Ezion FY2016 AGM - Notes
CEO Mr Chew Thiam Keng answered most of the questions.
1. On the current situation:
Rates are very low compared to 2 years ago and Ezion has been badly affected by the drop in oil price. They had commitments based on the oil price of $90 - 100, however the clients later asked asked for a lower rate. Delivery of a few units have been postponed, some indefinitely to manage cashflow.
Companies that sell oil such as ExxonMobil and KrisEnergy benefit from the uplift of oil price from $30 to $50.
Although Ezion expects to be helped by oil price rebounding to $50, it has not happened as there is little exploration in the upstream sector, hence budget and rates are still depressed. Renewals are lower than 2 years ago when the crisis first started.
On the positive side, work is still there in shallow water space. (Ezion does work only in shallow waters, no work in deep waters)
As capital expenditure had already been committed before the price crash, Ezion will cater services and assets to maintenance of existing infrastructure such as oil wells. These wells still need maintenance as they will get choked.
More units are expected to go back to work but rates are still low.
They are converting units for offshore windfarms and as mobile offshore production unit (more on that below), and are also sending units to the Middle East as they are increasing demand there.
The company is hoping for oil price to stay at $50 to $60.
Headwinds to the industry include oil companies going bust.
If there is hardly any exploration and production now in South East Asia, then eventually there will be pent up demand.
2. On offshore wind farms:
Ezion is going into offshore windfarm installation with 2 long term projects in China.
Rates are low, however units can be deployed with a low cost of conversion.
Currently 2 units are going into conversion.
3. On liftboats, which Ezion develops, owns and charters:
Some properties of liftboats:
- used as support like a "floating hotel"
- to carry out repair / maintenance
- to clear chokages in oil wells
- they are self propelled, do not need not be towed like jackups
Ezion is the only operator of such class of assets in South East Asia. They were voted best contractor by Shell last year.
4. A shareholder asked about chartering rates. Rates depend on:
- The function: repair/support/safety requirements?
- how deep is the water?
- crane required?
- how much deck space required?
5. On the impairment of $70 million:
30% are bad debts from customers, 70% are from equipment.
6. On the buyover of the joint venture (JV) from Swissco:
The customer wanted a rate deduction & rescheduling of payment, which Ezion was happy to allow.
However the JV went into a standstill as the partner went into financial difficulties. Ezion bought out the partner so as to continue work that stopped due to the standstill.
They are in discussion to increase the rates.
7. On financing from local and Malaysian banks:
(they have successfully renewed working capital facilities with all their principal bankers; source: http://www.straitstimes.com/business/companies-markets/ezion-posts-666m-loss-for-q4-cuts-capex-renews-working-facilities-with)
Ezion has been paying instalments on time for the past ten years.
Government agencies have also been helpful in supporting the cash flow.
8. On mobile offshore production unit (MOPU):
It is a temporary platform above the oil well for processing crude oil.
Currently 2 undeployed units are being converted.
This would not be considered as capex to oil companies.
More information:
https://www.linkedin.com/pulse/mopu-conversion-solution-offshore-production-leonard-hale-pmp
Vested at $0.31
1. On the current situation:
Rates are very low compared to 2 years ago and Ezion has been badly affected by the drop in oil price. They had commitments based on the oil price of $90 - 100, however the clients later asked asked for a lower rate. Delivery of a few units have been postponed, some indefinitely to manage cashflow.
Companies that sell oil such as ExxonMobil and KrisEnergy benefit from the uplift of oil price from $30 to $50.
Although Ezion expects to be helped by oil price rebounding to $50, it has not happened as there is little exploration in the upstream sector, hence budget and rates are still depressed. Renewals are lower than 2 years ago when the crisis first started.
On the positive side, work is still there in shallow water space. (Ezion does work only in shallow waters, no work in deep waters)
As capital expenditure had already been committed before the price crash, Ezion will cater services and assets to maintenance of existing infrastructure such as oil wells. These wells still need maintenance as they will get choked.
More units are expected to go back to work but rates are still low.
They are converting units for offshore windfarms and as mobile offshore production unit (more on that below), and are also sending units to the Middle East as they are increasing demand there.
The company is hoping for oil price to stay at $50 to $60.
Headwinds to the industry include oil companies going bust.
If there is hardly any exploration and production now in South East Asia, then eventually there will be pent up demand.
2. On offshore wind farms:
Ezion is going into offshore windfarm installation with 2 long term projects in China.
Rates are low, however units can be deployed with a low cost of conversion.
Currently 2 units are going into conversion.
3. On liftboats, which Ezion develops, owns and charters:
Liftboat: www.ezionholdings.com/
Ezion is not competing with Keppel and Sembcorp, which are developing jackups among other offshore assets.
Some properties of liftboats:
- used as support like a "floating hotel"
- to carry out repair / maintenance
- to clear chokages in oil wells
- they are self propelled, do not need not be towed like jackups
Ezion is the only operator of such class of assets in South East Asia. They were voted best contractor by Shell last year.
4. A shareholder asked about chartering rates. Rates depend on:
- The function: repair/support/safety requirements?
- how deep is the water?
- crane required?
- how much deck space required?
5. On the impairment of $70 million:
30% are bad debts from customers, 70% are from equipment.
6. On the buyover of the joint venture (JV) from Swissco:
The customer wanted a rate deduction & rescheduling of payment, which Ezion was happy to allow.
However the JV went into a standstill as the partner went into financial difficulties. Ezion bought out the partner so as to continue work that stopped due to the standstill.
They are in discussion to increase the rates.
7. On financing from local and Malaysian banks:
(they have successfully renewed working capital facilities with all their principal bankers; source: http://www.straitstimes.com/business/companies-markets/ezion-posts-666m-loss-for-q4-cuts-capex-renews-working-facilities-with)
Ezion has been paying instalments on time for the past ten years.
Government agencies have also been helpful in supporting the cash flow.
8. On mobile offshore production unit (MOPU):
It is a temporary platform above the oil well for processing crude oil.
Currently 2 undeployed units are being converted.
This would not be considered as capex to oil companies.
More information:
https://www.linkedin.com/pulse/mopu-conversion-solution-offshore-production-leonard-hale-pmp
Vested at $0.31
Comments
Post a Comment