In the wake of continued industry challenges across the value chain with impacts felt by our customers and suppliers alike, 2016 was the year SMG maintained its focus on operational excellence and progressive cost saving initiatives. Despite improvements in the price of oil throughout 2016, charter rates have dropped further compared to 2015. In the PSVs and AHTS segments, we have experienced a drop in rates in the GCC and other operating regions. The main driver for the drop is tonnage oversupply coming primarily from SEA operators.
We continue to rely on the sustainable strength of our customer base, the current healthy contract backlog, and continued identification and implementation of cost saving initiatives to deliver positive performance.
Despite the challenging environment across the industry, which has reduced Stanford’s revenue from $109M in 2015 to $73M in 2016, management continues to make the decisions necessary to protect margins at healthy levels including sustained operational cost savings.
Chartering: In 2016, we operated a diverse fleet of 49 OSVs across the Middle East, South East Asia, Nigeria and Angola (40 owned, 6 under management and 3 cross chartered). Utilization rate was lower than 2015 at 72%, which is nevertheless considered high utilization as compared to the average worldwide utilization rate. 54 new contracts were secured (mainly short term) throughout the year.
Ship building: Grandweld successfully completed and delivered 8 new vessels to clients. Those included 1 Dive maintenance and support vessel to ADNOC, 2 Aluminum Crew Boats to Global Marine, 2 Aluminum Crew Boats to Humaid Badir Shipping and 3 Aluminum Crew Boats to International Naval Works.
The teams’ focus on HSE could not be more reflective in the performance results with zero LTIs over 9.2 million man hours worked. This is a significant accomplishment that highlights everyone’s commitment to safety and continued focus on HSE. With a large and modern fleet, professional management team and certified HSEQ management systems, Stanford Marine reaffirms its position as one of the world class providers in the industry. These results would not have been possible without the hard work of our teams, both onshore and offshore, whom I would like to thank and salute for their exceptional efforts and work ethic.
We are proud to continue making a positive change to social issues such as education, health and wellness, economic development and environmental sustainability. Year on year, we continue to sponsor initiatives outside our company such as the financial support to the Al Noor Training Centre for Children with Special Needs, the Rashid Pediatric Therapy Centre, and The Angel Appeal. At SMG we believe that acting responsibly and giving back to society makes us a more effective organization.
What should we expect in 2017? Given the underperformance in 2016 stemming from weak charter rates and reduced utilization levels plus the fact that oil prices are not expected to improve further in 2017, we believe that at best, our charter rates will not deteriorate further. The shipbuilding business is also expected to come to a standstill in the wake of oversupply of OSVs worldwide which led to tonnage devaluation everywhere. Ship repair, however, will remain steady. Despite the negatives, I remain optimistic that we will pull through the year ahead. We have a strong base of solid charter contracts at Stanford and our operational efficiencies are continuously evolving; thanks to the dedicated individuals who strive to make it better each and every time.
In summary, I would like to thank the SMG team for their continued support and hard work in 2016. I would also like to thank our shareholders for their ongoing guidance and cooperation during this challenging period.