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3 Things to Learn From PACC Offshore Services Holdings Ltd’s Conference Call

Earlier today, I had participated in a conference call organised by PACC Offshore Services Holdings Ltd (SGX: U6C), an offshore support vessel operator.

The call was a briefing for the company’s fiscal second-quarter results (for the three months ended 30 June 2015) that was released this morning.

PACC Offshore Services Holdings (POSH for short) is Asia’s largest operator of offshore support vessels with a combined fleet of 116 operational vessels. These vessels include Anchor Handling Tug Supply Vessels, Anchor Handling Tugs, and Platform Supply Vessels, among others.

The compay has four main operating segments: Offshore Supply Vessels; Transportation and Installation; Offshore Accommodation; and Harbour Services and Emergency Response.

Here are three of my takeaways from the conference call.

1. The profit & loss statement

POSH’s revenue for the first-half of fiscal 2015 increased by 16% year-on-year to US$128.6 million. But, its net profit sank like a rock by 87% to just US$6.1 million.

On a positive note, the company’s move into the Offshore Accommodation segment has been well rewarded. In fact, the segment is the only one within POSH that is growing. The Offshore Accommodation segment’s gross profit increased by 199% to US$14.7 million in the first half of fiscal 2015. This came on the back of a 190% spike in revenue to US$39.4 million.

PACC Offshore gross margin table

Source: POSH’s earnings release

Meanwhile, the other segments in POSH all saw massive declines in their gross margin in the reporting period predominantly due to lower charter rates. You can see this in table above.

2. Expansion

POSH has a current focus on geographical expansion into West Africa and the Middle East. According to management, they are already seeing some results there. One good example is that the firm has managed to secure a long-term charter in the Middle East for POSH Enterprise, a newly built offshore accommodation vessel.

3. Current oil industry outlook

According to comments given in the conference call, POSH’s management thinks the current weakness in the price of oil is mainly due to the slowdown of economic growth in China and the uncertainties over a possible international sanction on Iran.

Gerald Seow, POSH’s Chief Executive Officer, mentioned during the call that he thinks the price of oil has more or less stabilised and that he expects prices to improve in the long-term due to increasing demand.

Foolish Summary

The short-term outlook for POSH and the oil & gas industry does not look too bright. And with the low price of oil currently, there’s nothing much POSH can do to pull its profitability back up to where it was a few years ago.

This is also a good reminder of how dependent oil & gas services providers in Singapore are to the price of oil. Investors may want to think hard about which companies in the oil & gas space are well-positioned to withstand the current downturn so that they can benefit from any possible future rebound.

Like to talk more about oil & gas companies? If so, you can come meet David Kuo and the rest of the Fool Singapore team on August 15! 

Please join us at Invest FAIR Singapore on 15 August. (Suntec Centre, Booth B-16). Come chat with us at our booth, and see our MAS-licensed Director, David Kuo, give his official SGX investor presentation.

You won't want to miss this! Add Invest FAIR Singapore to your calendar today.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.