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As we enter 2016, the global economy continues to grapple with the effects of a prolonged period of depressed oil prices. This operating environment has had a ripple effect, negatively impacting not only oil and gas exploration and production, but also the companies that support production and exploration activities. The core businesses of Mermaid Maritime Plc ("Mermaid") -- subsea services and offshore drilling -- have not been immune to these global currents. And while this downturn has presented tremendous challenges, I am very proud that we maintained positive operating results in 2015. And I remain confident that we have put in place ample preparations to weather this storm and emerge strong and competitive.


In our subsea business, our major oil-producing customers have continued to lower or postpone CAPEX by around to 20 to 25 percent, in line with continued downward pressure on oil prices. The combination of weaker demand and a steady supply of vessels entering the market during the year and for the next 24 months, has impacted vessel utilization and put additional pressure on sell rates. As a result, we have seen a number of our well-known peers exit this business. Many others are saddled with debt and remain at risk as long as oil prices remain low.

The situation our offshore drilling businesses face is similar: oil prices have affected demand while an oversupply of old and new rigs has kept both utilization and day rates low. We do not expect market conditions to improve significantly in the ensuing months and there is reason to believe this downturn may last through 2016 or longer.


As a result of the challenging outlook across the oil and gas industry, we significantly recalibrated our strategic plan in early 2015. A two-pronged strategy was developed and implemented by Mermaid's senior management team that takes into account both a short-term/tactical approach ("Strengthening our Core") and a longer term vision ("Positioning for Growth"), that will ensure our ability to continue to build sustained shareholder value.

Strengthening our Core: Driven by two essential pillars, our short-term strategy is based on revenue protection and cash preservation, supported by a solid foundation of an increasingly streamlined and standardized organization.

Positioning for Growth: Our longer-term strategy is based on a gradual and focused value chain move to higher value engineering driven segments offering short and medium range turnkey contracts or lump sum contracts like our Cable Lay business. We are also in the initial states of implementing selective geographical expansion program.

The successful implementation of this strategy helped not only deliver satisfactory 2015 operating results, but gives us the flexibility to take advantage of market opportunities when conditions improve. Set against the backdrop of the current operating environment, Mermaid remains in a strong position, with a healthy balance sheet as evidenced by our strong liquidity and low net gearing. Our backlog stands at US Dollars 255.5 million as of 31 December 2015, lower than in previous years, but still competitive given market conditions.


Despite the challenges of our operating environment, revenues grew 2.6 percent to US Dollars 336 million in 2015. EBITDA for the year was also positive, while net profits before extraordinary charges were US Dollars 2.8 million.

The year-on-year improvement in our revenues was driven by our growing and now profitable cable-lay activities that resulted in strong growth in subsea services in the Western Hemisphere, where our revenues have grown by over 60 percent annually since 2011. We also saw a year-on-year increase in average utilization of subsea owned assets. This was achieved as a result of long-term contracts with established clients thanks to our continuous focus on customer retention aimed at meeting and exceeding service levels and ensuring client satisfaction. We are also reaping the benefits of strategic geographic deployment and Inspection Repair Maintenance (IRM) - focused positioning.

Underscoring these efforts was our outstanding safety record. In 2015, across over 3.7 million man-hours, we reported just one loss time injury and one restricted work case.

In line with our company's principles of transparency, and as required by accounting standards, we carried out an impairment review in 2015. In accordance with our corporate governance practices, our findings were reviewed and validated by one of the 'big four' international accounting firms.

In total during the fourth quarter, we booked US Dollars 228.5 million in non-cash provisions for impairment on the value of key assets, investments in subsidiaries and share of impairment loss in Asia Offshore Drilling Limited ("AOD"), an associate investment in jack-up rigs.

As a result of these extraordinary charges, our positive operating performance translated into net losses for 2015 of US Dollars 231.3 million and US Dollars 16.2 cents per share.


Performance in our subsea services division was buoyed by fortified relationships with longstanding clients including Saudi Arabian Oil Company (Saudi Aramco), for whom we conducted seven campaigns of spool installations, rectified 320 freespan locations, and carried out nearly 7,000 dives and 1,065 ROV dives during the year.

