After a decade-long boom, there were zero new orders globally for jack-up rigs last year on account of the current oil downturn. Singapore's largest rig builders finding it difficult to navigate safely, reports The Straits Times.
With oil prices swooning, and rigs' daily rental rates having crashed to US$92,000 (S$132,000) from US$130,000 in 2014, there's a risk that 70 per cent of two Singaporean leaders - Keppel Corp and Sembcorp Marine (SMBMF)
's order book might get cancelled, especially if the Petrobras bribery scandal in Brazil deepens
Analysts at Macquarie caution that Singapore's offshore and marine sector is facing a structural decline, and that the current downturn is even worse than the Global Financial Crisis of 2008-2009.
The other big risk comes from the duo's Brazilian yards. Japanese shipbuilders like Mitsubishi (MBI.F)
Heavy are cutting their losses and exiting as the Petrobras saga
Keppel Corporation and Sembcorp Marine are also under threat from receiving low quality non-rig orders, which Macquarie believes dilutes returns. Payment delays will also lead to increased balance sheet pressure for both rig builders.
The Singapore investment
firm owns a little less than half of SembMarine's parent, Sembcorp Industries (U96.SI)
, and 21 per cent of Keppel, Bloomberg data
shows. It can't be feeling very chuffed about the 47 per cent slump in SembMarine over the past year, or Keppel's 26 per cent slide.