Sembcorp Marine posts loss. Doesn’t expect quick pick-up in rig orders

Singapore’s rig builder Sembcorp Marine has warned it might take some time for offshore rig orders to recover, despite the increase in the global exploration and production (E&P) capex, boosted by higher oil prices.

The company has this week posted a net loss of $33.8 million in the fourth quarter of 2017, compared to a profit of 34,3 million in the corresponding quarter of 2016,

Its fourth quarter turnover which fell to $655 million, a 21% drop compared with $830 million for the same period in 2016. The lower revenue was due to lower rig building revenue, fewer floater and offshore platforms projects.

Worth noting, the rig builder’s 4Q result was boosted by an up front payment of $500 million made by Borr Drilling which in October ordered nine jack-ups for 1.3 billion.

Rig oversupply

Wong Weng Sun, President & CEO, Sembcorp Marine said: “Global exploration and production (E&P) capex spending continues to show signs of improvement, underpinned by the upward trend in oil prices. Oil majors continue to adjust to lower oil prices to be better positioned to proceed with offshore E&P investment decisions.

Offshore rigs utilization and day rates have generally stabilized. Recent mergers and acquisitions amongst drilling companies, together with increasing secondary rigs sales are indicative of an initial recovery in the drilling segment. However, a broadbased rig orders recovery may take some time as the oversupply in most drilling segments have yet to re-balance.”

While the orders for offshore exploration rigs have been scarce, Sembcorp Marine sees opportunity in the production part of the oil and gas business.

Weng Sun said:” We continue to make steady progress in the development of projects for our proprietary Gravifloat technologies for a range of near-shore gas infrastructure solutions, including liquefaction, regasification, storage and power generation. We are hopeful that our advanced discussions with several potential customers will translate to initial orders.”

He said that demand for repairs and upgrades, especially for LNG carriers and cruise ships remains strong. Regulations on ballast water treatment requirements coming into force in the foreseeable future will further underpin the potential of this segment.

“However, the immediate outlook remains challenging. It will take some time for capex spending to translate into new orders. Industry activities remain low and competition for orders remains intense. Sembcorp Marine will continue to further strengthen its balance sheet and actively pursue the conversion of enquiries into new orders,” Weng Sun said.