SembMarine

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RE: SembMarine

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SembMarine - CitiGrp

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SembMarine - BT

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27 Jun 07

SembCorp Marine clinches US$190m contract for jack-up rig

JUST a day after Keppel Corporation announced it had won rig contracts worth US$534 million, arch rival SembCorp Marine, the world's second-largest builder of offshore rigs, reported a US$190 million contract for a deep-drilling offshore jack-up rig for Offshore Group Corp.

The high-performance rig is the third in a series of three identical BMC Pacific 375 design jack-up rigs that the Offshore Group has ordered from SembMarine subsidiary, PPL Shipyard, following the first unit in October 2006 and the second in January this year.

Construction of the jack-up rig is expected to start in the third quarter of 2007 with delivery scheduled in September 2009. To be built based on PPL's proprietary BMC Pacific 375 Deep Drilling design, the jack-up rig will be equipped with a drilling package with capabilities to drill high-pressure and high-temperature wells at 30,000 feet while operating in 375 feet of water. It is also designed with accommodation for 120 people.

PPL's managing director Ong Tian Khiam said: 'This third jack-up rig order is a reflection of the optimism that owner has in the jack-up rig market and in particular our rig design and our ability to deliver on schedule and within budget.'

SembMarine's net order book to date stands at S$9.1 billion with completion and deliveries until 2010. This includes S$4.5 billion new orders secured so far this year. In comparison, Keppel's current order book stands at over S$11 billion, of which S$3.3 billion were secured this year alone.

PPL has built a total of 29 jack-up rigs, six semi-submersibles, and four swamp barges. Its flagship jack-up design, the Baker Marine Pacific Class 375 design, has secured orders for 19 units so far since its launch in 2004. Four of these deep-drilling jack-up rigs have since been delivered.

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SembMarine - UOBKH

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SembMarine - UBS

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SembMarine - BNP

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SembMarine - DBS

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SembMarine - CIMB

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11-May-07

Rising tide

Won two drilling rig contracts worth US$592m

In just one day, SembCorp Marine secured two drilling rig contracts from Petropod and Nobel Drilling worth a total of US$592m.

Dual capabilities jack up rig worth US$442m from Petropod. This rig is to be built based on its proven CJ70 design, suitable for drilling and production activities in the harsh Norweigian North Sea environment. The contract is scheduled for delivery in mid-2010.

Second ultra-deepwater semi-submersible rig project awarded by Noble Drilling.
Sembmarines share of this contract is US$150m with the owners furnishing the equipment (worth circa US$400m). This semi-sub will have similar specifications and design as the first unit contracted earlier in Dec 06. Fabrication work for this semi-sub has started and delivery is scheduled in 4Q09.

Comments

Upgrading our order win assumption, order book could hit new high. Order momentum for SembMarine is escalating with YTD wins totaling S$3.8bn, surpassing 2006 wins of S$3.1bn. We are upgrading our order assumption for 2007 to S$4.5bn from S$3.5bn, mainly after factoring in the expected higher value of semi-submersible and rigs projects to be awarded. This will bring SembMarines order wins to a new high, beating its record of S$4.2bn orders awarded in FY05. We believe our target is conservative as SembMarine could secure another semi-submersible contract (average value of US$535m).

Innovative design commands premium contract value. This dual capabilities jack up rig represents the largest order secured by SembMarine for its CJ70 design. We note that this design is enabling SembMarine to strengthen its market position in offshore projects, equipping it with the ability to compete head on with Keppel Corporations N class rigs.

Raised forecasts for FY09 by 11%, following revisions in order win assumption for 2007. FY09 EPS growth is subsequently raised from single-digits to 19% yoy.

Valuation and recommendation

Maintain Outperform, target price raised to S$4.68 from S$4.50, based on blended valuations, after imputing our higher order assumptions. Our new target price implies earning multiples of 17.8x (CY08) and 14.9x (CY09), which are justified by its 3-year EPS CAGR of 24%. We continue to like the stock for its earnings growth and defensive nature, backed by attractive forward dividend yield of 5.7% and 75% payout. Earnings visibility has now stretched into 2010. Maintain Outperform.

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SembMarine - BT

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SembMarine - CIMB

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SembMarine - OCBC

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SembMarine - BT

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20-Apr-2007

Is party over for S'pore rig builders?

A TWO-YEAR boom in offshore oil-drilling rigs has pushed shares of Singapore's Keppel Corp and SembCorp Marine to record highs, but bullish investors seem to have overlooked something: the order flow has slowed significantly.

Keppel and SembMarine - the world's number one and two oil-rig builders - have reported a steady quarterly decline in the number of new orders since the start of 2006, while oil companies, including Petrobras of Brazil and Oil and Natural Gas Corp (ONGC) of India, have started to put projects on hold due to rising costs.

That could spell trouble for the strongly overbought shares of Keppel and SembMarine shares, which have more than doubled since the start of 2005 and have set fresh highs in April, some investors say. 'We have turned neutral on Singapore shipyards,' said Michael Lim, fund manager at Prudential Asset Management, who had an overweight rating on the companies until last month.

