Chairman’s Message

Mr Thia Peng Heok George
Board Chairman, Independent Director

Extracted From Annual Report 2021

On behalf of the Board of Directors (“Board”), it is my pleasure to present the Annual Report of CH Offshore Ltd. (“CHO” or the “Company”) and its subsidiaries (the “Group”) for the financial year ended 31 December 2021 (“FY2021”).

2021 has proven to be a challenging sequel to 2020 in this continuing Covid-19 saga which has yet to see a return to pre- Covid normalcy. The emergence of a new Covid-19 variant, Omicron, proved how rapidly things can change. Many countries ended 2021 with muted Christmas and New Year celebrations having to reinstate border restrictions and social distancing requirements at short notice. Given the poor economic performance of 2020, 2021 saw a substantial rebound in economic activity in advanced and developing economies. The pent-up demand from 2020 contributed to the higher growth seen in 2021 which unfortunately is not expected to be sustainable through 2022 and 2023. The high GDP growth rates that these economies enjoyed especially in the first half of 2021, are expected to be dampened in 2022 and 2023 due to longer-lasting inflation, ongoing supply-chain and labour force issues and possible new Covid-19 variants. Governments are also expected to unwind massive fiscal and monetary support provided during the pandemic1.

Following the sharp drop in oil consumption in 2020, with increasing economic activity, easing of Covid-19 related restrictions and the rollout of vaccination programmes, global oil consumption rose by 5.5% in 2021 from 2020, although still remaining 3% below 2019 levels2. For the year 2021, oil consumption outpaced oil production which was deliberately restrained as a result of crude oil production curtailment by OPEC+ members, reduced investment by US oil producers and other supply disruptions. The net consumption position has resulted in falling inventory levels and higher oil prices in 2021. WTI Crude Oil opened the year at circa $47 per barrel and continued on an upward trend ending the year at mid-seventies per barrel, below the year’s high at mid-eighties per barrel in late October 2021. Prices for Brent Crude Oil moved in a similar fashion starting the year at low fifties per barrel and ending the year at circa $78 per barrel and reaching a high of mid-eighties per barrel also in late October 2021.

Given the higher oil prices in 2021, the vessel chartering market has seen increased vessel activity and improved utilisation and day rates though there is still some way to go before the market is back to historical averages3. In addition, not all vessel segments in the offshore space has seen the same level of progress towards a more balanced market. The larger higher capacity Anchor Handling Tugs (“AHTS”) are expected to benefit from the demand from the floating offshore wind developments especially in China in addition to the usual rig activity and FPSO projects. Offshore E&P programs in Asian countries (e.g. Malaysia, Australia and India) are also starting to resume and are looking for large capacity vessels. However despite the increase in demand, the market is still persistently oversupplied with almost twice as many units in total as the market requires as at 31 December 2021. If, as expected, the vessels which are currently cold stacked are scrapped rather than activated for the market, the supply- demand gap should hopefully close.


Impact Of Covid-19

Prioritising the health and safety of our employees is critical to us especially during this Covid-19 pandemic. We have continued to maintain Safe Management Measures (“SMM”) within our office and our SMM Plan is regularly updated as and when there are changes in the requirements. Throughout the year, we have received positive feedback on our implementation of our SMM Plan from the various inspectors from regulatory agencies.

When the vaccination programme was launched in Singapore in early 2021, and priority was given to employees in the marine & offshore sector via the Maritime and Port Authority of Singapore, we strongly encouraged our employees to sign up for the vaccinations and supported them during the vaccination recovery process. During the course of the year, we abided by the various cycles of relaxation and restrictions in relation to employees working in the office and implemented a two-team rotation strategy to reduce the probability of spread in the office.

When employees or their family members were inadvertently infected by Covid-19, we supported them by allowing flexibility to work from home to safeguard the health and safety of our employees.

A number of our vessel facing employees who were required to enter shipyards were required to undergo routine weekly PCR tests however since Q4 2021, the Fast and Easy Testing regime was implemented and the weekly PCR tests were replaced by twice weekly ART testing. Since then, all regular testing is no longer required. We also implemented weekly testing for our office-based employees and received ART kits from the Singapore government to help subsidise the cost of testing.

Onboard our vessels, our crew are regularly reminded of the various Covid-19 good practices and are provided with medical grade personal protection equipment and observe safe distancing measures especially in relation to third parties boarding the vessel. Due to Covid-19 related restrictions in various countries, both in relation to entering a country and subsequently in relation to going offshore, crew changes remain a challenge as quarantine timelines have to be accounted for as well as frequent flight changes and cancellations. With proper timely planning, we have managed to minimise the impact on crew changes.

