Gulf Marine Services loses two contracts, agrees bigger bank loan

5th Jul 2016 09:50

(ShareCast News) - Gulf Marine Services has cut its earnings guidance for 2016 but arranged a larger bank facility as two contracts were terminated early by clients and a third chose not to take up a contract extension.One contract with a Middle Eastern national oil company for a large, static self-propelled self-elevating support vessel (SESV) will end in the fourth quarter, while another smaller SESV contract has also been ended, with the charter ending in the third quarter.GMS, which has also secured an extension to its bank facility, said is now expecting earnings before interest, tax, depreciation and amortisation (EBITDA) to be US$100-110m in 2016, equivalent to an EBITDA margin in the high 50% range and with 2016 earnings per share of 14.5-15.5 cents.Management said they are focused on managing costs via a series of cost-saving initiatives.With net debt expected to peak at around $435m at the year end as the new build programme nears completion, directors have agreed an improved bank facility agreement that permits the maximum net leverage ratio to be 5.0 times EBITDA up to 1 July 2018.Chief executive Duncan Anderson said the company's national oil company clients in the Middle East were pushing thorough cost-saving measures in due to the ongoing challenges facing the industry but felt an upturn was inevitable before long."We expect the need to sustain production will, in due course, result in the resumption of higher levels of opex activities, though the timing of this is not easy to predict. As a MENA-based business GMS is well-placed to engage in the upturn in opportunities when they arise.He added that the European market was showing greater stability and said there were discussions about "a number of opportunities" in other countries outside of the UAE and further afield."While current trading conditions are difficult, and somewhat unpredictable at a regional level, our focus remains on maximising vessel utilisation and I am confident that our state-of-the-art fleet and leading operational expertise will prevail, giving us a real competitive edge over other market participants."Shares in the company were down 15% to 39.94p, their lowest level since flotation in March 2014.