Email This Print This Recent Key Developments

2014 Financial Year and Subsequent Events to 15 December 2014
In the 2014 financial year, Mermaid built on the successes of the previous years and further developed its platform for growth, stability, and most importantly profitability. This cumulated in Mermaid achieving historical net profits of USD 45.2 million being the highest level of annual net profits earned since Mermaid started business in 1983. A list of key developments during the year is set forth below.

In September 2013, Mermaid completed its rights issue with a 90.7 percent subscription rate and commenced its private placement to third parties for remaining unsubscribed rights shares. In the same month, Mermaid also announced the disposal of the 'Mermaid Performer', its smallest vessel, as part of its fleet renewal plan.

In October 2013, Mermaid announced the completion of the private placement for the remaining 9.3 percent unsubscribed rights shares to independent third parties and therefore the successful completion of the raising of SGD 157.1 million in gross proceeds, as intended.

In the same month, Mermaid also announced the early adoption of functional currency reporting in USD to eliminate unrealized translation-related foreign exchange gains and losses in its financial statements and also to allow Mermaid to present its financial statements in a currency that is more understandable to its international base of shareholders and investors.

This was followed by another announcement that its tender assist drilling rig 'MTR-2' had been awarded a Safety Milestone Award from the International Association of Drilling Contractors for achieving four (4) years of no loss time incidents. This is considered by Mermaid to be a significant achievement and exemplifies Mermaid's dedication to safety that is in par with its operating efficiency.

In December 2013, Mermaid's Indonesian unit took delivery of a new build DP2 remotely operated vehicle support vessel (“RSV”) 'Resolution' for a charter of three years with options for up to an additional two years. This addition to the subsea fleet represented a boost to Mermaid's capabilities and was prompted following the award of two major inspection, repair and maintenance (“IRM”) contracts in Indonesia for Mermaid's other charter-in vessel DP2 RSV 'Endeavour' resulting in the latter vessel being mostly committed through to 2016.

Also in December 2013, Mermaid announced that its dive support vessel (“DSV”) 'Mermaid Commander' retained its subsea construction support role in the Gulf of Thailand. This became the ninth consecutive year that Mermaid had been awarded the work. The 2014 campaign was valued at USD 32 million and comes with options for two additional campaign years.

In January 2014, Mermaid announced the order of two new build performance class tender rigs and one new build subsea DP2 multi-purpose dive support and construction vessel. These new orders will be built in shipyards owned by China Merchants Industry Holdings Co. Ltd. in China. The aggregate sum of the investment was USD 436 million. The delivery of the tender rigs, named 'MTR-3' and 'MTR-4', are scheduled for the first and second quarter of 2016 respectively and the delivery of the new build DP2 multi-purpose dive support and construction vessel, named 'Mermaid Ausana', is scheduled for the third quarter of 2016.

The 'MTR-3' and 'MTR-4' will be state-of-the-art performance class tender assist drilling rigs incorporating the latest modern design features, and will be the most advanced tender rigs in the market when they are delivered in 2016. The rigs will each be equipped with a modern drilling package supplied by leading drilling equipment specialist National Oilwell Varco and will feature a larger deck space, bigger cranes, faster rig moves, larger and more living quarter capacity, larger tank storage and offline activity systems.

In addition, both rigs will be able to operate in water depths of up to 243 meters with conventional mooring and 914 meters with pre-laid mooring, and have a drilling depth rating of 7,620 meters and accommodation for 200 personnel. All these features are expected to make both rigs an appealing option and solution for potential customers looking for a complete production drilling program.

The DNV classed, fully OGP compliant 'Mermaid Ausana' on the other hand, will be equipped with an 18-man twin bell saturation system and will have two self powered hyperbaric lifeboats. The vessel will also be equipped with diesel electric frequency controlled propulsion, highly efficient azimuth thrusters, dynamic positioning systems, offshore cranes and a large platform deck for construction duties. Upon completion and delivery in 2016, the 'Mermaid Ausana' is expected to possess excellent characteristics for worldwide deployment.

