On 30 May 2021, Medserv plc published the results for the financial year ended 31 December 2020.
During 2020, Medserv plc generated €32.4 million in revenues compared to €68.7 million in 2019. The substantial drop in business activity reflects the non-recurrence of the income that was generated from the contract in Suriname in 2019, as well as the disruption brought about by the COVID-19 pandemic which caused a number of offshore exploration projects to be delayed to H2 2021.
On the expenditure side, operating costs (net of other income) dropped markedly to just under €38 million compared to €65.6 million in 2019. Nonetheless, given the sharper drop in revenues, Medserv reported an operating loss of €5.55 million compared to an operating profit of €3.09 million in 2019. Excluding depreciation and amortisation charges, adjusted EBITDA amounted to €5.57 million which, in the main, emanated from the Group’s OCTG operations in the Middle East.
Net finance costs for the year amounted to €4 million. Accordingly, Medserv posted a pre-tax loss of €9.55 million compared to a pre-tax loss of €2.55 million in 2019. After taking into account a tax credit of €0.76 million and a loss of €0.44 million attributable to minority interests, Medserv posted a net loss of €8.35 million compared to a net loss of €2.92 million in 2019.
The Statement of Financial Position shows total assets dropped by 21.3% to €121.8 million largely reflecting lower amounts of trade receivables and right-of-use assets. Likewise, total liabilities decreased by 13.8% to €117.5 million mostly due to the reduction in the amount of lease liabilities. As a result, shareholders’ funds contracted to €5.34 million which, in turn, translates into a net asset value per share of €0.099.
In their commentary, the Directors of Medserv explained that although the oil industry is going through a challenging period, an upside exists for those companies that will survive this challenge. Oil prices are expected to recover as oil demand rebounds on the back of anticipated global economic recovery combined with the ongoing petroleum supply limitations by the OPEC and the COVID-19 vaccination rates.
The recovery is expected to be gradual. Various energy research firms are predicting both the offshore drilling activity as well as the global oil demand to recover in the second half of 2021, with oil prices predicted to rise to around $60 per barrel. This is up from the average of $41 a barrel registered during the year. Looking further ahead, various forecasts predict oil prices and global drilling activity to improve further within the next five years.
The ILSS segment which consists mainly of Malta for Libya, Egypt, Cyprus and Suriname services most of the offshore oil and gas projects in these respective countries. Offshore drilling activity in Libya has been suspended. Despite the ongoing political and hostile environment currently ensuing in Libya, Medserv has remained the shore base of choice by the IOCs for all oil and gas operations offshore Libya. During 2020, Medserv also secured the renewal of its contracts with the major players operating offshore Libya for the coming three to four years as well as a new contract for the transportation of goods and drilling related equipment from global sites to specific locations in Libya using the Company’s facilities in Malta as a logistics hub.
The mega development project for the installation of production platforms offshore Libya is on track to commence late in 2021 and is expected to be completed over the coming years. The subsidiary in Malta will be acting as the logistics base for the development of this project for the offshore Libyan gas field.
The planned drilling projects offshore Cyprus were postponed to the second half of 2021 as a result of the travel bans and closure of ports imposed by Governments in 2020. The earnings from the drilling campaign in Suriname were originally forecasted to be recovered from the drilling projects in Cyprus that were scheduled to commence at the end of the first quarter of 2020. Despite the Suriname drilling campaign terminating at the end of 2019, Medserv is committed to maintain its presence in South America and the Caribbean region and has therefore resized its setup to minimise its operating costs. The large finds in Guyana, Trinidad and Tobago, as well as the recent discoveries and future planned activity in Suriname, make this region an exciting growth area for the oil and gas industry.
Drilling and project development in Egypt remain ongoing and expected to improve further in 2021 following the successful award of a new contract in Egypt for the provision of materials and warehouse management services. Medserv continues to scout for tenders in Egypt to be rolled out by other IOCs within the Company’s core competencies. The Group is also keen to increase its participation in this significant growing energy market especially given its proven in-country track record to date.
The supply chain management of OCTG segment has continued to improve further. Oman remains the overall consistent contributor to date within the Group. The securing of the new contract in Abu Dhabi for supply chain management announced on 14 October 2020 has allowed the UAE business unit to improve its performance, however, its machine shop volumes remain down as a result of the pandemic.
Medserv still enjoys a strong business pipeline across its core markets, being North Africa, Eastern Mediterranean and the Middle East. As the rollout of the COVID-19 vaccination programme continues worldwide, the long-term energy projects for which the Group is already contracted will resume. The cost of commercialising these projects is relatively low as the investment in the required infrastructure has already been made by the IOCs. Furthermore, such projects are located close to the market or are needed for national consumption.
Medserv continues to adopt a dual strategy, that of securing sustainable growth through its pipeline and of strengthening its financial position. Through the share for share exchange of Regis Holdings Limited, Medserv aims at securing this outcome whilst also increase its global outreach across new and emerging markets.