Jack-up operator Gulf Marine Services expects to be “in breach of certain banking covenants” at the end of 2018 due to a delay in signing recently awarded contracts.
The company said the contracts will be inked next year, but warned it will continue to struggle financially in the near-term due to low rates for vessels.
“A recovery in day rates in the industry continues to be deferred due to a number of factors including current oversupply of vessels across the industry against tender demand, exacerbated by extended contract award delays and volatile oil prices,” GMS said.
The company is in talks with its banking syndicate to address the covenant breach.
GMS does not expect a recovery in its trading performance in 2019, in spite of improving calendar day utilisation levels across its fleet to an expected 70% for this year from 58% in 2017.
The company said it is uncertain when day rates will recover beyond 2019 and it is working with banks to establish an appropriate long-term capital structure for the business.
“The board will consider all available options to reinforce the balance sheet,” GMS said.
GMS pointed to a strong pipeline of tenders in the Middle East that should eventually lead to an increase in charter rates and said its young fleet makes it “well-placed to capitalise on a market recovery when it does materialise”.
GMS jack-ups include Endeavour (pictured).