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Keppel says rig demand sustainable with oil above US$80
Singapore’s Keppel Corp (KPLM.SI), the world’s largest rig-builder expects demand for rigs to remain sustainable as long as oil prices remained above US$80 a barrel, the head of its offshore and marine business said on Saturday.
Keppel Offshore & Marine Chief Executive Tong Chong Heong told Reuters in an interview that he expects the company to secure orders for some semisubmersible rigs, particularly those that can be used in medium depth waters in the second half.
Tong’s remarks came after Keppel’s shares, along with rival Sembcorp Marine (SCMN.SI), have suffered in a global stock market sell-off this month, also due to concerns that a decline in oil prices would affect the outlook of the sector.
“It’s really difficult to say because I will not be able to be so definitively sure that it won’t. But as long as the price of oil is above a figure of 80, I guess the viability of new conversions, new building, should be justifiable to go ahead.”
“What we hope for is not a sudden dip, where the price of oil goes right down to 40 or 50 dollars (a barrel), then I think that would be a great shock,” Tong said on the sidelines of a company event at one of its busy shipyards in western Singapore.
Keppel and Sembcorp shares fell 17 and 19% respectively in the past fortnight, steeper than the 10% fall in the broader Singapore index < .FTSTI> as a 10% drop in oil price spooked investors.
Keppel, around 20% owned by Singapore state investor Temasek Holdings, is enjoying a record year in terms of new orders throughout 2011 in which the company signed a total of $7.2 billion in new contracts, taking its total orderbooks to $9.1 billion with deliveries into 2014.
Most of the orders that the company secured this year are for jackup rigs, which customers will use in shallow waters, while the bulk of the deepwater projects have been awarded to Korean shipyards in drillship contracts.
“We expect some mid-range semi-submersibles because that has been one area that has not really been actively pursued. With all the drillships they are all for deep water, but all of a sudden everybody is relooking at the medium capabilities,” Tong said.
The Singaporean yards are competing with Korean rivals such as Samsung Heavy (010140.KS), Daewoo Shipbuilding and Marine Engineering (042660.KS) and Hyundai Heavy (009540.KS), which have a strong footprint in the drillship segment.
Keppel and Sembcorp have strong track records in constructing platform style jackup and semisubmersible rigs.
Tong declined to comment how much more in orders the company would sign this year but investment bank JPMorgan said Keppel had options for nearly US$3 billion ($3.6 billion) worth of rigs that had not yet been exercised, which could potentially take its total new orders for 2011 to cross US$10 billion.
“I think (what is) more important is the execution and delivery rather than just simply chasing (orders). Build whatever we take in today,” Tong said.
Keppel may win higher prices for offshore units on orders
Keppel Corp., the world’s biggest oil-rig maker, said it may win higher prices because of rising raw-material costs and increasing investment in exploration that has helped it post record orders this year.
Prices for offshore units are “moving up a little bit,” Chief Executive Officer Choo Chiau Beng said in an interview in Singapore yesterday, without elaboration. “When costs go up, prices have to go up otherwise the service provider cannot justify their existence.”
The Singapore-based rig-maker has won about $7.8 billion of orders this year, surpassing the company’s previous record, set in 2007, as customers including Transocean drill in new areas to offset depleted reserves. About US$205 billion ($246 billion) may be spent on deepwater projects in 2011 to 2015, 79% more than the previous five years, according to Douglas- Westwood Ltd., a U.K.-based energy consultant.
“Looking for new reservoirs will continue even though they will be more difficult to find,” Choo said. “There will be demand” for offshore units, he said.
Royal Dutch Shell Plc, Europe’s largest oil company, plans to spend $100 billion in four years through 2014 to maintain output growth, it reiterated in March.
OIL DEMAND
Global oil demand will increase by 1.2 million barrels a day, or 1.4%, this year to 89.5 million, according to forecasts by the Paris-based International Energy Agency. Next year, it will grow by another 1.6 million barrels to 91.1 million a day, according to the group.
The demand has helped push crude prices up by more than 16% in the past year to US$87.88 a barrel yesterday.
“Oil prices will remain fairly high for a quite long period of time,” Choo said. “Energy demands are going up very rapidly.”
Keppel gained as much as 1.9% to $9.63, the highest intraday price since Aug. 10, and traded at $9.59 as of 12:32 p.m. in Singapore. The stock has fallen 6.8% this year, compared with a 9.6% decline for the Straits Times Index.
Keppel won a US$195 million order this month for a jackup rig from a Transocean unit, following on from a US$380 million contract for two similar rigs in February. It also announced an order to convert a very large crude carrier into a floating production, storage and offloading facility for Single Buoy Moorings Inc.
