PACC Offshore plots steady course in rough seas

Posh CEO Gerald Seow remains confident of the industry's prospects and said now is the best time for national oil companies to invest in the exploration and development of new sources.
Posh CEO Gerald Seow remains confident of the industry's prospects and said now is the best time for national oil companies to invest in the exploration and development of new sources.PHOTO: PACC OFFSHORE

For veteran seafarer Gerald Seow, the lure of the ocean has always been irresistible.

The chief executive officer of SGX-listed PACC Offshore Services Holdings (Posh) recalls splashing in the sea as a child and paddling boats ranging from flat-bottomed wooden sampans to traditional outrigger sail boats known as prahus.

"I've always had a passion for the sea, and spent all my time on boats," Mr Seow said.

Mr Seow went to sea at 18, starting his career with Neptune Orient Lines. Three years later, he was certified as second officer and joined the crew of the tanker Neptune Aries. The memory of one balmy evening in the Saudi Arabian port of Ras Tanura remains indelibly etched in his mind.

"It was pitch dark and we had just cleared port. As the ship sailed out, the captain said to me, 'Mate, she's all yours', and walked off the bridge. He had entrusted the ship to me," he recalled.

Ten years later, Mr Seow came ashore to serve in various senior management positions within the NOL group in both the United States and Singapore.

"Running operations for NOL in a foreign country taught me a lot, and I got to experience the cycles in the shipping industry."

INTEGRITY AND HUMILITY

We must have good intentions, keep our promises, and be very open and transparent in our dealings with others. It's important to be humble - empty vessels make the most noise.

MR GERALD SEOW, on promoting values among his staff.

He remembers the slew of measures that NOL management undertook to overcome tough market conditions, which eventually helped the group to turn around its US operations. "Those years taught me the importance of diversification and how to manage risk. One must always challenge the status quo - you need to continue to grow and evolve, or die."

In 1996, Mr Seow joined Pacific Carriers (PCL) - part of Malaysian billionaire and Asian sugar king Robert Kuok's business empire - and was instrumental in developing its shipping liner and offshore marine services businesses. The latter was eventually spun off as Posh.

BRAND-BUILDING

Posh was listed on the mainboard of Singapore Exchange in 2014. It has a current market capitalisation of over $500 million, and is one of the largest Asia-based international operators of offshore support vessels.

Mr Seow holds a Certificate of Competency as Master of a Foreign-Going Ship from the Ministry of Transport of New Zealand, and a Master of Science in Shipping, Trade and Finance from City, University of London. He was appointed CEO of Posh in 2013.

The 64-year-old emphasises the importance of remaining relevant to the market. "For any business to be sustainable, it needs to offer solutions, such as cost-savings and more efficient ways of doing things."

The oil and gas sector remains mired in its worst slump in at least three decades, and the timing of its recovery is unclear.

According to June data from the International Energy Agency (IEA), oil demand is projected to grow by 1.3 million barrels a day this year, supported by higher consumption in India and China.

However, second-quarter oil output was 1.25 million barrels a day above the same period a year ago - its steepest annual rise since February last year - due to increased production by Libya and Nigeria, and a lower compliance rate by Opec members on the agreed extended cuts, IEA data showed. As a result, crude has languished below the US$50 per barrel mark and capital expenditure by oil majors remains depressed.

"At Posh, we are building a brand, and building it over the long term, irrespective of market conditions," Mr Seow said.

While Posh has a diversified business model, it has not been immune to the industry crunch.

Posh offers a suite of services to its clients across the oil and gas value chain, including offshore supply vessels that support mid- to deep-water operations of rigs and oil field operators, a fleet of harbour tugs that provide harbour towing operations, as well as a joint venture that offers heavy lift services to shipyards engaged in the construction, repair and conversion of various types of vessels.

The group swung into the red for the 2015 and 2016 financial years ended Dec 31, reporting attributable net losses of US$131.0 million (S$178 million) and US$371.4 million respectively. For the second quarter ended June 30 this year, it narrowed its attributable net loss to US$9.1 million from US$17.5 million in the year-ago period.

