Danish offshore shipowner Maersk Supply Service has reported a net loss of $1.1 billion for the fourth quarter of 2016 after being hit by impairment charges.
The offshore vessel owner said in its financial report posted on Wednesday that the deep loss for the quarter was a result of a $1 billion impairment charge.
The result for the quarter is drastically different in comparison to the same quarter in 2015 when it reported a break-even result, making neither a profit nor a loss.
As a result of lower rates, lower utilization as well as fewer vessels being available for trading due to divestments and lay-ups, the company saw the revenue for the quarter drop to $80 million in comparison to the $128 million for the same period in 2015.
Total operating costs decreased in the fourth quarter to $64 million from $88 million in the fourth quarter 2015.
As far as the entire year is concerned, Maersk Suply Service reported a loss of $1.2 billion in 2016 taking the company from black to red year over year since 2015 ended with a profit of $147 million.
The negative financial outcome in 2016 was impacted by an impairment of $1.2 billion due to significant oversupply and reduced long-term demand expectations as a consequence of lower offshore spending.
While working to load off some of its older tonnage, the company on Wednesday said four new Stingray Subsea Support Vessels would be delivered in 2017 and 2018 “consolidating ownership and operation” of the company’s total of nine project vessels.
As for the fleet reduction program announced in August 2016, so far, the company sold Maersk Beater, Maersk Chancellor, Maersk Finder, Maersk Puncher, Maersk Provider, Maersk Forwarder, Maersk Feeder, Maersk Fighter, Maersk Seeker and Maersk Supplier, leaving the Maersk Supply Service fleet at 47 vessels. In addition, the company had eleven vessels in lay-up at the end of the year.
As a consequence of the fleet reduction and the flagging of existing project vessels to the Isle of Man registry, the company’s manpower was reduced by a total of 325 offshore, and 43 headquarter employees.
Providing its take on the offshore supply vessel market forecast, the Danish player said market demand would remain low due to the low oil prices, and the general market outlook for the industry is expected to remain subdued in the long term.
In related news, Maersk Oil reported a $230 million profit for the fourth quarter of 2016 while Maersk Drilling posted a net loss for the fourth quarter of 2016. Maersk also announced that it intends to elect Jim Hagemann Snabe as the next chairman of the Group following the AGM in March.
Together with Maersk Oil and Maersk Drilling, Maersk Supply Service makes up Maersk Group’s Energy Division.
Maersk Supply Service said it would prepare for separation from A.P. Moller – Maersk.
According to the parent company Maersk Group, the Energy Division will continue to be operated and managed individually with the aim of finding sustainable structural solutions before the end of 2018.
As previously reported, Maersk in September 2016 confirmed it was working to split the company into two separate entities: one focused on shipping and logistics, the other on oil and gas sector, with its growth plan to focus on transportation and logistics services as an integrated Transport & Logistics company.