As reported in Energy News yesterday, MMA confirmed that OSV day rates were coming under pressure from operators trying to maintain fleet utilisation, while large oil companies were using the lower oil price environment to drive costs down including vessel rates.
"We believe the decline in vessel day rates has been 5-15% with the largest declines occurring in the smaller boat classes (5000bhp). MRM has targeted $A15 million in cost-cutting initiatives and productivity gains over the next two years," Hartleys oil and gas analyst Simon Andrew said yesterday.
"We maintain our ‘Neutral' recommendation on the stock with a target price of $1.08/share [reduced from $A1.11 per share]."
MMA's net profit after tax of $37 million was 16% below Hartleys' forecasts of $45 million, while headline revenue, EBITDA and D&A were significantly higher than the firm's forecast.
The difference, Andrew said, resulted from the accounting treatment of the mobilisation and de-mobilisation associated with the Europa contract.
"In addition to the associated revenue, the cost (estimated at $75 million) was capitalised and will be amortised over the life of the contract," he said.
At this stage, the contract is expected to run for nine months (until August 2015) but may be extended. Net debt climbed to $309 million, primarily because of the mark to market of MMA's US dollar-denominated debt.
Andrew noted that the performance of the Dampier supply base deteriorated, with EBITDA declining by 48% year-on-year. Margins also declined significantly. MMA provided guidance suggesting 2H performance from the supply base would be in line with 1H.
Ironically, Chevron, whose Gorgon project work has declined for the Aussie contractor, appears to be MMA's hope for the foreseeable future, along with other mega projects belonging to Chevron and Japanese major, Inpex.
Andrew said that beyond the 1H results, MMA's ASX share price might get a short term boost should Chevron announce plans to construct Train 4 at Gorgon.
"A commitment to Train 4 is likely to trigger an extension of the Europa contract," he said.
"Other catalysts could include contracts associated with both [the] Wheatstone and Ichthys LNG projects."
All this has seen Hartleys reduce its FY15 NPAT forecast by 8% to $71.4 million.
For 2H FY15, Andrew believes the Europa accommodation ship contract should fill the revenue void left by the completion of the Subsea 7 contract; however, he warned that 2H is still likely to be weaker than 1H FY15.
"For FY16 we maintained our NPAT forecast of $56 million, which is below the current Bloomberg consensus figure of $65 million," Andrew said, adding that Hartleys had also reduced dividend assumptions.
"We now expect MRM's earnings to deteriorate over the next two years and [as] the speed at which oil prices recover is difficult to predict we therefore cannot justify anything more than a ‘Neutral' rating on MMA."