Sembcorp Marine won an order for two jackup rigs from Noble for US$444 million on Aug. 2. By comparison, Sembcorp received a contract for the same type of equipment from Noble for US$400 million in December.
CHINA LOGICTICS
Keppel operates shipyards in Singapore as well as in the U.S., Qatar, Brazil and Indonesia. It is investing in a second yard in Brazil to tap growing demand there.
The company is also looking at building its logistics business in China, including possible projects in Jilin and Nantong, Choo said.
The price of hot-rolled steel in China was US$633 per metric ton on Aug. 8 compared with US$527 per metric ton on Aug. 9, 2010, according to Metal Bulletin data on the Bloomberg terminal.
Keppel, which is also involved in infrastructure projects, plans to focus on developing more power plants and waste-to- energy plants as demand for alternative sources of energy is expected to increase after Japan’s nuclear accident, Choo said.
Demand for office space in Singapore is likely to help push rentals higher, Choo said, without elaboration. Keppel is currently building the Marina Bay Financial Centre and Ocean Financial Centre in the city area.
ABB secures equipment supply orders
Swiss engineering company ABB secured orders worth $200 million to supply equipment to 24 vessels to be built in Singapore and South Korea.
Andrew Hobbs 15 August 2011 09:06 GMT
The orders, for equipment for 23 new jack-up and DP drilling vessels and one Floating Production Storage and Offloading vessel, were all made during the second quarter.
Made by companies including Samsung Heavy Industries, Hyundai Heavy Industries, Keppel Fels and Jurong Shipyard, the equipment will go to vessels including semi-submersible drilling rigs, drill ships, mobile oil and gas platforms as well as floating production, storage and offloading vessels.
ABB will supply a range of services to the vessels, including complete electrical systems and related equipment such as generators, distribution switchboards, and transformers, as well as drives and motors to power the ships’ thrusters and drilling systems.
17 cents dividend,not bad at all
aiyo, typo, it should be " ...hoping it will NOT be dragged down by disappointing KL's result..."
susan66 ( Date: 21-Jul-2011 11:46) Posted:
Me too at $11.05 forget to cut loss. But today gap up again, lucky. So far so good. 
James5007 ( Date: 21-Jul-2011 10:29) Posted:
results out today, hoping for miracle and hoping it will be dragged down by disappointing kepland's result...
I am still stuck with some at > $11!!! 
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Me too at $11.05 forget to cut loss. But today gap up again, lucky. So far so good.
James5007 ( Date: 21-Jul-2011 10:29) Posted:
results out today, hoping for miracle and hoping it will be dragged down by disappointing kepland's result...
I am still stuck with some at > $11!!!
susan66 ( Date: 20-Jul-2011 15:56) Posted:
| Waited long long, finally come back. Anymore upside? Next breakout should be $11.00 again. |
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results out today, hoping for miracle and hoping it will be dragged down by disappointing kepland's result...
I am still stuck with some at > $11!!!
susan66 ( Date: 20-Jul-2011 15:56) Posted:
| Waited long long, finally come back. Anymore upside? Next breakout should be $11.00 again. |
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Waited long long, finally come back. Anymore upside? Next breakout should be $11.00 again.
Rig Builders:
Daiwa maintains Positive rating on sector with Outperform ratings on KepCorp (TP $13.58), SembMarine (TP $6.05) and Sembcorp Industries (TP $5.80)
House favors Keppel over SembMarine, given belief that the former’s ytd outperformance in order wins has improved its 2011-13 earnings outlook.
At current valuations, Keppel trades at undemanding 12.3xFY11E P/E and offers 27% upside potential to TP of $13.58.
In house view, sustainability of current rig-order momentum will depend on semi-sub orders.
Believe two key factors that will drive the return of new semi-sub orders are
1) utilisation rates, and
2) day rates. Orders for these rigs may come as soon as 4Q11, where house tip a recovery in utilisation rates and day rates that could in turn drive new order demand.
So Daiwa(korea) said they favour keppel corp more than sembcorp and marine... ...
I believe ubs/ and rbs will issue a analysis report that may be likewise.. ...
The chart below indicates price till wednesday july 13 2011 :))
Forgot to include in the previous post... ....
SEMB MAR CHART - Trading at the lower end of the range now.... Currently at 5.20....
Can lock in some positions from 5.16 to 5.20 and take profit above the 5.38 level.... Stop loss below 5.10.
KEP CORP CHART - Good to bargain hunt below the 10.60 mark....... Take profit above the 11.00 level. Stop loss at the 10.35 level
Any strength in the market will see blue chips like Kep Corp rebounding fast
Chart shows price till thursday july 14 2011
Kepcorp:
IIFL reiterate Buy with TP $14.15. Note that group orders intake fairly steady over 1H11 and also received orders for 2 semi-sub units and 7 support vessels for its Brazilian yard.
