10 Questions for Mermaid Maritime

1.    Describe Mermaid Maritime’s operations and some of its key business segments?

• Mermaid Maritime specialises in providing comprehensive subsea and offshore services, primarily to the oil and gas industry. Our operations are crucial for the installation, maintenance, and decommissioning of offshore infrastructure. 
• Our key business segments include:
  • Inspection, Repair, and Maintenance (IRM): This involves using skilled divers and Remotely Operated Vehicles (ROVs) to inspect, repair, and maintain underwater structures such as pipelines, rigs, and platforms.
  • Cable Laying: This includes the laying of subsea cables used for telecommunications and power transmission, which are critical for connecting offshore installations to onshore facilities.
  • Transportation and Installation (T&I) and Decommissioning: Mermaid assists in the transportation and installation of subsea equipment and infrastructure, as well as provides safe and efficient decommissioning of offshore oil and gas assets that have reached the end of their operational life.

2.    What are some of the key drivers of Mermaid’s revenue for 2Q2024?

• In 2Q2024, Mermaid Maritime’s revenue jumped 154.8% from US$62.0 million to US$158.0 million, underpinned by several growth drivers:
  • A sharp increase in decommissioning projects as many offshore oil wells are reaching the end of their productive life, necessitating safe and efficient decommissioning services in which Mermaid specialises.
  • Heightened demand for subsea cables for telecommunications and power transmission, particularly in support of offshore renewable energy projects.
  • Robust demand for maintenance of existing offshore infrastructure.
• Mermaid Maritime also benefited from high utilisation rates across its fleet of vessels, alongside elevated charter rates driven by strong market demand and the limited availability of specialised vessels.

3.    Mermaid’s total order book peaked at US$976 million as at June 2024. Could you share more about the projects secured?

• As of June 2024, Mermaid's order book reached a record high of US$976 million, reflecting its success in securing diverse projects across its core service areas. The secured projects include both short-term and long-term contracts, providing revenue visibility through 2027. The project awards span Southeast Asia, the Middle East, the North Sea, and Western Sub-Sahara. 
• In Southeast Asia, Mermaid has secured major decommissioning projects as offshore fields approach the end of production. In the Middle East, the company continues winning IRM service contracts, supported by strong relationships with major oil producers. 
• The company has also expanded in Europe, securing cable laying and subsea projects for offshore wind developments in the North Sea, aligning with the global shift towards renewable energy. These contracts demonstrate Mermaid's competitive strengths in fleet, expertise, and client relationships.

4.    What are Mermaid’s focus markets? Are there plans to expand beyond these markets?

• Mermaid Maritime primarily focuses on key markets in Southeast Asia, the Middle East, and Africa. In Southeast Asia, particularly Thailand, the company benefits from increasing decommissioning activities as oil fields reach end-of-life. 
• The Middle East is another significant market where it provides IRM and cable laying services, capitalising on the region's vast oil and gas reserves and infrastructure development. In Africa, Mermaid explores opportunities in both East and West Africa, aiming to expand IRM services amid growing offshore activities. 
• The company is also expanding into Europe, particularly the UK and North Sea, to tap into energy, decommissioning, and renewables sectors, including offshore wind projects. It remains open to new markets aligned with its strategic capabilities, leveraging its fleet, expertise, and client relationships to capture global growth opportunities.

5.    Could you provide an overview of industry trends and whether Mermaid is well-positioned for 2024 and beyond?

• The offshore oil and gas industry is experiencing a resurgence, driven by sustained high oil prices that encourage increased investment in offshore activities. A key trend is the growing need for decommissioning services, especially in Southeast Asia and the North Sea. This presents substantial opportunities for companies like Mermaid with decommissioning expertise. 
• Additionally, the global shift towards decarbonisation has increased investments in offshore renewable energy projects, boosting demand for subsea services like cable laying and IRM, areas where Mermaid excels. 
• The supply of specialised vessels remains tight due to lack of new builds and scrapping of older vessels, leading to higher charter rates and utilisation levels. With its modern fleet, technical expertise, and established client relationships, Mermaid is well-positioned to benefit from these favourable market dynamics.

