Perhaps, the writing was on the wall that the high oil price era was not sustainable. On hindsight, maybe we should have paid attention to the fact that there has been a rapid expansion of shale oil production which had boos t ed t he gr ow t h in t he US economy. Maybe we should have seen t he warn ing s i gns o f po t en t i a l oversupply of oil in the market due to OPEC’s unabated oil produc tion. Howeve r, a s t he s ay i ng goe s , “hindsight is always twenty-twenty”. What is without doubt, is the ripple effect the rapid drop in oil prices had on the global economy. Besides the adverse economic impact on energy expor ting countries, the ef fect is perhaps mos t v i s ib l y d i sp layed through the drastic actions that all oil majors and players alike were forced to deal with, potentially a sustained period of depressed oil prices. The effects of cuts in operating costs and deferral of capital expenditures will haunt the Oil & Gas service sector for the greater part of 2015 and beyond. On a positive note, dealing with adversity and challenging economic circumstances is not new to us at MISC. The global shipping industry underwent one of its most painful down-cycle in decades, a recession that coincided with the outbreak of the global financial crisis in 2008. However, the Board of Direc tor s and the management of MISC have been resolute in ensuring that the Group survives the tough times. We remain committed in our cause to bring back stability and strength to our financial position. As a result of all these purposeful actions taken in the past years such as the bold decision to exit the liner bus i ne s s , a bus i ne s s t ha t was synonymous with MISC when the Group first began, we are now realising the benefits of those tough decisions. Today, we enjoy bet ter f inancial performances with strong operational profits, supported by healthier cash reserves and a re-energised balance sheet. During the year, freight rates in the petroleum shipping segment continued to improve on the back of steady demand of vessels for crude oil movements, coupled with lower new tanker deliveries. In fact, supply of new vessels grew at its slowest pace in the last 10 years. Our petroleum shipping arm, AET, achieved better than expected results, thanks to the improvement in tanker freight rates, an increase in market share in the lightering business and effective cost management. In addition, contributions from our Dynamic Positioning (DP) tankers and Modular Capture Vessels (MCV), contrac ted on long - term charters, provided new sources of stable and recurring income to AET. PETRONAS’ decision in early 2015 to novate the shipbuilding contracts and subsequent execution of long-term charters for five (5) new LNG carriers with MISC had boosted the market sentiment on the Group. Favourably, PETRONAS had also agreed on the charter extension for the five (5) Puteri Class carriers on a time charter basis for the next 10 years. These positive developments signal PETRONAS’ continued support and confidence in MISC as their preferred LNG transpor ter. As we celebrate these milestones, they are also a t e s t amen t t o MI SC ’s ex t ens i ve experience, expertise and proven track record in delivering the operational excellence in LNG transportation. Long-term charters provided new sources of stable and recurring income to AET Novation of the shipbuilding contracts and subsequent execution of long-term charters for 5 new LNG carriers Charter extension for the 5 Puteri Class carriers on a time charter basis for the next 10 years p 55 MISC BERHAD - Annual Report 2014
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