Believe that the stock is severely underpriced at 13.5x P/E forward FY11.
New milestones for Sembcorp and Keppel
04:47 AM Jun 27, 2011
SINGAPORE - The Republic's two main oil rig builders Sembcorp Marine and Keppel FELS have further made their mark in the industry with significant milestones announced over the weekend.
Sembcorp Marine said one of the two harsh environment jack-up rigs that its unit, Jurong Shipyard, has built is poised to be the nation's largest new build.
The rig, West Elara, was built for North Altantic Drilling, a subsidiary of Seadrill Ltd, a company listed on both the New York and Oslo stock exchanges. The rig is among the biggest and most advanced jack-ups in the world, said Sembcorp Marine.
It added that the rig has already secured a five-year contract from energy company Statoil for deployment at the Norwegian Continental Shelf, an area which requires strict compliance to high standards of health, safety and environment.
Separately, Keppel FELS, a unit of conglomerate Keppel Corp, said that it is on track to deliver its third KFELS N-Class jack-up rig to international drilling firm Rowan Companies on time and within budget.
The rig, Rowan Norway, combines state-of-the-art design with the dual capabilities of performing drilling and production activities efficiently and safely, Keppel said on Saturday.
Keppel FELS managing director Wong Kok Seng said: " Rowan Norway is the third KFELS N-Class rig delivered to Rowan in eight months. These are high specification and complex rigs built to our proprietary design."
KepCorp: Annouced that it has secured a 3rd jackup order from repeat customer Asia Offshore Drilling at US$184m. Order is first of two options to build a KFELS B Class jackup rig, and schedued for delivery in 3Q13. With deal, Keppel’s O& M div has secured about US$5.8b new orders for the yr, with Oil Co’s still showing a preference for high specification jackups, which has been a boost for Keppel’s jackup business…..
We note that majority of street remains bullish on grp’s prospects, with a mean TP of $13.04. At current price, valuations appear relatively compelling, with grp trading at 11.1x FY12E P/E vs historical average of 14x.
KEP CORP CHART - Has broke above the 11.06 resistance convincingly.... Next resistance at 11.50..... Possible to enter from 11.06 to 11.14 level to trade the rebound...
http://singaporetradinginsights.blogspot.com
JOKE OF THE DAY .... ....
KEPPEL CORP VS SEMBCORP MARINE
VS 
Keppel Corp: Announced that it has secured shipbuilding contracts worth $140m in Brazil. The first contract entails building 6 tugboats for SMIT Rebras, while 2nd contract involves constructing a PSV for Guanabara Navegacao. This is the first PSV constructed under business model to build OSVs in anticipation of demand in Brazil, and such vessels will be offered for charter or sale upon completion…..
Contract places Kep’s Orderbook at an estimated whooping US$7.4b, with order wins YTD at US$5.76b, underpinning earnings till 2014. While above contracts are not expected to have any material impact on NTA and EPS for grp in FY11, we note that it could mark a start of future avenue, for grp to compete or gain market share in the Brazilian OSV mkts. Other notable SGX listed yards competing in the same mkt would include STX OSV……
We note that majority of street remains bullish on grp’s prospects, with a mean TP of $13.04. At current price, valuations appear relatively compelling, with grp trading at 11.1x FY12E P/E vs historical average of 14x.
Keppel O& M secures contracts worth S$140m in Brazil
SINGAPORE : Keppel Offshore & Marine said on Wednesday that its new Brazilian shipbuilding facility has secured two new contracts worth about S$140 million from fleet operators in Brazil.
The first contract entails building a series of six 45-tonne Azimuth Stern Drive harbour tugboats for Brazilian firm REBRAS.
The first tugboat will be delivered in the fourth quarter of 2012, followed by the remaining five at three-month intervals.
In the second contract, the yard will construct a large-sized 4,500 dead weight tonne (dwt) platform supply vessel for Keppel O& M's Brazilian ship owning arm, GNL.
This is the first vessel constructed under the business model to build offshore support vessels in anticipation of demand in Brazil, and Keppel said such vessels will be offered for bare-boat charter or sale upon completion.
The vessel is slated for completion in 2013.
Keppel Singmarine Brasil specialises in constructing offshore support vessels such as anchor handling tug supply vessels, oil recovery support vessels and harbour or terminal tugboats.
The new facility in Brazil is also able to fabricate offshore steel structures and support major projects undertaken by Keppel's BrasFELS yard.
The contracts are not expected to have any material impact on Keppel Corp's earnings in the current financial year.
- CNA/al
