking to enter the UK and North Sea regions for energy, decommissioning and renewables projects.

Here are 5 things to know about Mermaid Maritime.

#1 Describe Mermaid Maritime’s Operations And Some Of Its Key Business Segments?

Hiring a team of over 1,000 skilled divers, crew, technicians, support service providers, and coupled with its Remotely Operated Vehicles, (ROVs), Mermaid Maritime conducts Inspection, Repair and Maintenance (IRM) projects for underwater structures such as pipelines, rigs and platforms.

Under its cable laying business, Mermaid Maritime can lay subsea cables for telecommunications and power transmission – which are critical for connected offshore installations to onshore facilities.

Finally, Mermaid Maritime assists in transportation and installation of subsea equipment and infrastructure, as well as provides safe and efficient decommissioning of offshore oil and gas assets that have reached the end of their operational lifespan.

#2 What Are Some Of The Key Drivers Of Mermaid’s Revenue For 2Q2024?

In 2Q2024, Mermaid Maritime’s revenue jumped 154.8% from US$62.0 million to US$158.0 million, underpinned by several growth drivers:

– A sharp increase in decommissioning projects as many offshore oil wells are reaching the end of their productive life, necessitating safe and efficient decommissioning services in which Mermaid specialises.

– Heightened demand for subsea cables for telecommunications and power transmission, particularly in support of offshore renewable energy projects.

– Robust demand for maintenance of existing offshore infrastructure.

– High utilisation rates across its fleet of vessels, alongside elevated charter rates driven by strong market demand and the limited availability of specialised vessels.

As of June 2024, Mermaid Maritime’s order book reached a record high of US$976 million, reflecting its success in securing diverse projects across both short-term and long-term contracts, providing revenue visibility through 2027. 

The project awards span Southeast Asia, the Middle East, the North Sea, and Western Sub-Sahara. 

In Southeast Asia, Mermaid has secured major decommissioning projects as offshore fields approach the end of production. In the Middle East, the company continues winning IRM service contracts, supported by strong relationships with major oil producers. 

The company has also expanded in Europe, securing cable laying and subsea projects for offshore wind developments in the North Sea, aligning with the global shift towards renewable energy. These contracts demonstrate Mermaid’s competitive strengths in fleet, expertise, and client relationships.

Mermaid Maritime Projects

#3 Could You Provide An Overview Of Industry Trends And How Mermaid Maritime Has Positioned Itself To Remain Relevant For Upcoming Projects?

The offshore oil and gas industry is experiencing a resurgence, driven by sustained high oil prices that encourage increased investment in offshore activities. A key trend is the growing need retire ageing oil and gas assets, especially in Southeast Asia and the North Sea. This presents substantial opportunities for companies like Mermaid with decommissioning expertise, especially while aligning with global environmental objectives. 

Additionally, the global shift towards decarbonisation has increased investments in offshore renewable energy projects, boosting demand for subsea services like cable laying and IRM, areas where Mermaid excels. 

This also opens opportunities for Mermaid Maritime in the development of offshore wind farms in UK and Europe — which requires extensive subsea infrastructure including power transmission cables and equipment maintenance — aligning with Mermaid Maritime’s expertise in cable laying and subsea engineering. 

The supply of specialised vessels remains tight due to lack of new builds and scrapping of older vessels, leading to higher charter rates and utilisation levels. With its modern fleet, technical expertise, and established client relationships, Mermaid is well-positioned to benefit from these favourable market dynamics.

#4 What Are Some Key Risks In This Business And How Is The Group Mitigating Them?

Mermaid Maritime operates in an industry facing several inherent risks. The cyclical nature of the oil and gas sector means oil price fluctuations can significantly impact investment levels and demand for offshore services. 

Geopolitical risks, such as regional conflicts or changes in government policies, can affect operations and market access. Additionally, operational risks relate to project delays, cost overruns, and specialised vessel availability. 

To mitigate these risks, Mermaid employs several strategies, maintaining a diversified portfolio across regions and sectors. Strong relationships with major clients provide stable contracts and revenue. Mermaid also prioritises cost management and operational efficiency to protect margins, incorporating cost pass-through mechanisms in contracts. The company invests in its fleet and technology whilst maintaining a mix of short-term and long-term contracts to ensure revenue stability.

The company is also actively pivoting away from the more volatile aspects of the O&G sector towards more stable and predictable segments such as decommissioning work and subsea cable laying. These areas, driven by regulatory requirements and renewable energy transition initiatives, provide steady growth as compared to the cyclical nature of exploration and production services in the O&G industry.

To further mitigate these risks, Mermaid is also diversifying its project portfolio across various regions and securing long-term contracts to ensure revenue stability. The Group continues to strengthen project management processes to minimise delays and cost overruns, while maintaining strong client relationships.

As Mermaid Maritime operates in a capital-intensive industry that requires substantial funding for vessel operations and project execution, uncertainty over interest rates can significantly impact Mermaid Maritime’s finance costs. The higher interest rates environment has increased borrowing costs.

In 2Q2024, the company’s finance costs increased by 71% due to new loans taken to support growth initiatives. To manage interest-rate risk, Mermaid maintains an optimal debt structure and has a considerable portion of its debt owed to its parent company, Thoresen Thai Agencies, often under favourable terms compared to market rates.

#5 How Is Mermaid Advancing Its Sustainability And ESG Commitments?

Mermaid Maritime is committed to integrate ESG considerations into its core business operations. Our most notable achievement has been reducing our carbon intensity by 46% from 2019 to 2022 through optimising energy usage, investing in advanced vessel technology and implementing operational efficiencies.

Mermaid is exploring the use of sustainable fuels and continues to upgrade its fleet to be more environmentally friendly. The company is also focused on reducing emissions and waste and improving resource efficiency in its operations.

On the social front, Mermaid emphasises the safety and well-being of its employees, investing in training and development, and maintaining high safety standards. The company is also committed to community engagement and supporting local initiatives in the regions where it operates.

Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 12 November 2024 and republished with permission. You can read more about Mermaid Maritime (SGX: DU4) on the SGX website.

Read other featured companies from SGX’s 10 in 10 series on the DollarsAndSense website.

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