MedservRegis plc - Interim Report
On 22 November 2017, Medserv plc issued an Interim Directors’ Statement updating the market on its performance since the start of the second half of its financial year on 1 July as well as future prospects.
Although the Company’s potential business pipeline remains robust, the challenging environment for both its operating segments – Integrated Logistics Support Services (“ILSS”) and Oil Country Tubular Goods (“OCTG”) – continues to have a negative effect on performance. In fact, the Group’s earnings for the second half of the current financial year ending 31 December 2017 are lower than forecasted due to ILSS and OCTG projects that are expected to commence towards the end of this year.
In Cyprus, Medserv noted that the recently opened second ILSS base will become fully operative in the coming month as four to five wells are expected to be drilled in the waters offshore Cyprus in the next twelve months. As such, Medserv Cyprus will support the upcoming exploratory drilling campaign planned by ENI Cyprus from both its shore bases in Limassol and Larnaca. Moreover, Medserv Cyprus has also recently participated in a tender for the provision of ILSS to a second International Oil Company (“IOC”) which is planning to drill next year.
In Oman, Medserv opened its second OCTG base in the country and this started operating as from November 2017. The new OCTG base, which is located in Duqm, is in support of a contract (the largest ever won by Medserv) awarded at the beginning of this year for an initial period of five years with a five-year extension option.
The Group’s shore base in Malta and the supporting Libya branch office remain a major contributor to the ILSS segment. In this respect, Medserv explained that the Malta shore base is heavily active and that its business pipeline remains strong supporting IOCs and the majority of subcontractors operating offshore Libya.
In Italy, Medserv is actively pursuing an ILSS project which is expected to be executed next year. On the other hand, Medserv’s operations in Portugal, whilst currently a small operation, remains profitable pending further developments on drilling offshore Portugal.
Medserv also made reference to previous Company Announcements wherein it was stated that the ILSS business of the Group is in an advanced stage of concluding a strategic long-term contract for the provision of shore base services in a new geographical area. In this respect, Medserv noted that negotiations are still continuing since the scope of services has increased. Nonetheless, contract execution is expected to commence in the first quarter of 2018. Meanwhile, the Group’s ILSS segment is also awaiting the results of a tender in Trinidad after failing to secure one of the two tenders submitted.
Medserv noted that the OCTG segment is foreseen to be its largest growth driver in the coming years as the “Mill to Well” model is being increasingly adopted between pipe manufactures and their clients. This results in growth of the Group’s OCTG business as it continues to successfully deliver Supply Chain Management to the leading pipe manufacturers. The OCTG segment of the Group is also well positioned to secure two new premium threading licenses. Moreover, Medserv is currently awaiting adjudication for the provision of machine shop services to an IOC operating in East Africa and is also evaluating a new market for setting up a machine shop providing premium threading services.
Overall, the projected growth for the period between 2018 and 2020 remains strong for both ILSS and OCTG based on drilling projects as well as workover programs already contracted and expected to come to fruition in the coming three years, buttressed by an additional two new geographic markets by 2018 in line with the Group’s strategy.