We have continued to take counter measures to broaden our supplier base to source for equipment and provisions within Singapore or locally where our vessels are based. These counter measures, together with forward planning, are critical as supply chains (costs and timelines) have been impacted by Covid-19 suspensions in ports and an increase in shipping demand.


Financial Performance Review

In FY2021, the Group incurred a net loss of US$4.95 million as compared to a net loss of US$19.43 million in FY2020. The smaller net losses in FY2021 were attributed to lower impairment losses and the reversal of expected credit losses recorded in prior years. Group revenue saw a decrease of 18% from US$18.92 million in FY2020 to US$15.52 million in FY2021. This decrease was due to a lower utilisation rate from 61% for FY2020 to 59% for FY2021 from CHO-owned vessels and lower revenue generated from third-party chartered vessels as a result of the prolonged pandemic.

With reduced manpower cost and lower legal fees, the Group recorded a 25.7% decrease in administrative expenses to US$2.97 million for FY2021 compared to US$4.00 million for FY2020.

The Group’s shareholders’ equity stands at US$51.87 million as at 31 December 2021, a decrease from US$56.81 million as at 31 December 2020 after accounting for the loss of US$4.95 million incurred in FY2021. Cash and cash equivalents increased from US$3.19 million as at 31 December 2020 to US$6.93 million as at 31 December 2021 arising from the proceeds from the sale of vessels.



Oil inventories in 2021 fell as global consumption outplaced global production however a reversal is expected in 2022 and 2023 as pent-up demand from 2020 wanes and global growth slows. Economic growth will continue to be the main driver of consumption growth albeit at a slower pace but with the potential to surpass the pre-pandemic 2019 level in 20234. Although air travel is likely to increase through 2022 into 2023, it is expected to remain below pre-pandemic levels. As such, global inventories are expected to increase slightly over the next two years, thus putting pressure on oil prices. The impact of Omicron is yet to be fully felt as the impact on economic activity and oil consumption is still continuing although some countries, after having tightened restrictions for about a month or so, are already relaxing the additional restrictions and potentially even reverting to pre-Covid days. Easing production cuts from OPEC+ countries and the impact of higher 2021 oil prices on U.S. tight oil production is expected to contribute to increase global oil supply.

There continues to be many uncertainties on the global stage which could derail the expectations for 2022, not least of which would be the Russia-Ukraine tensions. Oil prices have risen sharply in the first few months of 2022. Developments in the fight against Covid-19 could also impact economic growth and oil demand as Covid-19 restrictions wax and wane in response to potential new variants and the use of antiviral medication.

To stay ahead in these turbulent times, we have continued to optimise our fleet, maintaining the larger AHTS, and also increased our focus on securing and delivering third party ship management agreements. We have widened our customer base to include vessel owners of various vessel types and sizes so as to be able to deliver to our charterers a broader range of vessels to meet their various requirements.

We remain agile and quick to respond by building on our strengths, managing operations in a cash effective way and focusing on delivering a high-quality reliable service. We are confident about the future and are ready to meet the challenges of 2022.



Sustainability is taking even more of a centrestage with the conclusion of COP26 in November 2021. Our Board, together with our Risk Management Committee, drives CHO’s sustainability strategy and ensures that the Group adopts best business practices with a view to the environmental, social and governance impacts. In line with the increased focus on sustainability, as part of our preparation for our Sustainability Report for FY2022, we will be collating more environmental data in relation to our operations and identifying and implementing ways to reduce our carbon footprint

Our PRIME core values (Passion, Respect, Integrity and Honesty, Monetary Discipline and Excellence) together with our “Do No Harm” mindset form the backbone of the CHO way and are integrated into our Group policies and procedures. The CHO way ensures that we do no harm to ourselves and to those involved and are affected by our operations, to the environment in which we operate and to our relationships with clients, subcontrators, customers, shareholders and other stakeholders.

As a service company, we are cognizant of the fact that our people are our most important assets and therefore we place strong emphasis on fair employment, training and development and health and safety. We continue to hire experienced diverse people to strengthen our operations and are heartened by the strong team spirit shown by our employees as they band together to support each other through the pandemic even as they work from home. As a company operating globally, we ensure good corporate governance and business ethics and transparency to maintain the trust and support of oil majors and other charterers and develop long term relationships for a sustainable business. We continue to work with government agencies in the fight against Covid-19 in the hope that the new normal brings more travel, more social interaction and a more inclusive society.



On behalf of the Board, I am deeply appreciative  of  our  management and employees for their tenacity and dedication to the Group and our clients to deliver a high level of quality service despite the challenges of 2021. I would also like to thank our customers, shareholders, suppliers, stakeholders and investors for standing unwaveringly by us and supporting us as we navigate through the ever-changing circumstances. Last but not least, I am grateful to my fellow Board members for their wise counsel, guidance and insight in overseeing the Group and I look forward to a better year ahead.