Meanwhile, we just received an award from CUEL Limited (CUEL), in recognition of Mermaid achieving 10 years without a Day Away from Work Case - a highly notable achievement. At the same time, we reported strong growth (180 percent year-on-year) in our Cable Lay business, which was launched as part of our desire to move up the value chain in 2014.

Finally, we focused on broadening our customer base for a more balanced portfolio, adding a number of clients, particularly in the Western Hemisphere. An increasingly diversified revenue base bolsters our ability to mitigate concentration risk. In parallel, there were a few setbacks in other regions where we saw lower utilization of selected long-term chartered-in vessels. The early termination of some of these long-term chartered-in commitments was a defensive strategy to reduce business risk and conserve cash. Going forward, we have taken steps to avoid a repeat of this performance through a stricter risk management policy with regards to long-term chartered-in exposures.


In our drilling businesses, we faced greater challenges as both of our drilling rigs, MTR-1 and MTR-2, were uncontracted for the year. We are currently reviewing several options for the rationalization of these assets.

AOD meanwhile, reported satisfactory operating results, with utilization for all three rigs at 98 percent. Before the impairment charge detailed above and other extraordinary items, AOD's full year contribution to Mermaid would have been US Dollars 19.8 million for 2015 despite a retroactive adjustment we booked in the fourth quarter as a result of a day rate reduction.


In adhering to Mermaid's "Strengthening our Core" strategy, we prioritized revenue protection initiatives while also enhancing internal processes. Key achievements in 2015 included:

  • Enhancements in risk/execution management for our Cable Lay and Lump Sum projects, which became profitable in 2015
  • Collaborative cost saving negotiations with suppliers
  • Implementation of a rightsizing plan to reduce our fixed costs

To put ourselves on track for Mermaid's "Positioning for Growth" strategy, we enter 2016 with a strong overall balance sheet. Our cash reserves remains healthy at US Dollars 63.3 million and we have limited debt.


Looking ahead, the outlook for oil and gas remains bearish but I believe our senior executive team is implementing all of the necessary steps to ensure we are ideally positioned to ride out this downturn. Our commercial team is aggressively tendering for new jobs to add to our existing healthy backlog. In terms of cost control and cash preservation, some of the key initiatives we will be focused on for 2016 include:

  • Rationalization of un-competitive assets across our drilling and subsea services segments
  • Intensification of efforts to improve internal costs efficiency and productivity while strengthening our overall control environment
  • Phase two of our rightsizing initiative in order to realize needed cost savings but with a focus on key talent retention

I am confident that these steps will build on the competitive position we have already established. When the next phase of this cycle comes into view, we will be poised and ready to once again capture growth.


First I would like to express my sincere appreciation for the Company's employees, who have not only persevered through this difficult operating environment, but have stewarded the company to an encouraging performance in a number of key metrics. It is their dedication that has cushioned us against the worst effects of the downturn, and positioned us well for the future.

It was the Greek poet Homer, who said in the 8th century B.C., "Light is the task when many share the toil." What I believe Homer meant is that teamwork towards a common and shared objective makes both our labor more gratifying, and our objective more reachable. I see both of these traits exemplified in our results for 2015 and as we look to 2016 and beyond.

Finally, I would like to take this opportunity to offer my sincere gratitude to you, our shareholders, for your continued support and confidence in the Company. 2015 was a difficult year. Market conditions remain weak and we do not anticipate an imminent industry turnaround. This reality forced us to take a number of non-cash impairments, significantly impacting our bottom line and limiting our ability to issue a dividend.

As we move into 2016, Mermaid will remain focused on its core mission of being the "Contractor of Choice" in the offshore oil and gas services industry. I believe in our strategy and in our ability to implement our strategic initiatives. And with your continued support, I have no doubt that we will endure and "Rise to the Challenge".

Yours Sincerely,

Mr. Prasert Bunsumpun
Chairman of The Board