6.    Given the global transition to cleaner energy sources, what are the opportunities available and how does Mermaid plan to capitalise on these for growth?

• The global transition to cleaner energy sources opens significant opportunities for Mermaid, particularly in offshore renewable energy. The development of offshore wind farms — requiring extensive subsea infrastructure including power transmission cables and equipment maintenance — aligns with Mermaid's expertise in cable laying and subsea engineering. The company is expanding its services in regions with growing offshore wind projects, such as the UK and Europe. 
• Additionally, the increased focus on decommissioning old oil and gas assets aligns with global environmental objectives, and Mermaid's established capabilities are increasingly in demand as operators retire ageing assets. By diversifying its services and targeting growth sectors, Mermaid aims to capitalise on these opportunities to drive growth and contribute to global sustainability efforts.

7.    What are some risks in this business and how is the Group mitigating them?

• Mermaid Maritime operates in an industry facing several inherent risks. The cyclical nature of the oil and gas sector means oil price fluctuations can significantly impact investment levels and demand for offshore services. Geopolitical risks, such as regional conflicts or changes in government policies, can affect operations and market access. Additionally, operational risks relate to project delays, cost overruns, and specialised vessel availability. 
• To mitigate these risks, Mermaid employs several strategies, maintaining a diversified portfolio across regions and sectors. Strong relationships with major clients provide stable contracts and revenue. Mermaid also prioritises cost management and operational efficiency to protect margins, incorporating cost pass-through mechanisms in contracts. The company invests in its fleet and technology whilst maintaining a mix of short-term and long-term contracts to ensure revenue stability.

8.     What are some notable developments that shareholders can look out for or expect in the near to medium term?

• Shareholders can anticipate several positive developments from Mermaid Maritime in the near to medium term. The company's order book has grown significantly, hitting US$976 million as of 30 June 2024, which provides strong revenue visibility for the coming years. Continued contract wins, particularly in high-growth areas such as decommissioning and cable laying, are expected to further strengthen the order book.
• Expansion into new markets, especially in Africa and Europe, may open additional revenue streams and enhance Mermaid's global presence. Operational improvements and cost management initiatives are likely to improve profit margins over time.

9.    Sustainability and ESG have increasingly been a key focus. How is Mermaid advancing its sustainability commitment?

• Mermaid Maritime is committed to integrate ESG considerations into its core business operations. Our most notable achievement has been reducing our carbon intensity by 46% from 2019 to 2022 through optimising energy usage, investing in advanced vessel technology and implementing operational efficiencies.
• Mermaid is exploring the use of sustainable fuels and continues to upgrade its fleet to be more environmentally friendly. The company is also focused on reducing emissions and waste and improving resource efficiency in its operations.
• On the social front, Mermaid emphasises the safety and well-being of its employees, investing in training and development, and maintaining high safety standards. The company is also committed to community engagement and supporting local initiatives in the regions where it operates.

10.    Why should investors take a closer look at Mermaid Maritime?

• Mermaid Maritime has a strong position in a growing and dynamic market. The company has demonstrated robust operational performance, with a substantial and increasing order book that provides revenue visibility for the coming years. Mermaid's expertise in critical subsea services, combined with high vessel utilisation rates and rising charter prices, positions it to capitalise on favourable industry trends.
• The global increase in decommissioning activities and the transition towards renewable energy sources present significant growth opportunities that Mermaid is well-equipped to exploit. The company's expansion into new markets and services diversifies its revenue streams and reduces risk.

10 in 10 – 10 Questions in 10 Minutes with SGX-listed companies

Designed to be a short read, 10 in 10 provides insights into SGX-listed companies through a series of 10 Q&As with management. Through these Q&As, management will discuss current business objectives, key revenue drivers as well as the industry landscape. Expect to find wide-ranging topics that go beyond usual company financials.

This report contains factual commentary from the company’s management and is based on publicly announced information from the company.

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Click here for Mermaid Maritime’s 1H24 results release.