MMA $50m deal as oil pressure grows

Marine services company MMA Offshore has won a $50 million contract to provide services to Woodside Petroleum, but says low oil prices are placing significant pressure on market demand, with conditions unlikely to improve during the financial year.

Under the deal with Woodside, MMA will provide three vessels to support the energy giant’s offshore North West Shelf, Pluto, and AusOil projects for an unspecified period.

The contract includes a number of options, which could boost the value of the deal to $110 million if exercised.

Meanwhile, MMA also said the offshore oil and gas vessel market remained under significant pressure due to low oil prices and reduced demand for services across the market.

“As a result, the first four months of trading were lower than expected with market conditions unlikely to improve through FY16,” the company said in a statement.

It expects to deliver between $75 million and $85 million in earnings for the full year, but with a low level of projected demand for the second half of FY16.

In response, MMA shares were hit hard on the ASX, closing 20.5 per cent lower to 29 cents each.

MMA said activity at the Chevron-operated Gorgon LNG project on Barrow Island continued to decline, while tender activity in the market had been met with significant competition.

“Overall utilisation for the first quarter was 52 per cent for the international fleet and 61 per cent for the Australian fleet,” it said.

“Demand for slipway services was well below expectations due to fewer offshore vessels in Australia and clients reducing costs.

“MMA is trading within banking covenants and is actively working to reduce debt through asset sales.”

The company has contracted about $22 million in vessel sales to date.

Managing director Jeff Weber said the significance of the Woodside contract couldn’t be overstated.

“There is enormous pressure on the offshore marine industry to achieve sustainable cost positions without comprising quality operations,” he said.

“The award of this contract is an endorsement of our ability to support world-class operators in this challenging economic time and to provide cost-effective solutions.”

MMA is targeting $15 million in savings through a cost reduction program.