Message from the CEO
Topaz Energy and Marine is a leading offshore support vessel (OSV) company and an essential part of the energy supply chain. Headquartered in Dubai, we have a successful, 40-year track record of providing services to offshore oil and gas producers and contractors. Topaz now has ten operational centres and is primarily focussed on the Caspian, Middle East and West Africa, with Subsea operations in the North Sea and Gulf of Mexico.
The offshore support vessel industry has experienced extraordinary pressure and continues to be impacted by an unprecedented drop in the price of oil, further exacerbated by an ample supply of OSVs. Despite these immediate challenges, Topaz believes the industry demonstrates fundamentally attractive long-term dynamics supported by the inevitable rebalancing of supply and demand for extracted energy. Topaz has taken advantage of the current market conditions to streamline its operations, demonstrating the resilience yet flexibility of its strategy in order to remain competitive.
With strong geographical positions in our home markets of the Middle East and the Caspian Sea, Topaz has capitalized on the strategic importance of these geographies to the global hydrocarbon markets. As a result of our robust operational quality and safety track-record, Topaz continues to forge strong and long-standing relationships with many of the world’s leading oil and gas producers in these regions such as BP, Total, Chevron, AGIP, Maersk Oil and Saudi Aramco.
The flexibility of Topaz’s fleet allows it to take advantage of opportunities in prime growth markets around the world. Having established operations in West Africa, we intend to continue our strategy of selectively pursuing opportunities and expanding into key strategic markets poised for future growth while maintaining our leading market positions in the Caspian Sea and Middle East.
Our strong client relationships and our longer-term contracting model have allowed us to build and maintain a healthy backlog providing us with a high degree of revenue assurance over the medium and long-term, which has been important in the current market. We increased our backlog to US$1.7 billion during mid 2016, driven by new clients and extensions of existing contracts. It’s our aim to continue building this backlog and therefore maintain visibility of our future earnings with long-term contracts for most of our vessels, complemented by short to medium term contracts for the vessels we deploy in our Middle East and global operations. We believe that this strategy enables us to maintain high fleet utilization levels while maintaining our stable return on assets.
One of our core competitive strengths is the quality of our fleet and our investment in our now 100-strong fleet of vessels. This ensures we have one of the most technologically advanced and versatile fleets with an average vessel age of approximately 8 years, well below the global average. We intend to continue to strategically expand our fleet, from construction of new vessels to strategic vessel acquisitions. We are constantly optimizing our fleet, divesting aging and non-strategic tonnage to focus on mid- to high-end OSVs, which are more versatile and can address a wider range of our clients’ needs.
Topaz’s financial strength has allowed it to take advantage of the competitive vessel market, committing US$115 million to acquire two subsea vessels from Vard Norway for delivery in 2017, representing the renewal of our subsea fleet. Following a milestone contract award in Kazakhstan worth in excess of US$500 million, we have also commissioned the construction of 15 newly designed Module Carrying Vessels (MCVs), innovatively crafted to navigate shallow river systems.
We strive to maintain a strong balance sheet with ample liquidity. We will achieve this through our robust contract backlog and by continuing to focus on cash generation by achieving higher utilization, excellence in our cost management and focusing on return on assets from all our operations and future investments. We have used the current market to place extra emphasis on managing operational costs, improving efficiencies, resetting our cost and financial base and enhancing our competitive advantage.
Our commitment to the environment, our employees and our communities is fundamental to Topaz’s activities, its delivery of quality and its ability to execute its vision in a sustainable way. Our uncompromising focus on safety is one of the key factors distinguishing Topaz from our competitors and our investment in this area has been acknowledged through several HSE-related awards granted by both clients and industry trade bodies.
The quality of our people supports the execution of our strategy and promotes a culture of excellence throughout the organisation. Even in challenging markets, Topaz continues to enhance crew welfare and offer opportunities for our people to develop, which helps us attract and retain the best people.
Exceptionally difficult market conditions are testing our resilience and agility. However, we have proven we have the right strategy in place, a strong and flexible fleet, considerable earnings visibility and a streamlined cost and financial base, positioning us well to withstand current challenges and take advantages of growth opportunities.
René Kofod-Olsen, CEO,
Topaz Energy and Marine