Keppel to Exit Offshore Rig Building Business
Singapore's Keppel Offshore & Marine, a company famous for its offshore rig construction, is set to undergo a major transformation, look for opportunities as a developer and integrator of offshore energy and infrastructure assets, and exit the offshore rig building business.
The company will be restructured into three parts, separating construction and ownership of legacy drilling rig assets from its core operations, "which will be slimmer, asset-light and people-light."
"Keppel Corporation announced today that amidst the global energy transition and major disruptions facing the oil industry, the Company will carry out a comprehensive transformation of its wholly-owned subsidiary, Keppel Offshore & Marine (Keppel O&M), to better align it to Keppel’s Vision 2030. This is part of Keppel’s strategic review of its offshore and marine (O&M) business, with the goal of creating a slimmer, and more competitive Keppel O&M that is well-placed to support the energy transition, even as Keppel continues to explore inorganic options," Keppel said.
"Reflecting Keppel’s commitment to sustainability and combating climate change, Keppel O&M will exit the offshore rig building business, after completing the existing rigs under construction. In line with the Group’s more disciplined approach towards capital allocation, Keppel O&M will not undertake any new project requiring large upfront capex or without milestone payments. It will also progressively exit low value-adding repairs and other activities with low bottom-line contribution, and focus on higher value-adding work," Keppel Corp. said.
Loh Chin Hua, CEO of Keppel Corporation and Chairman of Keppel O&M said, “The share of renewables and new energy solutions in the global energy mix has been growing rapidly, driven by environmental concerns as well as technological advancements and the declining cost of renewables.
"Natural gas, as a transitional fuel, is also projected to overtake oil as the world’s largest energy source in the years to come. To seize opportunities in this fast-changing environment, we are making bold and decisive moves to transform Keppel O&M to ensure that it remains relevant and competitive, and fully aligned to Keppel’s Vision 2030."
“We are also exploring inorganic options for the O&M business, but there is no assurance that any transaction will materialize. In the meantime, we believe that our organic restructuring of Keppel O&M will not only enhance its competitiveness but also its attractiveness if we were to undertake any inorganic action.”
As part of the transformation, Keppel O&M’s business will be restructured into three parts: a Rig Co and a Development Co (Dev Co), which will be transient entities created to hold its approximately S$2.9 billion worth of completed and uncompleted rig assets; and, an Operating Co (Op Co), comprising the rest of Keppel O&M, which will be transformed into an asset-light and people-light developer and integrator of offshore energy and infrastructure assets.
Rig Co will be responsible for completed rigs, and the plan is for the company will put the completed rigs to work, or sell them if there are suitable opportunities. Dev Co will work to complete the uncompleted drilling rigs.
"Priority will be given to completing rigs that have firm contracts with customers. The Dev Co will be wound up, once the rigs have been completed and delivered to customers, or transferred to the Rig Co, where they will be put to work or sold," Keppel said.
"With a healthy balance sheet and undistracted by its stranded rig assets, the Op Co, which has a strong net order book of S$3.3 billion, 82% of which is in renewables and gas solutions, will seize opportunities in the energy transition, and is expected to be self-sustaining, financially independent and profitable over time," Keppel said.
The restructuring will start with immediate effect and is expected to be executed over the next two to three years, Keppel said.
"Reflecting its new focus, Keppel O&M will carry out a rebranding exercise and refine its vision and purpose," the company added.