Reach Subsea has returned to profit in the second quarter on the back of higher contract rates, but activity was lower compared to last year.
The subsea vessel and services company recorded pre-tax profit of NOK 3.9m ($433,000) for the quarter, compared to a net loss of NOK 18.0m ($2.1m) in the first quarter, which is the North Sea spot market's low season.
"Improved pricing and the benefit of our flexible business model only partly offset the effect of lower year-over-year activity levels," the Oslo-listed company said in its second-quarter financial report.
The second-quarter result is in line with the NOK 4.8m pre-tax profit recorded during the same period in 2018, although this result was net of a NOK 5.0m termination fee.
Market comment
"The subsea industry is still characterised by oversupply of tonnage and equipment, resulting in a market with tough competition and pressured rate levels," Reach said in its report.
"There are some signs of improved visibility in terms of a generally higher tender activity, and the gradual occurrence of some longer-term tenders and contract awards."
Reach operates six subsea spreads — including vessels, remotely operated vehicles (ROVs) and personnel — alone or together with partners.
Income
Second-quarter revenue was NOK 180.8m this year, slightly down on the NOK 191.2m posted last year.
"The decrease in revenue is explained by a lower number of vessel spreads compared to the same period last year as well as the Allseas project in 1Q2018 generating a high turnover," Reach said.
Backlog
Reach had an order backlog of NOK 203.0m as of 30 June, compared to respective NOK 135.0m a year ago.
Likewise, Reach's outstanding tender value was NOK 2.1bn at the end of the second quarter, compared to NOK 1.7bn a year ago.
The company described the improvements in both metrics as a "solid increase".
Reach's actual contract backlog could even be higher, as the estimate does not include the full expected 2019 volumes from the frame agreements awarded during 2018.
Road ahead
Reach said it expects higher utilisation of its subsea vessels and assets in the years to come because its "versatile and flexible" fleet has enabled it to broaden its market reach.
"With the award of several frame agreements during 2018 from clients such as Equinor, Shell, BP and Wintershall, Reach Subsea has gained access to new market arenas in which to win projects," the company said.
"The benefits are starting to materialise in terms of several call-offs that will contribute to good utilisation the coming season."
New acquisitions could be on the cards too, according to the report.
"We continue to monitor the market for opportunistic asset additions to complement and strengthen our portfolio for the future," Reach said.
