Maintain Outperform upgrade target price to S$14.00 (from S$13.50). Keppel has bagged two jack-up rig contracts worth US$393m, lifting its YTD orders to about S$5.5bn and order book to S$8bn. The order comes from repeat customer, Qatar Gulf Drilling Company, with delivery scheduled for 3Q13 and 2014, with no option  attached. In view of its impressive order momentum, we upgrade our 2011 order target to S$8.5bn (from S$7.5bn), backed by 13 unexercised options (US$3bn), and other enquiries. We note that payment terms for recent contracts have improved from 20:80 bullet payments to multiple milestones across construction periods, a vote of confidence in the financing conditions of the industry. Following our order-win upgrade, we lift our earnings estimates by 2-10% for FY11-13 and target price to S$14.00, still based on sum-of-the-parts valuation. We believe order momentum should continue to provide strong support for the share price.

Gulf Drilling, a repeat customer of Keppel FELS, has firmed up orders for 2 jackups, worth a total of US$393m, in line with expectations. Delivery for the jackups is scheduled in 3Q2013 and 3Q2014 respectively. These orders bring Keppel Corp’s FY11 YTD order wins to c. S$5.4bn, vs. our full year assumption of S$9bn. Further potential near term catalyst would be from award of orders for 4 jackups from Standard Drilling, worth c.US$768m in total. Maintain Buy, TP: S$13.55.

Keppel lands jack-up pair

Singapore-based offshore builder Keppel Fels has secured orders worth a total of $393 million for two high-specification jack-up newbuilds from Gulf Drilling International, confirming an earlier report by Upstream.

Asian yards are currently enjoying a surge in rig-building work as newbuild demand increases on higher exploration activity levels . The latest contracts come on the heels of a jack-up order from Gulf Drilling shareholder Japan Drilling won by Keppel in March. The two KFELS B Class Bigfoot jack-up newbuilds for Gulf Drilling, for which Keppel built two similar units six years ago, are scheduled for delivery in the third quarters of 2013 and 2014. The rigs are reportedly lined up for existing drilling commitments off Qatar where Doha-based Gulf Drilling is looking to boost its drilling market share. The newbuilds will increase the contractor’s jack-up fleet to seven units. Each rig will have a full 15,000-psi blowout preventor system, 75-feet cantilever outreach and be able to accommodate 150 people.

Source: Upstreamonline.com, 11:21 GMT 11. May 2011   |  last updated: 11:35 GMT 11. May 2011

Keppel seeks force majeure

Delays arising from the earthquake and tsunami that hit Japan in March will keep Singapore-based Keppel Fels from meeting construction contracts it has with Asia Offshore Drilling (AOD), the latter has announced.

AOD, a subsidiary of Mermaid Maritime, awarded the $360 million contract for the construction of rig Hull-B320 and rig Hull-B321, and an option for two more, to Keppel Fels in December last year.

In an announcement, AOD said Keppel Fels had told it that expected delays in steel material arriving from Japan was likely to delay the delivery of rig Hull B321 by six weeks, pushing its scheduled delivery date back to 15 April 2013.

Keppel had worked to minimise the delays, AOD said, with a re-scheduling of construction plans meaning that the delivery date for rig Hull-B320 was still on track for 1 December 2012, though these were subject to changes.

Keppel aims to invoke the contract’s force majeure provisions, with AOD saying it would evaluate whether that course of action was justifiable. The company also said it would ensure Keppel took all necessary steps to avoid the delay.

05:28 GMT 10. May 2011   |  last updated: 05:30 GMT 10. May 2011

Commodities pull back, what’s next?

 

In View: Commodities pull back, what’s next…?

The recent commodities pullback suggests to some observers the bursting of a “Bubble”, but many investment pros I spoke to believe it is a temporary pullback.

A weakening USD and strength in Global demand should underpin commodities’ strength, while players looking for diversification in their portfolios also will continue to require commodities as correlations break down, they pros say.

What has happened is a massive commodities slide signaled by a huge-run up in Silver prices. The white metal rose 81% in a 3 month period before putting in a Top on April 29. Since then, it has declined 25%+ as exchanges have raised margins, AKA the money required to buy a contract on speculation.

The rest of the commodities sector has fallen due to several factors, including worries about Global growth and a rise in Crude Oil stocks.

