This printed article is located at

executive chairman's statement

Extracted from Annual Report 2017



On behalf of the Board of Directors, it is my pleasure to present to you the Annual Report of the CH Offshore Group ("the Group", "CHO", or "the Company") for the financial year ended 30 June 2017.

The offshore and marine sector remained under tremendous pressure in FY2017. The prolonged slump in the crude oil price has resulted in many offshore projects being delayed or cancelled as investment in offshore oil exploration and production activities were cut back. This in turn triggered a slump in offshore oilfield support services. Consequently, the offshore support vessel ("OSV") industry is inundated with overcapacity issues and facing downward pressure on vessel utilisation and charter rates as vessel owners and operators contend with fierce market competition.

Throughout the prolonged downturn in the oil & gas (O&G) industry, the Group has stayed focus on implementing our strategic priorities through a series of cost rationalisation and business streamlining initiatives and prudent working capital management, while continuing to actively pursue new charter contracts in our target markets, especially in South East Asia, Mexico and the Middle East. Currently, the Group has ten vessels in South East Asia, one in Africa, three vessels in Middle East and two in Mexico. We have managed to maintain an average utilization rate of 63% in FY2017 despite of the market challenges.


Lower vessel charter rates and utilisation were largely the reason behind the 34% fall in the group revenue to US$16.4 million for the financial year ended 30 June 2017.

The Group responded to the harsh charter market environment by reining in on operating expenditure. Thorough review on our vessel operating costs, labour and administrative expenses were done and effective measures were taken to minimise costs in these key areas. These measures had resulted in 18% reduction in operating expenditure to US$4.9 million and 13% reduction in general and administrative expenditure to US$4.6 million as compared to the previous financial year.

Apart from cost-cutting measures, the Group also adopted a prudent approach in provisions and made impairment charges totalling US$33.5 million, of which US$31.1 million was for its directly owned fleet and US$2.4 million was for doubtful debt. In addition, the Group shared an impairment charge on jointly-owned vessels amounting to US$5.2 million. These charges resulted in the Group's net loss of US$40.1 million against the previous financial year's net profit of US$5.6 million. The Group's net asset value also decreased from US$161.3 million as at 30 June 2016 to US$121.2 million as at 30 June 2017. The Group's net asset value per ordinary share decreased from 22.88 US cents per share to 17.20 US cents per share.

During the financial year, the group took steps to increase its long-term borrowing by tapping on the Spring Singapore's Bridging Loan financial support scheme while reducing its short-term borrowing. The Group's liquidity remained healthy with a current ratio of 2.3, and gearing remains low with a long-term borrowings of US$3.6 million and a short-term borrowing to fund working capital of US$5.4 million.


The oil and gas sector faces more uncertainty in the year ahead. As a result of the late 2016 agreement among the Organization of the Petroleum Exporting Countries ("OPEC") to cut oil production, crude oil prices increased during FY 2016 from the historical lows experienced in the last several years. However, the increase in the production of oil from shale deposits on land in the United States together with weaker than expected demand for oil is creating an uncertain horizon for the continued strength or increase in oil prices. The ease with which shale oil well can be revived for production when prices rise add to the clouded outlook for oil prices in the year ahead. Any rebound in the offshore and marine market is also handicapped by the fact that offshore oil and gas projects now must compete for capital with lower-cost onshore projects.

Despite the uncertainty ahead, there are indications that the worst may be over. Crude oil price have likely seen their low for the current cycle. With the rebalancing of costs across the offshore oil and gas industry, new offshore oil and gas development is becoming profitable again, even at current oil prices. In short, the seeds of the ultimate recovery in the sector have been planted.

Despite the challenging environment, we have performed admirably over the last several fiscal years. We have maintained our excellent track record of generating a profit over the last few years. Our fleet utilization rate has remained in the 60s percentage range, much higher than the industry average. Additionally, we benefit from a mix between time charters and more stable, long-term bareboat charters.

Our fleet of AHTS (Anchor Handling Tug Supply) is relatively young and uniquely situated to enjoy the eventual upturn in the market. The core of our fleet is the Japanese-built 12,240 horse-power AHTS vessels. These vessels have high quality equipment, large deckspace and enjoy the horse-power required to serve the newer jackup drilling rigs. The Group's competitive edge also includes the quality of its experienced management and staff as well as the underlying strength of its main market in Southeast Asia.

We serve an economically fast-growing region with several countries with huge populations and demand for energy. The oil and gas wells in the region are largely older and producing in marginal fields. Consequently, many of the wells in Asia require near constant maintenance and well stimulation in order to maintain production, which in turn produces a steady stream of offshore projects for our high quality fleet. Demand for our fleet – especially our 12,240 horse-power vessels – will significantly improve as new drilling campaigns are launched in the eventual upturn in the market.

The Group will continue to develop ways to increase operational efficiency, cut costs and preserve cash. This is the simple strategy that will allow us to ride out the rest of the downturn and be ready for the rebound in the industry.


CHO's sustainability strategy is aligned with our core values of Passion, Respect, Integrity & Honesty, Monetary Discipline and Excellence (Prime) and our "do not harm" corporate policy. CHO is committed to improving the economic and social well-being of our stakeholders by operating the CHO way which ensures that we do no harm to ourselves as human, to those involved and affected by our operations, to the assets involved and affected by our operations; to the environment in which we work and to our relations with clients, subcontractors, customers, stakeholders and those affected by our operations.

CHO upholds high standards of corporate governance and transparency to safeguard shareholders' interests. We have in place an adequate and effective Enterprise Risk Management framework to enhance our business resilience and agility. CHO continuously strive to ensure full compliance with the 1974 International Convention for the Safety of Life at Sea (SOLAS 1974).

We rigorously strive to balance commercial viability with sustainability for future generations and have incorporated the key principles of environment, social and governance in settling out our business strategies and operations. However, it is clear to us that focusing on sustainability is good for our business and profitability. By adhering with our sustainability strategy, we will increase productivity and efficiencies and reduce our cost, which is increasingly vital in the currently challenged offshore oil and gas sector. Additionally, performing our business in a sustainable fashion avoids the risks and liability associated with environmental damage and provides a competitive advantage in securing and maintaining contracts with major oil and gas companies and national oil companies, which are increasingly demanding that key contractors adopt sustainable business practices. In short, our sustainability initiatives makes good business sense for our shareholders, our employees and our stakeholders. As a result, we are delighted to inform all stakeholders that the Group will start reporting on our sustainable practices and efforts in the annual report from this financial year onwards.


Our ability to cope with the past financial year's challenges would not have been possible without the outstanding efforts of our entire workforce. In FY2017, the executive team worked determinedly to steer the business through these difficult times and many tough decisions were taken along the way.

On behalf of the Board, therefore, I would like to thank our people for their outstanding efforts and dedication to the Group. To our shareholders, bankers, suppliers, customers and business associates, our heartfelt gratitude for their understanding and unwavering support and confidence in our ability to weather the headwinds in the sector.

To the Board, I wish to record my appreciation for their guidance and valuable advice.

Mr Tan Pong Tyea
Executive Chairman
21 August 2017

Please read our General Disclaimer & Warning carefully.
Use of this Website constitutes acceptance of the Terms of Website Use.
Copyright © 2018. All Rights Reserved.