Mermaid Maritime's subsea profits to jump 43%

Its subsea assets are almost booked for 2013.

According to CIMB, with its major subsea assets kept busy this year, it estimates that subsea gross profits will jump by 43% yoy for FY13. Earnings would be propelled by higher utilisation, day rates and positive operating leverage. 

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Mermaid’s subsea assets are more or less fully booked for FY13. One of its main contracts is a headline US$530m contract for five years for inspection, repair and maintenance (IRM) from Saudi Aramco (with a 2-year extension option) in late 2012. That contract is arguably one of the largest subsea contracts from the region.

For this contract, Mermaid teamed up with Zamil Offshore Services, one of the largest offshore and marine services providers in the Middle East. Mermaid’s share of revenue is expected to be 60-70% over the five years. We have conservatively modelled in 60%.

The contract covers full diving services, including air/mixed gas diving, saturation diving, ROV intervention and routine offshore field repair and maintenance.

Saudi Aramco has contracted four offshore support vessels and one dedicated saturation dive support vessel. Mermaid will be deploying Mermaid Asiana, one of its four dive support vessels to service the contract.

In addition, it will provide up to 110 divers, three remotely-operated vehicles and scuba replacement packages.

Considering the short-term and cyclical nature of subsea jobs, the contract is significant as it will provide a stream of stable revenue, profit and cash flows for Mermaid in the next five years. We estimate that the contract will account for 38% and 36% of its subsea revenue in FY13 and FY14 respectively.

Besides this win, Mermaid has secured a raft of contracts including: a 5-year US$25m IRM contract in Qatar and a US$30m contract for six months in China for subsea construction services to China’s state-owned company, COOEC.