MTQ Corporation

I dont understand Mr Kuah Kok Kim comment "I have never seen such a bad market in all my years in the industry." saying that now is worse than 1998 when oil price was at US$10.

Is it because O&G giants overinvested in capex in past few years, that why the situation is worse now?

I guess after 17 years, costs have exploded during long period of good times. 2015 Salary is hugely higher than 1998. The industry will need to do some radical adjustment. At current oil price and cost probably it doesn't make sense to do sea rig type of activities.

(02-08-2015, 10:30 PM)corydorus Wrote: I guess after 17 years, costs have exploded during long period of good times. 2015 Salary is hugely higher than 1998. The industry will need to do some radical adjustment. At current oil price and cost probably it doesn't make sense to do sea rig type of activities.

I think a lot of buddies conveniently forgotten about nominal and asset inflation.

An OCK curry puff used to be less than $1 but its now $1.80. However, I doubt that the OCK stuff salaries soared by similar quantum and also OCK shareholders' profits...

(02-08-2015, 10:43 PM)greengiraffe Wrote: I think a lot of buddies conveniently forgotten about nominal and asset inflation.

An OCK curry puff used to be less than $1 but its now $1.80. However, I doubt that the OCK stuff salaries soared by similar quantum and also OCK shareholders' profits...

It's not just inflationary pressures. There are also the elements of reduced workload and requirements (which leads to further discounts). This adds on to the flab acquired during the fat years.

It's good that MTQ is involved mainly in shallow water work, which is a lot more sheltered than places like Brazil, Mexico etc. Actually think they are tempering expectations when they said outright discounts being demanded are around 30%, their losses are big enough to imply a 30% reduction in the price of their services ;p Under promise, over perform.

It's really the fittest survives in this downturn, MTQ finally started bleeding and have been cutting flab. So would say it's starting to look interesting again!

(02-08-2015, 10:20 PM)financiallyfree Wrote: I dont understand Mr Kuah Kok Kim comment "I have never seen such a bad market in all my years in the industry." saying that now is worse than 1998 when oil price was at US$10.

Is it because O&G giants overinvested in capex in past few years, that why the situation is worse now?

I think he meant to say that there was overinvestment in capex in the last few years, so there was a "growth overdraft", capex will have to shrink in the next few years, maybe even the next decade or so before oil prices will go up again.

Mr Kuah is being candid by sounding pessimistic, everyone knows that good times arent coming back soon, so there is no point in putting up a front.

Thanks for the replies! hmm for me i am still holding onto the MTQ shares now. at least for me, i think there is no reason to sell now at such a low price, and still hard to find other cheap value counters in sgx now. if its coal, i would have run immediately. But with such a drastic drop, I suspect the recovery will be faster too. But i am not holding out hope for a recovery anytime soon.

(02-08-2015, 10:20 PM)financiallyfree Wrote: I dont understand Mr Kuah Kok Kim comment "I have never seen such a bad market in all my years in the industry." saying that now is worse than 1998 when oil price was at US$10.

Is it because O&G giants overinvested in capex in past few years, that why the situation is worse now?

I think the Chairman's comments are very genuine.

From EIA, http://www.eia.gov/dnav/pet/hist/LeafHan...=rbrte&f=m

Using 380 mthly data, the average price for Brent from 1987-2015 is 44.5
Using 166 mthly data, the average price for Brent from 1987-2000 is 18.8

So the acceleration of oil prices from the 2000s is quite remarkable if you consider how much this decade+ pulled the averages up. The fact that a couple of years back oil was >120 further puts the acceleration in perspective. The China growth story since WTO was the main fuel behind the rise.

This was then coupled with the falling USD. After spiking in 2002 at 120, the DXY has then dropped to 70 during the GFC trough. So oil in USD terms will have spiked accordingly as well.

Everyone was projecting forward using the megatrends of a weakening USD and a strong China-consumption story and planning their capex accordingly.

This was also worsened by rather reckless competition. I remembered attending a briefing with management of one of the local shipyards. When questioned on the heavily backloaded contract terms for the projects, the Chairman replied that the terms from the Chinese were even worse (the Chinese were actually funding the customer for the construction - willing to be cashflow -ve for entire construction period), and if they do not follow, they lose the contract. This reminded me of Chuck Prince's "As long as the music is playing, you’ve got to get up and dance.".

If one then looks back on highsight, one can probably get a sense of how long the magatrends have lasted and the effects when both trends ended abruptly (impending fed hike and the china slowdown).

I do not know where oil will go or how the O&G sector will end up - but putting things in perspective is useful.

(04-08-2015, 09:51 AM)AQ. Wrote: I do not know where oil will go or how the O&G sector will end up - but putting things in perspective is useful.

Yes, knowing where you stands, is as important as knowing the risks ahead. Thank for the post.

"This was also worsened by rather reckless competition. I remembered attending a briefing with management of one of the local shipyards. When questioned on the heavily backloaded contract terms for the projects, the Chairman replied that the terms from the Chinese were even worse (the Chinese were actually funding the customer for the construction - willing to be cashflow -ve for entire construction period), and if they do not follow, they lose the contract. This reminded me of Chuck Prince's "As long as the music is playing, you’ve got to get up and dance."

This is very true, at least the local shipyard management is honest.

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See COSCO's contracts... client can order based on 5% deposit, shipyard build, client can don't take delivery, reject and still get their refunds with interests back!!!!

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CityFarmer Wrote:
What catch my attention, is the detail of the contract, very favorable to shipowner. It shows how desperate of cosco for the contract...

(not vested)

Cosco unit to extend delivery deadline for two remaining PSVs to US customer

SINGAPORE (May 28): Cosco Corporation (Singapore) ( Financial Dashboard) said a US ship owner and Cosco Guangdong have mutually agreed to extend the delivery dates of two PSVs, originally scheduled for delivery in early 2014, until 30 June 2016.

On March 22, Cosco announced the signing of contracts by Cosco (Guangdong) Shipyard Co. with the US customer for the construction of four UT 771 CDL Platform Supply Vessels (PSVs) for over US$105 million in total.

Two of the PSVs were completed on 15 December 2014 and 17 February 2015 respectively.

To date, the construction of the two PSVs has also been significantly completed.

Under the new agreement, the shipowner can elect to take delivery of any one or both of the completed PSVs at any time prior to 30 June 2016 or “such date may be further extended by mutual agreement of the parties”.

Cosco said if the shipowner does not take delivery of either of the remaining PSVs, Cosco Guangdong will refund to the shipowner the instalments paid on the PSV of US$5.4 million per vessel together with interest.

The shipowner will also relieved of the obligation to pay to Cosco Guangdong the remaining payment under the shipbuilding contract.

Cosco closed 0.5 cent lower at 5.25 cents yesterday.
http://www.theedgemarkets.com/sg/article...s-customer

The latest financial report of the company.

MTQ Corp reports net loss of $0.5 million in 2Q

SINGAPORE (Oct 29): Engineering and subsea services firm MTQ Corp ( Valuation: 1.80, Fundamental: 1.15) sank into the red, notching up a 2Q net loss of $0.5 million, compared with earnings of $5.3 million a year earlier.

Revenue slid 28% to $57.8 million amid weak demand for oilfield engineering business, especially locally. The group’s performance was also weighed down by a weaker Australia currency.

Its business in Bahrain continued to thrive and generated slightly higher revenue compared to last year, MTQ Corp says.

The group adds that its healthy cash balance and low gearing will help it weather the industry downturn.

MTQ Corp closed 0.9% lower at 56 cents.
http://www.theedgemarkets.com/sg/article...million-2q