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Friday, 25 July 2014




From CMIB above:

CW8888: Good to note that Keppel;s Can-do drillship is not competing against Koreans as it is hard to compete the Koreans on Drillship.


  1. No indication of margin squeeze as originally feared by many analysts

    1. Brighter outlook for Keppel
      By Kang Wan Chern

      Shares of Keppel Corporation started the day on a high after it announced a set of positive results for 1H2014 on July 24. The news had reassured the market of its improving prospects in the quarters ahead.

      For the first six months of the year, the company saw revenues rise by 5.8% over the previous year, to $6.2 billion. Meanwhile, earnings were up by 2.1% to $864 million. To reward shareholders, Keppel will pay an interim dividend of 12 cents per share.

      Keppel’s stronger performance was driven mainly by its offshore and marine division, where it managed to keep its operating margins stable at 14.5% despite stiff competition from shipyards in China. In 1H2014, Keppel clinched orders totaling $3.2 billion in value, taking its current net order book to $14.1 billion, compared to $14.2 billion in FY2013. That order book, which consists mainly of jack-up rigs, will keep Keppel’s yards full until 4Q2016.

      Notably, the new orders include a contract to convert an existing Moss LNG carrier into a floating liquefaction (FLNG) vessel for Norwegian gas company Golar LNG. The conversion will be the world’s first and is worth some US$735 million, which has the same value as a drill ship. Keppel will take about 31 months to perform the conversion and expects to complete and deliver the vessel in 1Q2017.

      The contract also comes with options for two additional conversions, estimated to be worth some $1.8 billion, according to analysts. FLNG enables the liquefaction of natural gas – that is, the chilling of gas to –162 Celsius to its liquid form – aboard a floating vessel moored directly over an oil or gas field.

      As mentioned in the cover story of the July 21 issue of The Edge Singapore, more importantly, the Golar order opens up further opportunities for Keppel to grow in the LNG sector, which is a relatively new market for the jack-up rig builder. Already, the global FLNG industry is expected to attract more than US$65 billion of investments from now through to 2020, driven by rising costs of onshore LNG terminals. Asia-Pacific, in particular, is expected to draw a majority of investments in the FLNG sector.

      The order also comes at a time when Keppel has been taking on more a wider range of projects to complement its core jack-up rigbuilding business. The company is currently marketing a new drill ship design to deepwater customers and hopes to seal its first drill ship order soon. It is now also building three DSSTM38E semi-submersible rigs for Sete Brasil, the first of which is now 70% complete at its yard in Brazil. The second unit, now 30% complete, is scheduled to depart Singapore for Brazil in 4Q2014. In 1H2014, Brazilian projects contributed to nearly a fifth of the O&M division’s revenue.

      Nevertheless, Keppel continues to be positive on demand for its proprietary deepwater jack-up rigs, believing that the current softness in the deepwater market will not last. In fact, the company sees a sharp fall in deepwater jack-up rig deliveries after 2015 and believes that orders will soon return over the next few years. For now, it notes that enquiries for its proprietary jack-ups, particularly its B class standard jack-up, remains strong.

      Indeed, many analysts are now convinced of better times to come for Keppel. Low Pei Hwa of OCBC Research notes that Keppel’s order win year to date is already close to half of her full year new order estimate. Separately, Lee Yue Jer of OSK|DMG likes the stock for “its solid execution and long term competitive strengths.” Meanwhile, Clement Chen of Barclays believes that “Keppel’s 2Q2014 earnings will have positive implications for the share’s near-term performance.”

      The three analysts have buy calls on the stock with target prices ranging between $12.31 and $13.10, representing a maximum upside of about 20%.

  2. Uncle888 Like the response by LCH - This is Keppel Way. LOL! (Not cheapskate China yards hor)

    Kevin Chong, Deutsche: What is the potential of the PEMEX jackups being secured this year in the new Mexican yard?

    CYY: PEMEX is progressing well. We are at the stage where we are finalising our shareholders’ agreement. We will give you more updates when we come to a conclusion. I think it’s also public knowledge now that Mexico has approved the secondary law governing the reform. There is going to be some local content requirement amounting to about 25%, so having a facility there will help our prospects.

    LCH: I would like to add that when we announced the completion of FEED (Front-End Engineering and Design) study for the Golar FLNG, we also received enquiries from the market on when we are going to sign the contract. We eventually got it signed. This is the Keppel way. We want to make sure that when we sign on the dotted line and we get the deal agreed upon, it is with very thoughtful deliberations and making sure that the risks are all appropriately accounted for. We want to make sure that we get paid for taking any risk that we have to take.

    1. CW8888: Some financing from Japan's development bank.

      [MEXICO CITY] Japanese Prime Minister Shinzo Abe struck a series of energy deals Friday with Mexican President Enrique Pena Nieto at the start of a five-country Latin American tour.

      Abe, whose visit to the region comes on the heels of Chinese President Xi Jinping's, met Pena Nieto at the presidential palace for talks that ended with the signing of a raft of deals.

      The new agreements included one between Mexican state oil firm Pemex and Japan's development bank and another between Pemex and the Japan Oil, Gas and Metals National Corporation.

      With Japan on the lookout for new power sources after the Fukushima disaster forced the shutdown of its nuclear reactors, energy is high on the prime minister's agenda for the trip.


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