The orders were undertaken as part of Mermaid's commitment to expand the size of the rigs and vessels to enhance its offshore oil and gas support services business. These new assets will also enhance Mermaid's market position in terms of the modernization of its fleet. To date, the initial payment of 15 percent of the total contract value has been made to the shipyard with the remaining 85 percent due upon delivery in 2016.

Also in January 2014, Mermaid's shareholders approved the payment of a final dividend of US 0.86 cents per ordinary share for the 2013 financial year and payment was made to all shareholders in February 2014.

In February 2014, Mermaid announced an award of a 3-year subsea call-out contract for light construction and IRM services utilizing the 'Mermaid Sapphire' for 60 to 120 days a year from 2014 to 2016. The potential value of this contract is USD 19 million.

In June 2014, Mermaid announced the award of subsea call-off services contract with an estimated value of USD 19 million for an initial period of 2 years serving Gulf of Thailand. The contracts will also utilize the 'Mermaid Sapphire' and another vessel of opportunity for duration of approximately 75 days for each vessel per year through to 2016.

Also in June 2014, Mermaid's shareholders passed a resolution to change the financial year end of the company from 30 September to 31 December thus aligning it with its parent company Thoresen Thai Agencies Plc. and also other companies in the offshore oil and gas industry, generally.

Mermaid also announced that month of an amendment to the drilling contract for 'MTR-2' with Chevron Indonesia which saw the tender rig used as a work-over unit at a reduced rate. This was due to the customer being in the process of obtaining new drilling permits from the Indonesian authorities.

In August 2014, Mermaid announced that its associate Asia Offshore Drilling (“AOD”) achieved average utilization levels for its three jack-up drilling rigs of 97 percent, which was in line with Mermaid's target. This was primarily due to all jack-up rigs experiencing high operating performance with limited downtime. Mermaid remains confident that AOD will continue performing at a satisfactory level for the remainder of the contract term ending 2016 and that AOD will continue to serve the same customer beyond this term.

Despite news of protests in Bangkok, Mermaid announced that it has had no effect from the protests in Bangkok and continues to serve key customers in Thailand with continued business expansion overseas. In particular, all of Mermaid's business operations are located outside Bangkok and overseas and Mermaid continued to secure contracts with key customers in Thailand.

In August 2014, Mermaid also announced a rebranding of its subsea business units which will be collectively operated under the name “Mermaid Subsea Services”. The Company's subsea business previously operated globally under separate brand names, namely Subtech in West Africa and the Middle East, Seascape Surveys in Singapore and Indonesia and Mermaid Offshore Services in Thailand and Vietnam. All three subsea units were integrated and now operate under the same new company name. The integration has united the Company and provided brand recognition and seamless services to our valuable customers throughout our global network. The subsea organization, which now works under one unified management, has two market divisions namely the western hemisphere that will cover Saudi Arabia, Qatar, United Arab Emirates, Nigeria, Libya and the North Sea, and the eastern hemisphere which will cover Australia, China, Indonesia, Malaysia, Singapore and Thailand.

As part of the rebranding exercise, Mermaid had also unveiled a new logo to represent the new single subsea unit. In addition to that, this unified structure promotes cross-selling of products and services resulting in improving utilization of assets for better profitability.

In September 2014, Mermaid announced that it had incorporated a new subsidiary called “Mermaid International Ventures” as an investment holding company. Assets will be restructured under this entity which will allow Mermaid to better manage its investments and expansion plans.

In September 2014, Mermaid also announced the award of two saturation diving contracts in the Middle East with a total estimated value of up to USD 45 million. This saw the charter-in of the DP3 multipurpose support vessel 'Bourbon Evolution' to support these new work scopes for approximately 6 to 8 months with options.

In October 2014, Mermaid announced an increase in shareholding from 70 percent to 95 percent in Subtech Saudi Arabia, to be renamed Mermaid Subsea Services (Saudi Arabia) Ltd. Mermaid plans to use this entity to tender for additional service contracts in Saudi Arabia.

