SEAMEC Ltd Management Discussions.

01. INDUSTRY STRUCTURE AND OUTLOOK

The global scenario in Oil and Gas Industry shows promise and expectation. A recovery in Oil prices was seen in 2018, but remained at 10 percent below the ten year average of US$ 79/ bbl. It is forecasted that worldwide crude oil prices will be average US$ 63 a barrel in 2019 and US$ 62 barrel in 2020.

Recovery from the oil price crash of 2015, which led to widespread decommissioning and lay off, presented an opportunity for the Industry. For operators, priorities were shifted and innovation was pushed to the forefront as a necessary means of under pinning commercial success. The way has been paved for new trends, strategies and business models, painting an ever clearer picture of optimism and growth in coming years.

The year under review ended with the news of growth and stability from oil and gas giants. The positive news bolstered by a Report from KPMG which revealed that confidence level stands very high with 85% of the corporate leaders expressing trust in the rise of more commercial opportunities over next year. Furthermore, Moodys recent outlook sounds as a tone of optimism speculating 12-18 months period of stability and growth in the sector. Despite the upbeat, some market adversity prevails. Examples are USAs rise in production of shale oil and alternative fuels such as ethanol, massive oilwells in Gulf of Mexico producing large quantities of Oil and Gas regardless of low prices, OPEC not willing to cut output enough to put a floor under prices, as members do not want to lose market share to US companies and the trade war between US and China attributing to Chinas slow growth.

Major oil companies are investing in renewable energy, natural gas production. Consumers are increasing their focus on mitigating CO2 emissions. Some players are stepping up efforts to reduce the environmental and carbon foot prints in the energy and Industrial sections. Distribution of energy tends to be focus of decision making throughout energy value chain. The rise in fuel consumption from developing economies such as China and India and the demand for natural gas is expected to propel.

India is poised to become fastest growing energy market in the world in next four decades. It will increase Indias influence on the World Energy Scenario.

Demand for primary energy in India is expected to increase three folds by 2035 to 1516 million tons of oil. Crude oil consumption is expected to grow at a CAGR of 3.60 percent to 500 million tonnes by 2040 from 221.76 million tonnes of last year. Natural Gas consumption is forecasted to increase at a CAGR of 4.31 percent to 143.08 million tonnes by 2040 from 54.20 million tonnes in 2017. Government of Indias reformative policy on foreign investment is likely to attract US$ 25 billion investment in liquid, flexible and global liquification of Liquid Natural Gas (LNG). Upstream capital expenditure is cautiously advancing as Government of India has allowed 100% FDI in upstream and private sector refining projects.

The Bulk Shipping Industry witnessed a moderate accelerated growth. The improvement is expected to accelerate further in anticipation of envisageable growth in demand. However, last quarter, there was a steep fall in the Baltic Index. The Baltic Index is showing renewed upward projection and therefore this segment of Industry is poised to grow in the range of 8 to 10% in coming years.

02. OPPORTUNITIES AND THREATS

Oil Industry will hike investment and grow its work force in 2019. Confident oil industry is set to ratchet up spending in 2019. In India, the oil major ONGC continues to invest in exploration and production activity of Oil and Gas to meet its energy security. This apart, maintenance, replacement of pipelines and rewards IMR jobs, provides project opportunities for SEAMEC. Hence Offshore service providers tend to have assured business.

SEAMEC continues to remain as a major provider of offshore sub sea oilfield services in India.

The component of the SEAMEC fleet includes Diving Support Vessel and a Bulk Carrier. SEAMEC has a distinct and unblemished track record as a confident player, was successful to a great extent in securing the contracts and provided its best performance to the utmost satisfaction of the client. The Companys assets of experienced human force, fleet and formidable track record are recognized as force to reckon with.

As per Baltic Dry Index (BDI), the segment of Bulk Carrier is rising globally having impact both in terms of utilization as well as the freight.

ONGC plan of action for revamping of subsea pipelines and EPC contracts will be a source of encouragement and opportunity for SEAMEC to utilize its proven resources by participating in the projects and commercial activities as may emerge.

Aging of Companys fleet along with the complexity of maintaining them continues to remain as an challenge. Your Company is looking at options and opportunities in mitigating these factors in a structured business dynamics.

The marketing of older vessel is a challenge as newer tonnage leads to fierce cut throat competition, resulting in further reduction in the Charter Rate. In addition, Offshore Personnel with availability of an alternate engagement, remains as a potential threat.

03. BUSINESS SEGMENT ANALYSIS

The business segment for the Company during the year under review was Offshore segment in domestic market and bulk carrier operations in international market.

The performance of the Company and details of segment reporting are available in Annual Accounts.

04. FINANCIAL PERFORMANCE

For meaningful comparison pertinent financial parameters are discussed below: -

(र. In million)

Particulars

2018-19

2017-18

Revenue

3304

2124

Operating Expenses

2011

1604

Operating Profit

1293

520

Operating Profit Margin

0.39

0.24

Interest Expenses

6

8

Depreciation

482

489

Profit / (Loss) before Tax

805

23

Provision Tax Expenses

38

20

 

(र. In million)

Particulars

2018-19

2017-18

Net Profit

767

3

Net Profit Margin

0.23

0.001

Debtor/Sales

0.46

0.58

Creditor/Purchase

0.82

1.10

Inventory / Turnover

0.05

0.07

Current Ratio

1.27

1.12

Debt Equity Ratio

0.01

0.03

Networth

3474

2707

Interest Coverage Ratio

135.16

3.98

Comments on Current Years Performance:

Revenue The increase in revenue is primarily due to deployment of Companys vessels and also execution of accommodation Barge Contract on bareboat basis in consortium.
Operating Cost The normal operating cost increased proportionate to commercial utilization of assets and bareboat contract of Barge.
Operating Profit Profit is due to contribution made by Companys all assets under deployment.
Depreciation Marginal decrease of depreciation due to sale of vessel – "Revelation".
Current Tax Exp. The Company is being assessed under Tonnage Tax Scheme. Current tax is primarily on the interest income of short term deposits with Bank and tax provisions made in the profit earned in Barge Contract which is outside the ambit of tonnage tax.
Net Profit Overall profit due to income from all operating vessels and write back of provisions made for one of the debtors realization.

05. HUMAN RESOURCES AND INTERNAL CONTROL ADEQUACY

Human Resources and Internal Control Systems and Adequacy thereof has been stated in the Directors Report.