The strategy of the Group is to establish itself as a global “one-stop shop” provider of high-specification quality tender rig drilling and subsea engineering services to the offshore oil and gas industry. The principal elements of this strategy are as follows:
The Group took delivery of two (2) additional newbuild DP2 DSVs: M.V. “Mermaid Asiana” and M.V. “Mermaid Endurer” in 2010. The Group plans to continue pursuing tactical and strategic growth opportunities through further asset acquisitions as and when the opportunities arise. To this end, the Company has invested in AOD which has ordered three (3) new high-specification jack-up rigs from KFELS. In September 2011, AOD resolved to increase the water depth capacity for its three (3) jack-up rigs under construction from 350 feet to 400 feet to increase the marketability of the rigs, allowing them to successfully operate in more offshore areas.
The Group plans to continue to maintain a robust balance sheet which will provide it with the financial flexibility to ride through the challenges in the current market. In July 2011, the Company announced that it had signed a 10-year loan agreement for US$110 million with Export-Import Bank of Thailand. Mermaid would use the new facility to refinance its existing loans for two vessels, M.V. Mermaid Endurer and M.V. Mermaid Asiana. Mermaid expects to strengthen and grow its subsea engineering business while keeping financing costs low.
Although the Group's primary focus has been in South East Asia, the Group is well placed to take advantage of global market opportunities. Since 2008, MOS expanded its provision of subsea engineering services to include China, India and Sakhalin, Middle East, and Brazil. In 2010 the DP2 DSV “Mermaid Endurer” was brought into service for the UKCS. The Group will leverage on its geographical coverage and strong client relationships along with track record of Seascape and Subtech to further develop business in those territories, while maintaining a prudent stance in geographic expansion and whenever possible, enter into partnerships with suitable parties to share the associated risks and returns. In December 2011, MOS also expanded its subsea engineering services to West Africa for the first time, leveraging on the track record of Subtech in the Mediterranean region.
The Group's objective is to be a preferred provider of offshore oil and gas rig drilling and subsea engineering services to clients. The Group will therefore continue to focus on consistently delivering high quality services, safely and efficiently. Contracts with major oil and gas companies constitute the majority of the Group's business, and the Group continually monitors its clients' current and future needs and seeks to recognise opportunities to capitalise on its strengths, expertise and geographical location.
A key part of this strategy is to maintain a strong safety record and a robust fleet which is increasingly important for clients. To this end, Mermaid was awarded an 'A' grade rating for CHESM from Chevron Indonesia company for its operations on its tender rig “MTR-2” in November 2010. This was followed in February by the receipt of the “Outstanding Crew” awards at Chevron Thailand's Annual Business Partner (Contractor) Forum held in February 2011. In November 2011, this marked several safety achievements for the Group, namely the Company's tender drilling rig “MTR-2” has operated for over 850 days with Chevron Indonesia Company without a single lost time incident and an equally important milestone was being awarded by Chevron and CUEL for achieving ten (10) years of marine operations without a single lost time incident on the M.V. “Mermaid Commander”.
Contracts for the provision of subsea engineering services are typically short-term, while the contracts for the provision of tender rig drilling services are generally long-term. Longer-term contracts do provide greater stability and higher utilisation rates, but they also pose the risk of the Group being locked into belowmarket rates if market rates rise. To meet this challenge, the Group seeks to actively manage a balanced risk and reward profile between shorter-term and longer-term contracts to allow it to maintain high fleet utilisation levels and a strong financial performance in down cycles, while taking advantage of improving markets rates during up cycles.