Gulf Marine Services dropped sharply today, falling by around three quarters as the company warned it would be unable to meet its obligations to lenders as increased competition hit its business.
The firm, which provides services to the energy sector, lost 74.7 per cent of its £113.5m market value. Shares fell as low as 8.04p, their lowest level since listing at 130p in March 2014.
In a trading update to shareholders this morning, the company said there had been a delay in signing contracts, meaning that they would be pushed into 2019.
This, it said, will put it in breach of its banking covenants by the end of this year.
The company runs a fleet of 15 self-elevating jack-up barges, offering services for oil and gas, renewables and construction at sea.
It counts the likes of ABB, Siemens, Royal Dutch Shell, Equinor and Conoco Phillips among its customers.
Alex Brooks, an analyst at Canaccord Genuity said the company had been hit by increased supply on the market.
“The underlying problem is that during the go-go years of the oil and gas industry from 2009 to 2014 everyone believed that the good times would last forever. There was endless money to build new assets and sooner or later there were too many,” he told City A.M.
This oversupply meant that by the end of 2013 there were more ships chasing work than there was work for them to do.
The oversupply has already caused problems for other businesses in the sector as competitors able to offer lower prices can undercut their rivals, especially those with more costly services.
“Gulf Marine have put out a release which is a full collection of disaster,” Brooks said. “There is a profit warning for 2018, a profit warning for 2019, and it’s not going to get much better in 2020.”
The share could fall by another 50 per cent to around 4p per share, he added.
The company has around $450m of debt on its balance sheet, mainly to lenders in Abu Dhabi who will look to transfer the debt into equity, thereby battering existing shareholders.
Established as a local operation in the United Arab Emirates in 1977, the Gulf Marine grew its fleet and reach up to a listing in London in 2014.
It operates in the Middle East, South East Asia, West Africa and Europe using vessels made at its shipyard in Abu Dhabi.