Keppel Fels expects to deliver as many as 14 rigs this year
By JAMIE LEE
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THE fundamentals in the offshore and gas industry remain intact, Keppel Corp said yesterday as its unit, Keppel Fels, delivered the third of a fleet of four jack-up rigs to Maersk Drilling.
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| Mr Tong: 'Orderbook of $10.8 billion will keep us busy for next few years' |
The fourth rig is on track for delivery in the second quarter.
Keppel - which is set to announce its results tomorrow - would selectively pursue new projects in the year ahead, said Tong Chong Heong, the newly appointed chief executive officer of Keppel Offshore & Marine (Keppel O&M). Keppel Fels is wholly owned by Keppel through Keppel O&M.
'The fundamentals in the offshore oil and gas industry remain intact. There is a need for drilling and production activities to support long term demand for energy,' Mr Tong said, adding: 'Our healthy balance sheet and orderbook of $10.8 billion will keep us busy for the next few years.' Keppel Fels expects to deliver as many as 14 rigs this year.
The upbeat note comes on the back of two scuppered deals announced recently by Keppel - a US$405 million semisub contract with Scorpion Offshore and a $69 million multi-function support vessel order from Ezra Holdings' unit Lewek Shipping.
Kim Eng analyst Rohan Suppiah is bracing for significant provisions or writedowns from cancelled orders and adjusted inventory, as well as the earnings shortfall from associate Singapore Petroleum Company.
'Potential provisions muddy (the) earnings outlook,' he wrote in a research note yesterday, saying that he expects Keppel's 2008 earnings per share to stand at 66 cents versus a consensus of 67 cents. Full-year net profit would come in at $1.05 billion, 7.1 per cent lower than $1.13 billion a year ago, Mr Suppiah estimated.
He added that offshore demand was 'firmly stuck in the doldrums', noting that besides the earlier order cancellations announced, Brazilian oil producer Petrobras had recently cancelled the tender processes for its P-61 tension leg platform and P-63 production storage and offloading (FPSO) projects because the bids were deemed too high amid current market conditions. The lowest P-61 bid stood at US$1.72 billion while the lowest P-63 bid was US$1.65 billion, Kim Eng said.
'This clearly indicates that customers are no longer willing to pay through the nose, unsurprising in the current oil price environment,' he said, though there has been no confirmation if Keppel and Semb Corp Marine had bid for either project.
'The wider implication is that national oil companies are balking at the current high prices being quoted, and implying that rig builders will have to trim their margins significantly in order to secure jobs,' he said, adding that the tight credit market renders a bleak outlook for the sector.
Kim Eng does not expect any writedowns to the landbank of Keppel's property unit, Keppel Land, but said outlook is 'unexciting' for the developer - which is reporting its results today.
Mr Suppiah kept a 'hold' rating on the stock.
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