Singapore rig builder Sembcorp Marine may reap lower profits as more customers request to defer rig deliveries, a securities house has predicted.
Demand for rigs and drillships has shrunk as oil prices continue to trend downwards and oil companies cut back on exploration and production activities.
Mexican offshore oilfield provider Oro Negro, which ordered three rigs from Sembcorp Marine in 2013, is now seeking to defer the deliveries.
The three rigs — Vastus, Supremus, and Animus — were due to be delivered in June, August, and October of this year.
All the rigs have been launched or are near completion. Temasek owns 22.49% of Oro Negro, with the remainder held by Ares Management (22.54%) and Mexican-owned private equity firm Axis Capital Management (49.5%).
Each rig was ordered for about USD209 million but data from IHS Petrodata shows that rig values have dropped to about USD140 million.
“Payment terms were 20% deposit and 80% on delivery, so USD500 million remains outstanding,” said UOB Kay Hian Securities analysts Nancy Wei and Foo Zhiwei. “Netting the 20% deposit and assuming an operating margin of 15%, we estimate USD145 million as the uncovered cash cost per rig. If Oro Negro were to cancel the rigs, we believe [Sembcorp Marine] will be able to sell the rigs and recoup its costs when the market improves.”
However, Sembcorp Marine may need to reverse USD68 million of profits recognised, assuming a 15% operating margin and 100% completion.
UOB Kay Hian has predicted net profits of SGD445 million (USD318 million), SGD450 million, and SGD460 million for Sembcorp Marine for 2015, 2016, and 2017.
Besides Oro Negro, Singapore’s Marco Polo Marine and Malaysia’s Perisai Petroleum have asked Sembcorp Marine to defer delivery of the rigs Iron V and Perisai Pacific 102.