Offshore and marine firms brace for massive losses as fourth quarter results roll in

But this is just the tip of the iceberg.

The offshore and marine sector has been sailing on rough seas since oil prices began their precipitous plunge in September. As the fourth quarter earnings season rolls in, the market will finally get a first glimpse of oil’s damage on service companies.

According to a report by Maybank Kim Eng, the full impact would not have been felt yet and earnings are likely to deteriorate further .

“Oil’s rout would not have been fully felt in 4Q14. It should be felt from 1Q15. The biggest question is whether share prices have discounted the downturn. We believe the bottom remains murky given moving targets,” stated the report.

Offshore and marine players are expected to initiate some form of cost-cutting to mitigate pricing pressures and lower utilisation. Substantial labour retrenchments or permanent capacity rationalisation, which signal expectations of a prolonged downturn, are also in the horizon.

“Managements’ tones during results briefings will provide read-through for FY15. But as oil prices and capital budgets are still moving targets, the companies themselves may find it difficult to size up their prospects accurately,” noted Maybank Kim Eng.