Keppel Corp (KEP SP) – Keppel gets accommodation semi contract worth US$260m
Previous day closing price: $11.10
Recommendation – BUY (maintained)
Target price – $15.30 (maintained)
Keppel Corp has been awarded a contract worth about US$260m from Floatel International to build a new generation accommodation semisubmersible for delivery in 1Q14. This new vessel will be built to the SSAU4000NG design with Dynamic Positioning (DP) 3 capability. This is Keppel’s third accommodation semisubmersible project with Floatel following the delivery of two units last year. The new vessel meets the stringent UK HSE requirements to work in the UK sector of the North Sea, as well as in the Gulf of Mexico, Brazil and Western Australia. It can accommodate 500 persons in one-man and two-man cabins.
The semisubmersible is capable of operating alongside fixed platforms, floating platforms and Floating Production Storage and Offloading Vessels, with a full complement of deck cranes and fire-fighting capabilities. Floating accommodation platforms are needed to provide additional living quarters for drilling and production personnel. Such support is required during hook-up and commissioning in the development phase, for maintenance and upgrading during the production phase, as well as for decommissioning.
While this vessel is intended for quite a specific use, it indicates continued strength in the deepwater segment. We believe orders for deepwater rigs will also start to pick up soon in view of the resurgence we have witnessed in the jack-up market and Keppel stands to benefit from the trend. We maintain our Buy recommendation on the stock with target price unchanged at $15.30.
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