The offshore and marine sector has been going through rough times in recent months with oil prices near multi-year lows and slowing production demand. According to the Singapore Maritime Foundation, rig builders have not received any orders for drilling rigs since the start of the year.
Among the companies affected is Ezra Holdings, which reported a 79 per cent drop in its quarterly earnings for three months ended in February, attributed to lower contributions from its subsea, as well as offshore support and production divisions.
With slowing demand and weak oil prices hurting the company’s bottomline, Ezra said the Group plans to streamline core operations, which will involve cutting costs and manpower.
According to Moody’s Investors Service, the continued fall in oil prices in the first quarter of this year has hit upstream exploration and production companies globally.
However KrisEnergy, an upstream oil and gas company, is keeping positive. It said its diversified portfolio and assets have provided a level of cushioning against the oil price volatility.
Said KrisEnergy’s executive director, Mr Richard A. Lorentz: “I wouldn’t like to say that we are immune to oil prices dropping, but a big part of our portfolio is long-term natural gas contracts, and the natural gas contracts in South East Asia in particular do not really vary on a day-to-day basis, they are fixed contracts.
“The rest of it is just making sure we are smart about operating, cutting costs, deferring some exploration licences that are not firmed, but at the same time, we are putting our focus on getting out to offshore developments, producing as fast as possible.”
Some industry analysts added that due to strong demand in the past few years, some firms have a full backlog of orders, which will help see them through the next couple of years.
According to Mr Lee Yue Jer, an investment analyst at the RHB Research Institute Singapore, there are companies like Ezion with their long-term asset chartering contracts, and companies with very large and very strong orderbooks that should see them with decent operations for the next couple of years, like Keppel, Sembmarine and Triyards.
“(This should be) long enough for them to tide out the temporarily low oil prices,” he said.
On the downstream segment, Moody’s expects regional refiners to have benefited from improving margins and refined product spreads in the first quarter of this year.
However, it expects refining margins to remain weak in 2015, as supply continues to outpace demand growth.
