Seatrium Limited (formerly SembCorp Marine and KOM)

[CityFarmer]

there are many types of semi subs, conventionally moored, dynamically positioned, how deep can they go? and who are their clients?

but they still can't do drillships can they? this is the bigger business for SCM because a huge chunk of their orderbook recently came from this rig... this rig has much higher values than semi subs too...

and I also thought Chinese firms focus more on ship building instead of rigs?

I should probably start learning more about them too (a newbie here)

(not vested)

More detail info from the link below. Interestingly, the customer, Primepoint is base on Singapore.

http://www.offshoreenergytoday.com/prime...nese-yard/

http://www.primepoint.sg/

The price of the 2 units, base on Moss Maritime “Moss CS50″design, is US$0.825 billion or more than US$400 mil per unit. It should be a mid-range specification unit.

From YZJ's latest end-year financial report, page 18

"the Moss CS50 non-DP semi-submersible Drilling platform with Drilling Rig is the cost effective version of oil and gas exploration rig in medium to deep water, the Group believes that such cost effective rig design meets the current and future demand of rig investors, and is a product that suits rig builder in China with the potential demand to gain economies of scale"

http://infopub.sgx.com/FileOpen/Announce...eID=276405

[zerobeta]

thanks seems like the general consensus is that there is indeed a rising competition from China but it may take years before it starts shaking KEP and SCM due to their lack of financial resources and tech capability... also due to KEP and SCM reputation being more trustworthy... still this is something KEP and SCM need to watch out, they need to innovate more and perhaps ASP will be trending down too... (CMIIW)

Also from Seadrill Credit Suisse presentation, there are some quite interesting findings about the industry prospect:
http://www.seadrill.com/stream_file.asp?iEntityId=1575

1) offshore ultra deepwater production will increase by a CAGR of 19% in 2012-2020 (0% for offshore shelf and 1% for onshore)
2) There will be 60 newbuilds floaters in 2014-2016 but 50 retirement during the same period, bringing a net addition of 10 floaters only. Hence it's projected that we will need 189 more floaters by 2020 to meet the potential demand

From another study, Douglas-Westwood also forecasted a 8% growth per year for offshore O&M in 2012-2016

All in all, seems like high-specs drilling sector is a highly prospective industry... competition is always an issue but this is true for all other industries... so need to take a look deeper in all these firms to find the potential winner...

[CityFarmer]

US$236 mil for a high spec jack-up rig? IIRC, it is at the lower end of the market price...

(not vested)

--------
SEMBCORP MARINE’S JURONG SHIPYARD SECURES A US$236 MILLION CONTRACT TO BUILD A FRIEDE & GOLDMAN JU 2000E JACK-UP RIG FOR HERCULES NORTH SEA LTD.
Singapore, May 21, 2014: Sembcorp Marine’s subsidiary Jurong Shipyard has secured a US$236 million (about S$296 million) contract to build a high specification, tailor-made jack-up rig for new customer Hercules North Sea Ltd.
...
http://infopub.sgx.com/FileOpen/SCMPress...eID=298108

[mulyc]

recently divested at a significant loss.

I feel uneasy with the move towards relaxed payment terms (thinks its 10:10:80) in order to remain competitive. aside from the that the global competition just seems to keep getting tougher and tougher for SMM.

[CityFarmer]

recently divested at a significant loss.

I feel uneasy with the move towards relaxed payment terms (thinks its 10:10:80) in order to remain competitive. aside from the that the global competition just seems to keep getting tougher and tougher for SMM.

The recent drillship contract payment term is 5:95, IIRC

[mulyc]

recently divested at a significant loss.

I feel uneasy with the move towards relaxed payment terms (thinks its 10:10:80) in order to remain competitive. aside from the that the global competition just seems to keep getting tougher and tougher for SMM.

The recent drillship contract payment term is 5:95, IIRC

Doesn't that drastically heighten the default risk of SMM?

[weijian]

I would argue that 'high specification' is a relatively over abused word in any field that uses technological prestige as bragging rights.