CASH IS KING

As at Dec 31, the group's cash balances stood at US$15.1 million, up from US$13.8 million as at end-2015. At end-June, its cash and cash equivalents were stable at US$14.8 million.

Posh's strong balance sheet has enabled it to clinch landmark projects from global oil majors, including Shell, Inpex and Total. "Some of our competitors were awarded contracts, but could not deliver due to balance-sheet distress," Mr Seow said.

"Having been in shipping all my life, I've always known that cash flow is king. Because of our prudent management, we're seen as a reliable service provider to our customers."

As at June 30, the group has deployed six vessels to the Middle East to perform their charter contracts with a national oil company, and another six will be deployed progressively over the remainder of this year.

Posh has executed a couple of key projects this year. In the June quarter, it completed the towing of the Inpex Ichthys central processing facility - the world's largest semi-submersible platform located in Browse Basin, off the Western Australian coast.

Last month, it completed the towing of the Shell Prelude floating liquefied natural gas vessel, which is longer than four football fields and the largest offshore floating facility ever constructed.

Following the arrival of Shell Prelude in Browse Basin and connection of the 16 mooring lines, Posh Arcadia - the group's state-of-the-art, 750-person semi-submersible accommodation vessel (SSAV) - will provide accommodation support during the hook-up and commissioning phase of the project.

More recently, Posh also completed towing of the Ichthys floating production, storage and offloading (FPSO) facility. In the final quarter of the year, it will begin towing and positioning operations for the Egina FPSO platform, Total's flagship project that will be located off the coast of Nigeria.

Maintaining the group's operational excellence is crucial as it executes these bellwether projects. "Right from day one, safety has been our paramount concern because this is what our clients demand and expect of us," Mr Seow said.

The group also makes it a priority to invest in the training, development and welfare of its staff.

He is also aware of the degree of mental strength required to be at sea. "I've been a seafarer myself, so I understand what it takes to be away from home and loved ones for long periods of time."

Looking ahead, Mr Seow remains confident of the industry's prospects.

"According to reports from oil majors, more than 50 per cent of energy will continue to be sourced from oil and gas over the next 30 years. The long-term viability of the business is there. We're confident of riding through the downturn successfully, and are preparing ourselves for the recovery."

The group is focused on reducing operating expenses across operations, pursuing charters that generate positive cashflow and earnings before interest, tax, depreciation and amortisation.

It is enhancing its assets by offering more advanced solutions - thereby boosting revenue per vessel - as well as optimising resource allocation to capture longer-term expansion opportunities.

POCKETS OF DEMAND

Currently, the bright spots are in the Middle East and West Africa. The group has also set up joint ventures in Saudi Arabia and Abu Dhabi with the objective of expanding its presence in those key markets.

Now is the best time for national oil companies to invest in the exploration and development of new sources, said Mr Seow. "Onshore oilfields are depleting, and will continue to deplete, while offshore projects are becoming cheaper and more efficient."

Posh is also monitoring sector developments closely.

"A lot of industry consolidation is going on, and that's great because it will boost pricing power. If a good acquisition opportunity arises that makes sense, we might consider it."

He always tries to promote the values of teamwork and accountability among his staff.

"I tell them to question everything and not to take anything for granted. Basically, step up, speak out and do something about it."

Integrity and humility are also high on his list. "We must have good intentions, keep our promises and be very open and transparent in our dealings with others. It's important to be humble - empty vessels make the most noise."

Outside the office, the father of three girls and a boy, aged 24 to 36, never strays far from the water.

And despite a passion for all that floats, Mr Seow does not own a boat - yet. "They say owning a boat is like having two wives - it takes up a lot of time. Maybe when I retire?"

•This is an excerpt from Singapore Exchange's kopi-C: the Company brew, a regular column featuring C-level executives of SGX-listed companies. Previous editions can be found on SGX's My Gateway website www.sgx.com/mygateway

A version of this article appeared in the print edition of The Straits Times on August 28, 2017, with the headline 'PACC Offshore plots steady course in rough seas'. Print Edition | Subscribe