Offshore

OceanPact seeks profitability after executing post-IPO investments

CEO touts upside, but investors remain unenthusiastic

OceanPact presented its 3Q21 results on 17 November in a conference call with investors and analysts.

The Brazilian company reported Net Revenues of R$ 236.1 million ($ 42.1 million) for the quarter, +19.8% in relation to 2Q21 and +51.3% over 3Q20. Adjusted EBITDA reached R$ 50.7 m ($ 9 m), up by 44.4% quarter-over-quarter, with an EBITDA margin of 21.5%. In 2Q21, the EBITDA margin was 17.8%, down from 26% in 3Q20.

The Company recorded a net loss of R$31.1 m in 3Q21 ($ 5.5 m), in comparison with a net income of R$18.5 m ($ 3.3 m) in 2Q21. The main reasons for this loss were a negative non-cash exchange rate variation on part of its debt and the increase of depreciation costs and expenses due to a larger asset base.

A year ago, OceanPact’s fleet stood at 24 vessels. Despite the Covid-19 pandemic disruptions and a structurally depressed offshore market, the company went ahead with a bold growth plan through a phased approach.

First, the Rio de Janeiro-based contractor needed cash. After debt issuances and the R$ 1.22 billion ($226.5 m) IPO at the Brazilian stock exchange B3 in February 2021, the company closed a series of acquisitions. This investment phase included a few individual vessels and the acquisition of UP Offshore in May 2021, bringing in its whole 8-vessel fleet.

Consequently, OceanPact’s fleet by quarter-end reached 34 vessels. The company is also investing in more sophisticated equipment, having purchased 5 ROVs (underwater robots).

OceanPact’s fleet and backlog at the end of 3Q21. Image credits: OceanPact

However, many of the ships, when acquired, were unemployed. This threw the fleet occupancy rate to a low of 62.6% in 1Q21. OceanPact’s is trying to bring these numbers back up, as commented by the firm’s CEO Flavio Andrade: “Our fleet occupancy rate rose from 77.5% in the second quarter to 84.8% in the third quarter, with contracts being initiated (or resumed) with Enauta, Trident and Petrobras, which brought about a 21% growth in net revenues”.

Operational days and occupancy rate. Image credits: OceanPact

Mr. Andrade added: “The services segment has also seen a 17.7% rise in net revenues, mainly from the successful execution of OceanPact GEO contracts with BP (Pau Brasil), Petronas (BMC-661 and 715) and Wintershall (POT-M-857) for base-line surveys. As for the advisory services in the environmental segment, we highlight our participation in the virtual public hearings – the first validated by IBAMA for the oil and gas sector – for the production activities in the field of Bacalhau by Equinor, and the drilling activities for Exxon in the Sergipe-Alagoas basin”.

As a result, “our contract backlog to R$ 3.4 billion ($ 610 m) at the close of the third quarter, representing more than 4x last-twelve-month revenues”, the executive highlighted.

The company is now entering a new phase of digesting the acquisitions, which is not an easy task. Year-over-year, the fleet increased by 42% in number of vessels, with headcount climbing by 37.1% to 2,310 employees. Operational expenses are up 14.4% QoQ.  Mr. Andrade commented: “We consider that we are well advanced in terms of our capital expenditure plan, and the start of the capital return phase for the assets acquired. This new phase includes the continuous search for minimizing commercial gaps in the vessels, selective allocation of capital, cost control and SG&A management, aimed at sustainable growth”, despite “the various market cycles that have always marked our operations”.

But in order to really increase profitability, OceanPact depends on healthier chartering markets. During the conference call, when asked by JP Morgan analyst Ricardo Rezende if he believes the much-anticipated rate recovery is about to happen, Mr. Andrade was bullish: “I believe so. We have already seen a rise in the daily rates in the last [Petrobras] PSV bids. At the same time, we are seeing that the [overall market fleet] idleness is over. We are indeed seeing a lack of vessels in various segments, so far occasional, but we anticipate rate increases”.

Investors are not holding their breaths. After OceanPact’s IPO was priced at R$ 11.15 per share in February, the stock (BR:OPCT3) dived into an almost continuous free-fall throughout the year, closing at R$3.10 on 19 November, down 72.2%.

Since the maritime segments are prone to wild variations, one could expect an eventual upward movement. The problem is when. With the offshore market recovery expected for over 7 years now, patience is key.

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