Malaysia’s MISC believes the exceptionally low spot rate environment for LNG carriers can drag down their long-term value and says it will look at repurposing ships.
In a third-quarter results statement, the company said that during the three months LNG spot market rates “remained moderate” but below those for 2023 on subdued demand in Asia and elevated inventory levels in Europe.
It described fourth-quarter LNG spot rates as softer, driven by a high number of deliveries, limited additional liquefaction capacity and moderate expected demand in Europe.
“The segment also faces potential asset impairment risks amid a weakened spot market, where softer rates may affect the long-term value of assets,” it said, adding that heightened geopolitical tensions could disrupt certain contractual arrangements, which might have an adverse financial impact.
But the company said its gas assets & solutions segment will continue to pursue strategic opportunities to mitigate impacts on operating income.
This will include repurposing vessels into floating solutions and redeploying them to charterparties where feasible.
Its petroleum & product segment’s operating income is projected to remain steady, underpinned by its fleet of long-term chartered vessels and the potential to capitalise on opportunities in the spot trading market.
MISC is also bullish on its offshore business, where it has a portfolio of long-term contracts. It said new projects being commissioned will continue to support this segment’s financial performance.
“Moving forward, the offshore business segment will actively pursue new opportunities in the market while maintaining a strong focus on the timely and efficient completion of existing projects to mitigate potential cost overruns,” it said.
Upstream capital expenditure is expected to remain stable amid energy security concerns and geopolitical conflicts that will support its marine & heavy engineering segment.
It expects conversions to expand business for its marine sector, while the growing LNG fleet will provide further opportunities for repair and maintenance services.
Third-quarter profit fell to MYR 344.7m ($76.9m) from MYR 398.7m in the same three months of 2023.
But profit for the first nine months was up at MYR 1.7bn, compared with MYR 1.3bn a year ago.
Third-quarter revenue fell to MYR 3bn from MYR 3.4bn a year earlier.
The company said group revenues were down mainly due to fewer earning days from expiring contracts and lower charter rates in its gas assets & solutions segment.
This was coupled with lower revenue from the conversion of a floating, production, storage and offloading unit after slower project progress in the offshore business segment. But returns were mitigated by higher revenue from heavy engineering projects.
New group chief executive Zahid Osman said: “We are committed to staying responsive to market dynamics and offering integrated value solutions to our customers.”
He said the company’s forward focus is on delivering steady growth and value across its key segments by strengthening its financial framework and seizing opportunities that bring greater value.
