Gulf Marine Services agrees short-term extension with lenders

The company remains 'in constructive dialogue' with its lenders about a longer-term debt restructuring

Gulf Marine Services has a fleet of 13 vessels operating in the offshore oil and gas and renewable energy markets in the Gulf and North West Europe. Mona Al Marzooqi / The National

Gulf Marine Services signed an extension to its existing agreement with lenders, allowing the rollover of a $25 million (Dh91.8m) working capital facility and access to a bonding facility "to underpin liquidity and support commercial growth" until the end of January.

The Abu Dhabi-based company, which has a fleet of 13 vessels servicing the offshore oil and gas and renewables industries in the Gulf and North West Europe, said on Tuesday that it remained "in constructive dialogue" with its lenders about a long-term solution to its capital structure as it seeks to amend and extend its existing loans.

"This extension to our existing agreement is a necessary procedural step as we move forward in discussions with our lending banks," executive chairman Tim Summers said in a statement to the London Stock Exchange, where its shares trade.

GMS has been in turnaround mode for more than a year after a trading update in December 2018 revealed it was in breach of its banking covenants, triggering a sharp decline in its share price and leading activist investors to instigate the removal of its former board and management.

The company, which floated on the London Stock Exchange in 2014, expanded its fleet substantially in the same year, building six new vessels just as a collapse in the oil price triggered a substantial reining in of investment by oil companies.

In a recent interview with The National, Mr Summers said the company's new leadership had been working hard to reduce overheads and bring the operating costs of its fleet down.

"We had a cost [savings] target which started out at $6m on an annualised basis. We moved that to $8.5m, then $10m. It’s our idea to exceed that, if possible," he said.

The company declared a loss of $5.1 million (Dh18.67m) in 2018 on revenue of $123.3m and finished the year with bank loans of over $400m.

“Looking forward, the key activity for the coming period is, of course, to successfully negotiate a capital structure with our banks that’s sustainable. That conversation is ongoing and it’s constructive,” he said during the interview.

He predicted that the company's fleet, which had a utilisation rate of 69 per cent by the end of June last year, would be busier this year as 61 per cent was already occupied on long-term bookings even before 2020 got underway, with tendering activity in the Middle East region also picking up substantially.

The company cut some of its onshore headcount last year and renegotiated deals with third-party suppliers in a bid to become more competitive. It now employs about 500 staff, of whom 79 are onshore.

"We are in a lot stronger place than we were 12 months ago internally and well-placed for 2020," Mr Summers said.

He also said it was "well-positioned" in the oil and gas market, as it operates in the relatively low-cost shallow water production sites, working on brownfield upgrades and greenfield extensions, as opposed to newer, big-ticket exploration and production sites further offshore.

"All we can do at the moment is position the company as competitively as we can, knowing that whether the market overall is an active one or [not], you have to be as competitive as you can possibly be and that’s our goal," Mr Summers added.