Difficult Libyan scenario sees Medserv post €680,000 in pre-tax losses

Medserv invests in preparation for the expected upturn in the Oil and Gas exploration in the Mediterranean.

Medserv plc is strengthening its expansion programme despite the difficult market conditions that have continued to prevail due to the security concerns in Libya.

The company's turnover for the six-month period ended 30 June 2012 amounted to €2,545,888 compared to €3,914,590 registered in the comparative period to 30 June 2011.

The group registered a loss before tax of €680,589 compared to a profit of €141,137 achieved in the six-month period to 30 June 2011. After accounting for taxation, the net profit for the period to 30 June 2012 amounted to €9,765 when compared to a profit of €125,697 for the six month period ended on 30 June 2011.

The group's results for the first half of the year were lower than forecast with turnover substantially lower than that of the comparative six-month period. Both the Malta base and the Libya base continued to be affected by instability in Libya which is still recovering from the war.

Whilst the Malta base benefited from the relocation of oil field equipment from Libya to Malta, the Misurata base whilst open has not yet seen any new business from oil companies renewing operations. However existing fee income at the Misurata base is sufficient to support day to day expenditure so as to provide a break-even situation.

"Significant progress has been registered in Libya with regards to the political situation after the successful elections of recent, although the security situation is still a concern," Medserv chairman Anthony Diacono said.

"Libya has concentrated on resumption of production of existing facilities and oil and gas output has reached pre-war levels. However the return of International Oil Companies (IOC) to resume exploration is taking longer then expected, due to the security concerns. IOCs are now returning to Libya but with smaller budgets and fewer staff. It is obvious that they are carrying out preparatory work whilst waiting to see developments."

The financial results shown for the first two quarters of 2012 reflected the disappointing market conditions to date. However business is expected to pick up in the final two quarters 2012.

"It is anticipated that the offshore industry will take off before the onshore activity as security is not a threat for offshore," Diacono said. "Major oil company BP have lifted the force majeure and opened the way for exploration to commence 2013. This could be the catalyst to encourage IOCs to return to Libya and resume exploration. Medserv is well placed to participate in this activity from its base in both Malta and Libya."

Medserv reported an optimistic outlook going forward, so much so that the company has made substantial investment in facilities and equipment to meet the increase in demand starting 2013. The company has now also finalised and signed the lease for the land for a new base in Limassol Cyprus to service the Eastern Mediterranean.

The Misurata base whilst open has not yet seen any new business from oil companies renewing operations. However the company reports that existing fee income at the Misurata base is sufficient to support day to day expenditure.

A lease at the port of Limassol in Cyprus has now been signed and preparations are underway to enable the Group to provide a full service to the oil and gas industry offshore Cyprus. Government restrictions on drilling offshore Sicily have now been lifted and the group is renewing its efforts to obtain business from oil companies likely to conduct operations in the area.

Now that Libyan oil production has largely recovered to pre-war levels increasing attention is being paid to these projects as the country strives to increase its production of fossil fuels to meet demand.

The group is receiving at its Malta base shipments of material in preparation for commencement of these operations. Repairs to subsea structures and maintenance to platforms are also being carried out and in this regard the group has been awarded a very substantial contract to commence in September of this year. In addition the group is upgrading its equipment and has invested in excess of one million euro in the past six months in the purchase of a heavy-duty crane and other ancillary equipment.