On Thursday, signs of competitive currency devaluation between the US and Europe drove the “Greenback” North against the Euro, which pushed the price of US Dollar denominated commodities South.

Nevertheless, from my POV, the longer-term case for commodities remained intact.

Traders cited the margin requirements as one of 3 factors contributing to Silver’s sell down, the others being a 50$ price that may not be supported by fundamentals plus dissipating worries over inflation.

Savvy observers and players, believe that not only will Silver demand continue but it also will be strengthened by a Strong trade in Copper and Aluminumas as Global construction demand grows, They also believe grains will continue to rise, evidenced by food demand that has boosted Global prices to their 2nd highest on record, according to a United Nations report.

The US Fed’s move to buy various debt from financial institutions has given the stock market a huge boost that could run out when the central bank concludes its US$600B + Treasury-buying program next month. So we have to wait to see how much pain comes back into the market if any.

Back to Silver: 4 hikes in margin requirements in as many days are being cited for the steep fall in Silver’s price. But over a longer time line, experienced traders say the opposite will likely be the case..

After the selling period abates, the rise in margins effectively will have cleared out the smaller players, leaving the trade the domain of the houses with deep pockets who could step in and drive prices higher. Plus traders doubt whether enacting a similar margin squeeze in Crude Oil would help drive down prices too.

Let’s not forget the correlation issue and how it has broken down among various asset classes.

Much of the US Fed’s intervention in the markets, caused most investments to move in the same direction at the same time. But as expectations change and investors have tried to get ahead of the US Fed’s plans, commodities, metals in particular, have broken away and again can serve as an effective portfolio hedge.

Gold and Silver exhibit the most important characteristics that investors prize-low correlation to financial assets like stocks, the pattern was less than 20% correlation in both cases last month, and persistently low measurements in Y 2011. Even with the well-publicized increase in Exchange Traded Fund ownership of these assets, they still do not move the prices in step with stocks. So, in the short-term commodities are likely to remain volatile, and once the current price unwind finishes Silver should have no trouble returning to its former levels after it bottoms in the 30/32 Zone. Savvy big players probably will be cautious until then, and not selling but also not rushing to add positions either.

Ensco newbuild bags Total gig

French giant Total has contracted a new Ensco ultra-deepwater semi-submersible for a project off Brunei, the offshore driller said.

Under the contract, the newbuild Ensco 8504 will drill three exploration wells within 180 days at a base dayrate of $423,500. Total will have four options to extend the terms of the contract. The first two options will allow the French company to complete up to three additional wells at the same dayrate. The third and fourth options will allow for up to six additional wells at a higher dayrate, Ensco said.

Singapore’s Keppel Fels is the builder of Ensco’s 8500 series of ultra-deepwater semisubs, a seven-rig fleet. Delivery of the Ensco 8504 is set for the end of July this year, Ensco said. The mobilization fee from Singapore to Brunei will be $3.5 million. “Brunei is an emerging deep-water basin and we look forward to entering this market with one of our deep-water rigs for the first time,” Ensco Chief Executive Dan Rabun said. Two more rigs in Ensco’s 8500 series are still under construction with deliveries scheduled for next year.

Source: Upstreamonline.com 19:03 GMT 21. April 2011   |  last updated: 19:03 GMT 21. April 2011

Oil to Rally on Nigeria Unrest

The riots started as results showed President Goodluck Jonathan won Saturday’s elections. He was declared the winner on Monday night over his northern rival, ex-military ruler Muhammadu Buhari.

Nigeria is roughly split in half between a mainly Muslim north and a predominantly Christian south. Jonathan is a Christian from the southern oil-producing Niger Delta region.

Post-election unrest in Nigeria has left more than 200 people dead and hundreds of arrests have been made, a Nigerian civil rights group said on Wednesday.

Oil is climbing above $110 per barrel as the dollar weakened and the government reported an unexpected drop in U.S. crude supplies.

Benchmark West Texas Intermediate oil for June delivery gained $1.89 at $110.16 per barrel on the New York Mercantile Exchange. Meanwhile, retail gasoline prices increased slightly to $3.84 per gallon.

Oil rose early in the day as the dollar dropped relative to other major currencies and made crude cheaper for investors holding foreign currency.

