This article by Jennifer Tan (left, Director, Research & Products, Equities & Fixed Income, at the Singapore Exchange) was published in SGX's kopi-C: the Company brew series on 25 August 2017. The article is republished with permission.
For veteran seafarer Captain Gerald Seow, the lure of the ocean has always been irresistible.
"It was pitch dark, and we had just cleared port. |
Brand Building
POSH was listed on the Mainboard of Singapore Exchange in 2014. It has a current market capitalisation of over S$500 million, and is one of the largest Asia-based international operators of offshore support vessels.
"My technical and business knowledge, as well as hands-on experience, having been to sea, offer many advantages," Seow said.
"I understand what a ship can or cannot do, what the business needs or doesn't need, what's important to customers, and how to make a profit from the service."
Seow holds a Certificate of Competency as Master of a Foreign-Going Ship from the Ministry of Transport of New Zealand, and a Master of Science in Shipping, Trade and Finance from City, University of London. He was appointed CEO of POSH in 2013.
The 64-year-old emphasises the importance of remaining relevant to the market. "For any business to be sustainable, it needs to offer solutions, such as cost savings and more efficient ways of doing things," he noted.
Many people look at a business in terms of how to make a quick buck, but don't focus on providing solutions. So when the market hits a downturn, they become irrelevant. - Gerald Seow PACC Offshore Services Holdings (Photo: Company) |
"Many people look at a business in terms of how to make a quick buck, but don't focus on providing solutions. So when the market hits a downturn, they become irrelevant."
The oil and gas sector remains mired in its worst slump in at least three decades, and the timing of its recovery is unclear.
According to June 2017 data from the International Energy Agency (IEA), oil demand is projected to grow by 1.3 million barrels a day this year, supported by higher consumption in India and China.
However, second-quarter oil output was 1.25 million barrels a day above the same period a year ago - its steepest annual rise since February 2016 - due to increased production by Libya and Nigeria, and a lower compliance rate by OPEC members on the agreed extended cuts, IEA data showed.
As a result, crude has languished below the US$50 per barrel mark, and capital expenditure by oil majors remains depressed.
"At POSH, we are building a brand, and building it over the long term, irrespective of market conditions," Seow said.
While POSH has a diversified business model, it has not been immune to the industry crunch. "We've been very prudent, but the downturn has been surprisingly deep, impacting not just offshore, but shipping as well," he added.
POSH offers a suite of services to its clients across the oil and gas value chain, including offshore supply vessels that support mid- to deep-water operations of rigs and oilfield operators, a fleet of harbour tugs that provide harbour towing operations, as well as a joint venture that offers heavy lift services to shipyards engaged in the construction, repair and conversion of various types of vessels.
The Group swung into the red for the financial years ended 31 December 2015 and 2016, reporting attributable net losses of US$131.0 million and US$371.4 million respectively. For the second quarter ended 30 June 2017, it narrowed its attributable net loss to US$9.1 million from US$17.5 million in the year-ago period.
"We're still pretty busy despite the downturn, and there are pockets of growth that keep our cashflow positive," Seow pointed out.
♦ Cash is King | |||||||||||||||
As at 31 December 2016, the Group's cash balances stood at US$15.1 million, up from US$13.8 million as at end-2015. At end-June 2017, its cash and cash equivalents were stable at US$14.8 million.
Last month, it completed the towing of the Shell Prelude Floating Liquefied Natural Gas (FLNG) vessel, which is longer than four football fields and the largest offshore floating facility ever constructed.
He is also cognizant of the degree of mental strength required to be at sea. |
Pockets of Demand
Currently, the bright spots are in Middle East and West Africa. "There are more rig projects taking place there than anywhere else, and we will continue to participate in those tenders," he said.
The Group has also set up joint ventures in Saudi Arabia and Abu Dhabi with the objective of expanding its presence in those key markets.
Now is the best time for national oil companies to invest in the exploration and development of new sources, he added. "Onshore oilfields are depleting, and will continue to deplete, while offshore projects are becoming cheaper and more efficient."
POSH is also monitoring sector developments closely.
"A lot of industry consolidation is going on, and that's great, because it will boost pricing power.
A lot of industry consolidation is going on, and that's great, because it will boost pricing power. If a good acquisition opportunity arises that makes sense, we might consider it. - Gerald Seow PACC Offshore Services Holdings |
"If a good acquisition opportunity arises that makes sense, we might consider it."
In spite of the myriad of challenges ahead, Seow sleeps like a baby every night.
"We have a strong team, and that gives me a lot of comfort. All relevant processes and procedures are also in place to ensure the company's operational excellence."
He always tries to promote values of teamwork and accountability among his staff. "I tell them to question everything and not to take anything for granted. Basically, step up, speak out, and do something about it."
Integrity and humility are also high on his list. "We must have good intentions, keep our promises, and be very open and transparent in our dealings with others," he said. "It's important to be humble - empty vessels make the most noise."
Outside the office, the father of three girls and a boy, aged 24 to 36, never strays far from the water.
"I love sailing in the Mediterranean - the region has great weather, good marina facilities, and thousands of years of history. The blues and greens of the ocean are also more vibrant, maybe because of the climate."
And despite a passion for all that floats, Seow doesn't own a boat - yet.
"They say owning a boat is like having two wives - it takes up a lot of time. Maybe when I retire?"
Financial results
Year ended 31 December (US$ '000) | 2016 | 2015 | 2014 |
2013 |
Revenue | 183,100 | 280,820 | 234,037 | 237,263 |
Gross profit/loss | 4,985 | 58,026 | 57,204 | 72,391 |
Net profit/loss attributable to holders | -371,448 | -130,959 | 53,243 | 73,371 |
Quarter ended 30 June (US$ '000) | 2QFY2017 | 2QFY2016 |
yoy chg |
Revenue | 42,434 | 46,109 | -8% |
Gross profit/loss | -2,732 | 1,833 | NM |
Net loss attributable to equity holders | -9,109 | -17,527 | -48% |
Source: Company data
NM: Not meaningful
Outlook & Risks | ||
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PACC Offshore Services Holdings Ltd
Listed on SGX, POSH is one of the largest Asia-based international operators of offshore support vessels, and among the top five globally,. It owns a diversified fleet providing marine support services to the offshore oil and gas industry. The Group's four key business segments are:
- Offshore Supply Vessels (OSV) - supports mid- to deep-water operations of rigs and oilfield operators (exploration and construction phases).
- Offshore Accommodation (OA) - operates a fleet of offshore accommodation vessels providing a range of solutions for offshore construction, modification & maintenance, and decommissioning activities.
- Transport & Installation (T&I) - supports marine contractors in construction and maintenance of oilfield infrastructure and pipelines.
- Harbour Services & Emergency Response (HSER) - operates a fleet of harbour tugs actively engaged in supporting harbour towage operators. A joint venture also provides heavy lift services to shipyards engaged in the construction, repair and conversion of ships, offshore drilling units, other offshore structures, as well as topside production and processing facilities.
For its 2nd quarter results for the period ended 30 June 2017, click here.
The company website is: www.posh.com.sg.
The ccompany's Stock Facts page is here.