Previous day closing price: $5.40
Recommendation – BUY (maintained)
Target price – $6.66 (maintained)
Sembcorp Marine (SMM) has confirmed another US$444m worth of contracts, with Noble Corporation exercising its option for two additional jackups that were agreed upon last December. In addition, Noble has secured two more options to replace this, under the same terms and conditions.
Scheduled for delivery in 3Q and 4Q of 2014 respectively, the turnkey units will be built based on the same design and specifications as four earlier Friede & Goldman JU3000N units ordered by Noble. The JU3000N has an enlarged hull for more operational benefits including ergonomic and efficient accommodation layout, increased deck space and strategic placement of equipment for enhanced efficiency and safety during operations. The rigs will be capable of operating in water depths of up to 400 feet and drilling depths of 30,000 feet.
While new order flows have been generally quiet over the past two months, this latest contract affirms the positive long-term outlook for the rigbuilders and we continue to expect a similar pickup in the deepwater segment as well. We maintain our BUY recommendation on SMM and target price of $6.66.
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