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Q: Are you considering the purchase of any distressed jack-up rigs now?
| Mermaid Maritime |
17.9 cts |
| 52-week range |
17.2-44.5 cts |
| Market Cap |
S$253 million |
| Dividend Yield |
2.98% |
| Price Earnings |
12.3X |
| Price to Book |
0.36X |
| Debt to Assets |
15.70% |
Data from Bloomberg |
Our balance sheet is very strong compared to other oil service companies. Our net gearing is almost zero. Because of this, many drilling operators are coming to Mermaid.
Unlike other oil service companies, we do not have to deal with rig refinancing issues. International oil companies want to deal with service providers that are in a financially strong position.
At the same time, we are seeing many potential deals for distressed assets because of the weak market.
Having said that, we believe 2015 is not the time to buy, because the market is looking really bad. We are more interested to buy platforms, rather than jack-up rigs.
Unlike speculative vessel owners that place orders for rigs without any contracts in hand, we have a successful track record and can therefore get contracts. We see no need to tie up our own capital by committing to vessel ownership. We can secure the charter contract and use someone else’s capital to secure the vessel.
Mermaid has a 3-year contract to lease its 3 high-spec jack-up drilling rigs under Asia Offshore Drilling at US$180,000 a day to Saudi Aramco. The poor market conditions led Saudi Aramco to request for a discount to its charter fixture. So, Mermaid agreed to a 10% discount at US$162,000 a day.
Q: Will rates for AOD be reverted to normal after one year of discount?
The discounted rate of US$162,000 a day is applicable from April 2015 to March 2016. After that, the contract will be up for renewal. If contract is renewed, the rate will likely revert back to US$180,000 a day.
Renewal is very likely, as Saudi Aramco has installed equipment on this vessel. Furthermore, this customer does not like to change service providers. We are confident of being retained as long as we maintain high standards of service.
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