Keyfield riding on growth in O&G offshore accommodation

AS Malaysia’s offshore support vessel sector witnesses growth, offshore accommodation provider Keyfield International Bhd emerges as a beneficiary, poised to make waves within the oil and gas (O&G) sector with its imminent listing.

Keyfield’s initial public offering (IPO) would be the second Main Market listing so far this year, following Prolintas Infra Business Trust’s debut on March 13.

In a conversation with Starbizweek, Keyfield executive director and group chief executive officer Datuk Darren Kee Chit Huei sheds light on the company’s strategic vision for expansion, while emphasising its resilience even during challenging times.

“Accommodation work boat (AWB) is quite unique,” he says, noting how their operations adapt to various needs, including processes like maintenance and decommissioning of platforms.

“It is not like certain vessels, with rigid functions. Whereas, AWBS are actually deployed through various cycles of O&G activities,” he adds.

In view of this, Kee believes that being within the realm of offshore accommodation, the group is less vulnerable to shocks compared to other vessel types.

“Even in the worst time in 2019 and 2020, we were generating profit,” he says.

With its eyes set on fleet expansion, Keyfield aims to raise Rm188.1mil from its IPO.

A substantial portion of the IPO proceeds will go towards addressing bank borrowings related to past vessel acquisitions.

Kee says the funds will primarily be allocated to redeeming Keyfield’s cumulative redeemable non-convertible preference shares (CRNCPS) and settling the balance for the purchase of two vessels – Blooming Wisdom and Keyfield Helms 1.

“The CRNCPS were previously issued to acquire three vessels, Keyfield Compassion, Keyfield Commander and Keyfield Grace. The remaining proceeds will be utilised for the repayment of bank borrowings, workthe

“In the Malaysia context, four-point mooring is still highly sought after because rates are lower and Malaysia generally has calm waters,” Kee explains.

Of the eight AWBS that Keyfield has, three are four-point mooring vessels and the remaining five DP-2 units.

Additionally, it has three other vessels – two small vessels and one barge, which requires eight-point mooring.

The 500-men barge, named Blooming Wisdom, is one of only two in Malaysia, leading to high demand and a significant increase in daily charter rate (DCR).

When asked about the group’s plans for acquiring more vessels, Kee points to the challenge of finding sellers with adequate prices due to market mismatch.

“All the sellers who held onto vessels during downtime are now seeing better rates,” Kee adds, noting that they are refraining from selling due to improved DCR.

Shifting the focus on DCR, Kee says that DCR has experienced improvements, primarily due to the shortage of suitable vessels available in the market.

“I think DCR is very much a function of job activities versus the availability of suitable vessels,” he says, while acknowledging the direct correlation between oil prices and DCR.

Kee highlights specific increases in DCR for different vessel types.

He notes that for four-point mooring vessels, DCR rose by approximately 10%15% from 2022 to 2023, whereas for DP-2 vessels, there was a notable 25% increase during the same period.

Furthermore, in 2024, the group is witnessing an additional 25% increase in DCR for DP-2 vessels.

“However, many of our contracts have locked-in DCR rates, limiting room for increase. Nevertheless, they provide us with income assurance,” Kee adds.

Anticipating better rates, Kee expresses optimism about the potential improvement in the group’s bottom line.

Meanwhile, Kee discusses the lucrative nature of third-party vessel contracts, describing them as a “wonderful” business model due to their asset-light nature.

“For example, we secure contracts from Petroliam Nasional Bhd (PETRONAS) and act as the contract holder. If we don’t have a suitable vessel on hand, we seek out third-party vessels to charter to PETRONAS. Additionally, we can offer ancillary services such as catering and laundry services,” he explains.

On the topic of fuel costs, Kee highlights that when vessels are chartered to customers, the fuel cost is covered by them.

However, when the vessel is off-hired, the fuel cost becomes the responsibility of Keyfield.

Furthermore, Kee discusses the high barrier to entry in the offshore accommodation business, which the company views as an advantage.

He explains that the high costs associated with vessel ownership and maintenance serve as barriers for potential competitors.

Workboats and barges, for instance, can serve for up to 25 years, with maintenance costs ranging between Rm3mil and Rm3.5mil per vessel per year, depending on their age and specifications.

Keyfield will utilise 32.7% or Rm61.5mil of its IPO proceeds for the redemption of the CRNCPS, while about 34.6% or Rm65mil is earmarked for settlement of the balance of the purchase of Blooming Wisdom.

Another 18.6% or Rm35mil will be used for the settlement of the balance for the purchase Keyfield Helms 1, while about Rm3mil or 1.6% will be set aside for repayment of bank borrowings.

The remaining Rm14.56mil or 7.7% will be used for working capital, while Rm9mil will be for estimated listing expenses.

With an IPO price of 90 sen per share, Keyfield is set to debut on the Main Market on April 22.