Medserv plc - Interim Directors’ Statement

On 30 November 2019, Medserv plc issued an Interim Directors’ Statement providing details of its performance in Q3 2019. The company explained that revenues more than doubled and amounted to €19.3 million compared to €8.4 million in the corresponding period in 2018. The growth was mostly driven by the Integrated Logistics Support Services (“ILSS”) segment which contributed €14.4 million in revenues (or 75% of total revenues) compared to €4.5 million in Q3 2018. The remaining income of Medserv was mostly derived from the Oil Country Tubular Goods (“OCTG”) segment, which also registered an increase of 26% in revenues to €4.8 million (Q3 2018: €3.8 million). Overall, the significant increase in activity led to a surge in EBITDA as this also more than doubled to €3.2 million compared to €1.5 million in Q3 2018. Against this background, Medserv also noted that it is confident that it will achieve the targeted EBITDA of €14.1 million for the 2019 financial year as previously indicated in the Updated Financial Analysis dated 22 May 2019.

In addition, Medserv also provided a comprehensive overview of its various operations spread across different geographic regions:

ILSS

  • Malta. The local base continues providing shore base services for exploration drilling offshore Libya and hosts the planning team for the development of the two new offshore structures in the Sabratha gas field. Furthermore, Medserv is continuing to seek to increase its value in Libya particularly in engineering and technical services. These projects coupled with increased drilling activity in the Mediterranean basin have resulted in new potential product offerings being presented out of Malta.
  • Cyprus. The Cyprus shore base has been active in Q3 and Q4 2019 in preparation for new drilling programs in the coming period. Recent gas discoveries by Eni S.p.A. and ExxonMobil Corporation are expected to increase the number of wells to be drilled by the international oil companies (“IOCs”) in the coming years. Drilling in Cyprus is expected to resume in year 2020 and IOC’s owning offshore acreage in neighbouring countries including Greece and Crete are expected to start their offshore exploration program during the next few years.
  • Egypt. In Egypt, Medserv is awaiting adjudication of a tender submitted to another supermajor IOC operating offshore which is expected to be awarded in early 2020.
  • Suriname. Positive earnings continue to be generated from the shore base in this Latin American country. Medserv’s client, i.e. Staatsolie, drilled a total of six wells and this initial drilling program will end in Q4 2019. However, Medserv is committed to maintain its presence in the region since although it did not secure new contracts, the large finds in Guyana and Trinidad & Tobago, as well as future activity in Suriname, makes this region an exciting area for exploration in the oil and gas industry.

OCTG

  • Iraq. METS Iraq is expected to generate positive earnings for the 2019 financial year followed by an increased pipeline of projects in 2020.
  • UAE. Medserv is awaiting adjudication of an award of additional Supply Chain Management contracts which have been pushed back to early 2020.
  • Uganda. Although the Uganda-Tanzania pipeline project has been delayed further, Medserv has signed a conditional award letter for machine shop services with a major international supplier of OCTG in anticipation of a resolution in the dispute.

Outlook

Commenting on the outlook of the company, the Directors of Medserv explained that as major restructuring is still ongoing across the oil and gas industry in response to developments in the market, it is nonetheless taking steps to ensure that it remains in a position to continue in its growth trajectory. In fact, Medserv is evaluating various opportunities for provision of supply chain management of OCTG and machine shop services in the African region whilst also considering significant growth potentials for OCTG in the Middle East.

Meanwhile, the conditional agreement entered into by the majority shareholders of Medserv with AMT S.A. to launch a voluntary bid is intended to accelerate and further supplement the Group’s growth and internationalisation strategy.

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