The last pair of F&G JU2000E rigs (turnkey though) secured by SCM was ordered by Seadrill at USD 192mil per rig in Oct 2010. Up to last Aug2013, Seadrill has since turned to DSIC (a Chinese shipyard) for ~10 similar F&G JU2000E designs costing ~ USD 230mil per rig (tail heavy terms which are reflected in slightly higher total project cost). Benchmarking with these orders, SCM seems to have gotten a 'fair deal' but unmistakenly, they have decided to play the same game as the Chinese shipyards (a compensation for their non 'near market, near customer' strategy?)

As for default risks, there are many factors at play. A '10:90 (or 10:10:80)' or '20:80' payment terms might make little difference to the rig builder if the customer was EVENTUALLY going to default anyways. That said, if the customer was going to default, securing 20% terms is eventually much easier when going to auction the rig to prospective buyers. Besides payment terms, customer pedigree (tier 1 operator or purely speculative PE funds) and whether any contracts have been secured by the orders are both important factors that toggles the default probability. To date, SCM has done relaxed payment terms for both Transocean (a tier 1 operator) and the current Hercules North sea rig (already secured a contract with Maersk Oil and Gas).....One needs to observe very closely whether they will start to build rigs on similar relaxed terms with speculative PE funds.

I recall that SCM has had 3 cases of 'default' - 2 of them (Seadrill-PC rig, ~200+ mil and PetroMena-CJ70, ~550mil) and both of them were in the boom days with 'normal' payment terms and were subsequently auctioned to new buyers (not sure of the actual impact to profit margins). The 3rd one by Equinox Offshore-ARV3 (140mil) was more recent (last year) and it had a 5 year chartered contract with Petrobras. SCM might not have found a suitable price to sell it and Board made an unprecedented decision to operate ARV3 while continuing to look for sellers.

http://www.offshoreenergytoday.com/seadr...-in-china/ (F&G 2000E orders by Seadrill)
http://www.seatrade-global.com/news/asia...drill.html (F&G 2000E orders by Seadrill)

SCM defaults:
http://www.sembcorpmarine.com.sg/index.p...eturnid=78 (sale of CJ70)
http://www.sembcorpmarine.com.sg/index.p...eturnid=78 (sale of Pacific Class jack up)
http://www.sembcorpmarine.com.sg/index.p...eturnid=78 (ARV3 by Equinox Offshore)

[CityFarmer]

It is no surprise Sembcorp Marine unperformed, comparing with Keppel Corp on O&M business...

(not vested)

Sembcorp Marine’s 2Q net profit down 15%

Sembcorp Marine, the world’s second largest rig builder, posted a worse-than-expected 15 percent fall in second quarter net profit, despite stronger margins.

The company, a unit of waste-processor to infrastructure conglomerate Sembcorp Industry , reported a net profit of $149.7 million for the three months ended June 30, compared to $176.1 million a year ago.

The profit was missing the average forecast of two analysts surveyed by Reuters of $183.5 million.

Sembcorp said its net orderbook stood at $5.7 billion after securing a total ofS$2.6 billion in new orders since the start of the year, excluding ship repair contracts.
http://www.theedgesingapore.com/the-dail...wn-15.html

[retired1again]

Based on their announcement in SGX, the net order book as at 4 August 2014 was S$12.7B instead of S$5.7B as below quote.

Vested.

It is no surprise Sembcorp Marine unperformed, comparing with Keppel Corp on O&M business...

(not vested)

Sembcorp Marine’s 2Q net profit down 15%

Sembcorp Marine, the world’s second largest rig builder, posted a worse-than-expected 15 percent fall in second quarter net profit, despite stronger margins.

The company, a unit of waste-processor to infrastructure conglomerate Sembcorp Industry , reported a net profit of $149.7 million for the three months ended June 30, compared to $176.1 million a year ago.

The profit was missing the average forecast of two analysts surveyed by Reuters of $183.5 million.

Sembcorp said its net orderbook stood at $5.7 billion after securing a total ofS$2.6 billion in new orders since the start of the year, excluding ship repair contracts.
http://www.theedgesingapore.com/the-dail...wn-15.html

[Art or Science]

Hi CityFarmer,

I thought its up by 5% ?

http://af.reuters.com/article/idAFL4N0QA0WX20140804

http://infopub.sgx.com/FileOpen/SCM2Q201...eID=308129