In November 2014, Mermaid reported that it has a cautionary perspective on the oil and gas outlook over the next 12 months, given the fall in oil price and news that oil and gas companies may be reviewing their spending. In the meantime, Mermaid continues to see stable demand for its subsea vessels and related services on those projects that are ongoing. Mermaid also continues to emphasize on achieving high vessel utilization while at the same time focusing on value-added services to customers and longer term contract durations in growth areas of South East Asia, the Middle East and the North Sea.

During the year 2014, Mermaid also continued to implement its growth strategy by expanding its revenue base through the charter-in of additional vessels against confirmed customer contracts. Delivering on this initiative, in December 2013 Mermaid took delivery of the DP2 RSV 'Mermaid Resolution' on a 2+1 year charter to service in contracts in Indonesia as previously mentioned above. This was followed in June 2014 by a short term charter of the DP2 PSV 'Lewek Atria' for several months serving the Gulf of Thailand. In August 2014, Mermaid also chartered-in the DP2 Construction Barge 'Mubarak Supporter' on a 1+1+1 year charter to service contracts in the Middle East.

In November 2014, Mermaid announced that it had chartered-in additional subsea vessels to fulfill strong demand for its services. This included the 'Siem Daya 2', a DP3 offshore subsea construction vessel to provide subsea cable laying installation support in the Middle East with work until early January 2015, DPB 'Mubarak Carrier', a construction barge for short term work on subsea cable lay trenching support in the Middle East and the RSV 'Harkand Harmony', an ROV and survey support vessel for gas detection work in the Gulf of Thailand.

Also in November 2014, Mermaid announced final dividends of US 0.47 cents per ordinary share to be recommended to the shareholders for approval in January 2015, and a back log of USD 470 million in contracts to be performed mostly in 2015 and 2016. In addition to this back log, there is also an outstanding USD 110 million of pro-rata order book contribution from Mermaid's associate investment AOD.

In November 2014, Mermaid also announced that its Indonesian unit had entered into a five year charter-in contract for a five year old DP2 DSV 'Windermere'. The contract has a further option for an additional five year extension. This move is to position Mermaid as a leading Indonesian subsea services provider. The vessel has a good track record in Indonesia with work previously done for oil and gas majors. Being Indonesian flagged, the vessel will be in prime position to secure any potential work in Indonesia. In addition, the vessel will also bid for jobs in Myanmar, Thailand, Malaysia and Brunei while providing back up for the DSV 'Mermaid Commander' and for any additional work.

In December 2014, Mermaid announced the demobilization of the 'MTR-2' from Indonesia. The rig was terminated early due to customer's inability to secure their own government permits. The said events have all occurred through no fault of Mermaid. The 'MTR-2' tender rig, purchased by Mermaid in June 2005, has been utilized by this customer for almost a decade in its Thailand and Indonesia's production fields. During its course of service, the 'MTR-2' has been lauded for its safety record, operational efficiency, equipment reliability and performance. The 'MTR-2' had also received numerous awards from this customer, the latest being a commendation for achieving five (5) years of no loss time incidents a few months earlier.

In December 2014, Mermaid also announced the start of new build construction with steel cutting ceremonies for the 'MTR-3' and 'Mermaid Ausana'. The steel cutting ceremony for the 'MTR-4' is scheduled for early next year 2015. The construction of all three assets remains on schedule and delivery dates for all units remain in 2016.

The multiple contract wins and other achievements during the period and across various regions as mentioned above are outstanding as they reflect Mermaid's ongoing efforts to support its customers wherever they may operate and also the confidence and satisfaction that Mermaid's customers have in Mermaid's quality services. Furthermore, the contract awards mentioned did not include other smaller subsea projects awarded during the year using Mermaid's owned vessels, chartered-in vessels, or performed onboard third party vessels which in aggregate added further to Mermaid's total earnings and outstanding order book.

*All values cited are approximates

(as at 15 December 2014)