Keppel and SembMarine together have won over 70 per cent of all new global rig orders since 2005, when rising oil prices sparked a boom in oil and gas exploration. These orders are likely to keep their yards busy until 2009.

But oil prices are off their record highs, while oil companies have started to complain about the dramatic rise in the costs for developing new offshore fields. A large part of those costs are rental rates for rigs to drill deep under the seabed.

Mr Lim and other fund managers said the optimism over the rig boom has already been factored in, leaving stock valuations of Singapore rig builders a bit stretched. Keppel and SembMarine stocks are trading above 15 times their forecast 2008 earnings - about a 70 per cent premium to those of their South Korean rivals, Samsung Heavy Industries and Daewoo Shipbuilding.

Keppel received orders worth US$392 million in the first quarter of 2007 - below the US$507 million in the first quarter of 2006 and just one-fifth of the US$2 billion in 1Q 2005. SembCorp Marine's order book shows a similar decline.

At an industry conference in Paris this month, French oil major Total and Qatar's energy minister both warned service contractors - who rent out rigs to oil companies - that they risked damaging the energy industry unless they lowered their fees.

Brazil's national oil major Petrobras earlier this month cancelled tenders for gas compression modules for its two new rigs, due to high prices offered, and said it expected delays in bringing those rigs online.

Last week, India's ONGC said that plans to explore its biggest gas discovery in the Bay of Bengal might be delayed due to high costs.

However, some shipyard operators said that despite these setbacks, enough fields are likely to be developed to keep the demand for rigs healthy well into the next decade. They said that as long as oil prices are above US$45 a barrel, oil companies will continue to invest in new fields, adding that the recent slowdown in orders was 'temporary'.

Oil futures markets are generally betting that prices will be near US$70 over the next few years.

'The jackup business is still going to be great,' Ng Khim Kiong, chief operating officer of Labroy Marine, a smaller rig builder that competes with Keppel and SembMarine, said in a recent interview. He expects the industry to receive a hundred more rig orders in the next few years, or 'enough for most of the rig building yards to be busy for the next five years at least'.

Michael Chia, a Keppel executive director, predicted an even higher order level as the rise in exploration drilling in the past three years could bring forward production schedules at some of the fields and send oil companies scrambling for floating production platforms and Floating Production Storage and Offloading (FPSOs) vessels.

'Probably another 200 such floating production units could be required in the next five years. These orders have only started to come out now,' Mr Chia said.

However, a senior executive of a leading Singapore shipyard warned that unless there was a significant rise in new orders, Singapore yards would find it difficult to fully utilise the capacity at their yards beyond 2009. 'It takes about three years to build a rig. So the pace of orders this year will determine how strong or weak the rig-building cycle will be in 2010 and onwards,' he said. - Reuters

KK · Guru

Published April 4, 2007

SembMarine unit bags another jack-up

NORWAY'S Awilco Offshore ASA has exercised the last of its four options granted in 2005 for the building of jack-up rigs by SembCorp Marine (SembMarine) subsidiary PPL Shipyard. Costing US$149 million, the rig will be built based on PPL's proprietary Baker Marine Pacific Class 375 Deep Drilling design and is scheduled for delivery in the second quarter of 2009.

The latest order swells SembMarine's order book to well over $7.4 billion, of which $1.9 billion came this year. The company is the world's second largest builder of offshore rigs, after fellow Temasek Holdings-linked Keppel Corporation. With facilities to house 120 persons, the Awilco rig will be equipped to drill high pressure and high temperature wells at 30,000 feet whilst operating in 375 feet of water.

PPL, which has a proven track record for building and servicing jack-ups and semi-submersibles, will deliver two of Awilco's earlier orders later this year. It has built a total of 28 jack-up rigs, six semi-submersibles and four swamp barges. The flagship jack-up rig design, the BMC 375 Pacific Class, has secured orders for a total of 18 units so far since its launch in 2004.

Prices of these rigs have been going up with Awilco's first order in 2005 costing just US$121 million. The other two options cost US$144 million and US$142 million respectively. An earlier order by Awilco at PPL cost just US$118 million. In January this year, Taiwan's Offshore Group Corporation had to pay US$190 million for a similar rig from PPL. It was the second order from the Taiwanese company, which previously placed an order for a US$155 million jack-up rig for delivery in July 2009.

According to a Nomura Research report last year, SembMarine has the capacity to build five jack-ups and two semi-subs annually at its Singapore yards, and had announced plans to expand to eight jack-ups and two or three semi-subs each year. Another report last year, by Macquarie Research, expected SembMarine to secure contracts for another 24 jack-ups and 10 semi-subs over the next 10 years.

Singapore yards are so full that offshore rig operators have begun placing orders elsewhere, especially in China. For instance, Yantai Raffles Shipyard, founded and controlled by Singapore's Brian Chang (who ironically also founded PPL), has orders for three semi-submersibles from Awilco, including one secured in February worth US$310 million. Other local players in the offshore rig building arena include Labroy Marine, Pan-United Marine, Ezra Holdings, KS Energy Services and Cosco Corp (Singapore).

KK · Guru

SembMarine