The Energy Information Administration later reported that U.S. oil supplies shrank by 2.3 million barrels last week. Analysts expected an increase of 1.6 million barrels. The EIA report also said that gasoline demand is falling, adding to industry surveys that suggest American drivers are buying less gasoline as prices rise.

The Keppel Group leads the Singapore Consortium in the 50/50 joint venture with the Chinese Consortium led by Tianjin TEDA Investment Holding Co, Ltd, to develop the Tianjin Eco-City. In addition, Keppel is also developing its own 36.6-ha site in the Eco-– Singapore’s Senior Minister, Mr Goh Chok Tong today graced the groundbreaking ceremony of Keppel’s Seasons City in the Sino-Singapore Tianjin Eco-City (Tianjin Eco-City) and witnessed the signing of a joint venture agreement between Keppel Integrated Engineering Limited (KIE) and Tianjin Eco-City Investment and Development Co.,Ltd (TECID), to pursue the building, owning and operation of a water reclamation plant in the Eco-City.City’s Start-Up Area (SUA). Keppel Corporation and Keppel Land hold interests of 45% and 55% respectively in this site.

SBM pens Keppel DSCV order

SBM Offshore has returned to Singaporean shipyard Keppel with an order for a single diving support and construction vessel (DSCV).

The Monaco-headquartered shipowner has remained mum on the price of the unit while it is unknown if any optional contracts were penciled in at Keppel Singmarine. SBM is aiming to boost its presence in the turnkey services market with what will be the third such vessel in its fleet. The multi-purpose DSCV will have a double deck and a 250 ton knuckle boom crane. It will be able to operate in waters up to 300 metres deep and be able to carry out offshore construction and installation work up to 1,500 metres. Delivery is slated for the second quarter of 2013 when it will be fully owned and operated by SBM.

 

SBM’s head of investor relations Sebastiaan de Ronde Bresser would not reveal the contract price when contacted by Upstream on Tuesday but indicated it was in the midway range of $100 million and $200 million. He was unaware if any options had been left at the yard.

 

Some of the additional features have “made it a bit more expensive” than a conventional DSCV, de Ronde Bresser said, adding: “We believe with these additional items – like the double deck, the crane – [the price] is absolutely worth it for a construction support vessel”.

 

The vessel is being ordered primarily for use on SBM’s own systems but it could also be used for third-party work. The newbuild is something of a compromise between SBM’s two existing comparable vessels, the diving support vessel Dynamic Installer and the multi-functional support vessel Norman Installer.

Source: Upstreamonline.com 07:52 GMT 12. April 2011   |  last updated: 07:52 GMT 12. April 2011

Gain to Korean yard- Loss to S'pore.

Seadrill in new $600m drillship deal

Norwegian ship owner Seadrill said today it is continuing its rig shopping spree with an order to build a new $600 million ultra deep-water dual derrick drillship at the Samsung yard in South Korea.

 

The price tag includes project management, drilling and handling tools, spares, capitalised interest and operations preparations, said the rig owner. Delivery of the unit is scheduled for the third quarter of 2013. Last week, Seadrill was reported to be on the verge of confirming a separate order to build an additional two new tender assist rigs at Cosco Shipyard in China, following its earlier order for two such units at over $130 million.

The new drillship unit will be similar to the two drillships ordered from Samsung in November, said Seadrill. The dynamically positioned unit will be capable of operations in water depths up to 12,000 feet, and will have a hook load capability of 1250 tonnes. This rig will be outfitted with a seven-ram configuration blow out preventer stack, to target operations in areas such as the Gulf of Mexico, Brazil and West Africa. Seadrill said it has simultaneously secured an extension of the maturity date for a further option agreement to build a seventh drillship to be delivered from Samsung since 2008. The company said it has no specific plan to exercise this option, but might consider it if “the strong underlying trend currently seen in the deep-water market continues”. Chief executive Alf Thorkildsen said: " The decision to add another ultra deep-water newbuild to our modern fleet is based on the recent improvement in market outlook for ultra deep-water units, with significantly more tender activities. “The new drillship has an attractive delivery window, a favorable construction price and payment schedule and an equipment specification list that will meet our customers' future needs.”

Source: Upstreamonline.com 11:44 GMT 11. April 2011   |  last updated: 14:34 GMT 11. April 2011