Contrariwise
13 May 2016
AGM Report AGM reportGulf Marine Services 11/05/16Debt levels/Banking covenantsInvestors are mainly concerned with the company’s high levels of debt, and whether it would breach banking covenants. At year end the company had debt of $398.9m, which is expected to rise to a peak of $425m this year. The year end debt levels represented 2.9x EBITDA. Since then the company has since guided down earnings by 15-20%, while debt levels are forecast to rise. Hence the company will come perilously close to breaching its banking covenants. The Chairman, Simon Heale, was good enough to spend 20 minutes with me discussing this issue. He made the following points:• Management was comfortable with the debt levels and that banking covenants would not be breached• He was confident that covenants could be re-negotiated (at a cost) if they became an issue• Debt levels had increased due to the capex program which will see the fleet expanded to 15 vessels this year, but that program ends this year. In 2017 there will only be maintenance capex (this year $7.3m). This year the company generated operating cashflow of $125m and that in future years this money would be used to pay down debts. Hence, the banking covenant issue is a temporary one, and debts will come quickly under control starting next year• his estimate the company’s operating costs were around $22m, and interest payments another $22m. Hence ongoing costs were around $44m. Income would therefore have to fall a long way before the company was in trouble• The company sees no need for a rights issue, and has no plans for oneI was reassured. The shares currently trade on a 12m forward P/E ratio of 3.6 so it would seem that all the bad news is in the price.Other key points• In Q1 capacity utilisation was 93% much better than their competitors• Due to their new build program they have some brand new SESVs that are best in class, and well placed to compete for new business• A few new contract tenders are coming up• Net debt on 1st May of $408.5m, with $200m of undrawn banking facility• One SESV out of 15 is off-hire, and laid up, available to hire. It has been this way since end Feb• The Chairman could offer no insights into why the share price has been falling so precipitously recentlyOverallI was the only private shareholder to turn up, and the Chairman (Simon Heale, a patrician Englishman) was good enough to spend 20 minutes chatting to me. I was impressed with the concern he showed for the concerns of small investors. The CEO, a soft spoken Scotsman, did a brief 10 minute presentation. It did not say anything new and I gained little view of the relative competence of the management from it.
smilingmickey1
11 May 2016
Re: Update... The big worry is the debt!It's increased slightly since the year end results. We are not sure how much capex remains to be expended on construction of the last vessel in the program so difficult to know how it will end up against projection. Rig occupancy has been kept high which should be good for cash flow but no idea how much rental prices have been come down..The latest vessel is only contracted out for a very short period maybe awaiting a better offer?The net debt is very high here. Future cash flow should reduce the debt. Evidence of debt reduction will do wonders for the share price. Short term I don't see much relief here.
maerskcon1
11 May 2016
Update... .....was okay so hopefully our share price should start to go up. Price of oil does make a difference but that seems to have stabilised as well. Good news the new build came in on time and budget plus cost saving measures progressing. Should be a rosy second half to look forward to. GLA.
smilingmickey1
01 May 2016
Re: Down Down! Hi PMP,I finally jettisoned my shares at 60pThe problem for GMS is that they have a large debt which they are planning to pay off from the proceeds of kit hire. The market for hiring their kit is quite soft so rates of hire have been coming down. At last report hire rates had not come down too much but the Company expected further softening.There should be a trading update prior to the upcoming AGM. So am keeping my eyes peeled. A recovery in oil prices could herald an increase in rig rates, but contracts take a while to work through before that rates can benefit GMS bottom line.
PMP1
21 Apr 2016
Down Down! Anyone have any idea why this keeps going down?
Contrariwise
15 Mar 2016
Why is GMS not bouncing with the oil price? I have a decent sized position in GMS on the expectation that it will do well as the oil price recovers over the next couple of years. Thus far it has been a poor investment and I am at a loss to understand why the share price has continued to drift continually lower despite the recent bounce in the oil price. Does anyone have any ideas what is going on?
lambrini girl
17 Feb 2016
Re: North Sea decommissioning work worth a tickle 80p for a bounce..
janebolacha
18 Nov 2015
North Sea decommissioning work This article from "Energy Voice" illustrates the scale of the opportunity for GMS in North Sea decommissioning work over the next few years:[link]
II Editor
10 Sep 2015
NEW ARTICLE: Trends and Targets for 11/09/2015 " GULF MARINE PLC (LSE:GMS) completes our  Oil Equipment, Services & Distribution Sector week. Back in January it bottomed with exquisite precision at 94p but movements since, unsurprisingly given the overall grotty market, have failed to ..."[link]
smilingmickey1
14 Aug 2015
Re: GMS top pick in oil services sector Not long to wait for the interims.
janebolacha
12 Aug 2015
GMS top pick in oil services sector [link]
smilingmickey1
30 Jul 2015
Re: Found this good report on GMS Thanks for posting that.IHMO the uncertainly going forward relates to whether the daily hire rate can be maintained. Not much direct competition from other platform hirers in the ME but producers will be looking to reduce costs wherever they can in this low price oil environment we have.To date GMS have announced daily hire rates for new contracts as being in line with existing. So we should expect some good results in August. Outlook for prices going forward will be interesting to hear.
mcescher
29 Jul 2015
Found this good report on GMS Looking undervalued and I like the business. I plan on topping up after reading this infographic [link]
smilingmickey1
10 Jul 2015
Re: Motley Fool: GMS "Dirt cheap!" JaneI agree it's cheap. Not so sure about low debt as this is increasing to fund the capex on the expanding fleet. May see more debt if they keep on building vessels after the end of the current program of work. Surprised we have not seen an RNS re the completion of Shazam and contract commencement. Perhaps that will only come with the interims.We should see a sizable increase in earnings in the forthcoming interims, with more vessels on contract than previous period which might see a bit of a re rating of the share price. Share price being held back by poor oil industry outlook. These guys can even take advantage of the current malaise with decommissioning work now!SM
janebolacha
10 Jul 2015
Motley Fool: GMS "Dirt cheap!" "Dirt cheapGulf Marine Services (LSE: GMS) is without a doubt one of the cheapest stocks around. The company currently trades at a dismal forward P/E of 6 and analysts believe earnings per share will expand 22% this year. These numbers give a PEG ratio of 0.3.At present, Gulf Marine only yields 1.6% although the payout is covered ten times by earnings per share which leaves plenty of room for growth. Group debt is low, so there’s no need to retain profit for reinvesting later. Shareholders could be in line for a special payout in the near future. "[link]
