Abu Dhabi: Dubai-based oilfield services firm, Topaz, sees opportunities in the second half of this year despite a challenging low oil price environment.
Oil prices plunged by more than 60 per cent in the last three years due to oversupply and weak demand hitting the business of many oilfield services companies across the globe.
“We are predicting green shoots in the second half of 2017, and 2018 is probably going to be a better year compared to past many years. A lot of projects that have been shelved by clients both in the Middle East and West Africa are now being reactivated,” Rene Kofod-Olsen, CEO of Topaz and Marine, an offshore support vessel (OSV) provider, told Gulf News in an interview.
He, however, said it is still going to be tough, and the companies who respond better to the crisis will do well.
Topaz, a subsidiary of Renaissance Services, a publicly traded company on the Muscat Securities Market, has a fleet of 100 offshore support vessels with operations in Caspian, Middle East, West Africa, North Sea and Gulf of Mexico.
To cope with the low oil price environment, the firm has undertaken cost cutting measures to the tune of $35 million in the last two years. The cost-cutting measures include reducing manpower, laying off some idle ships and revisiting cost proposition.
“These measures are necessary to have a decent margin of operation as opportunities are fewer in the low oil price environment. The whole industry has to be reset according to the situation,” Kofod-Olsen said.
The company’s contract backlog now stands at $1.5 billion, double the amount of the same period last year. Major contracts included in the backlog are the Tengiz contract worth in excess of $550m commencing in 2018 and an ongoing long-term BP contract for 14 vessels.
“Although we remain fully compliant with all our financial covenants as of the reporting date, we have preemptively obtained approvals to reset the financial covenants on the senior secured facility (maturing 2022) from our long-term banking partners, enabling us to enhance our liquidity and headroom for the future,” Kofod-Olsen said.
The main source of financing is through bonds and from banks in the region as well as internationally.
Topaz reported a 25.1 per cent drop in revenues for the first quarter of this year compared to the first quarter of 2016.
On oil price outlook, he said it would be moving up marginally due to efforts made by Opec to cut production and also due to growing demand from non-OECD (Organisation for Economic Cooperation and Development) countries.
“There is a significant growth in non-OECD countries and the world needs more energy. Renewable energy will take some years to pick up and the demand for oil and gas is still going to be there,” Kofod-Olsen said.
