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Keppel Profit Drops as Oil Price Slump Delays Offshore Projects
Keppel Corp., the world’s largest builder of oil rigs, reported a 41 percent decline in first-quarter profit as weak oil prices led to delivery delays of offshore projects.
Net income dropped to S$211 million ($156 million) from S$360 million a year earlier, Keppel said in a statement Monday. Sales slumped 38 percent to S$1.7 billion from S$2.8 billion. The higher contribution from its property business at 47% helped to partially offset lower profits from offshore and marine sectors, the company said in the statement.
Oil companies and rig operators face rising debt and spending cuts, and have abandoned orders or asked shipyards to delay deliveries of offshore drilling rigs and production facilities. That’s caused shipyards to post losses or smaller profits after writing off costs from projects under construction, and demand has fallen with crude prices still less than half of what they were three years ago.
"The sustained low oil price environment continues to take a toll on the global oil and gas industry, which is in the midst of one of the most severe downturns in recent years," Chief Executive Officer Loh Chin Hua said in the statement.
Keppel fell 2 percent to close at S$6 Monday before the earnings announcement. The stock has fallen 7.8 percent this year.
Brazil Challenge
Keppel and its smaller rival Sembcorp Marine Ltd. also face risks from Brazil, where debt-ridden Sete Brasil Participacoes SA accounts for a combined $10.5 billion in orders for semi-submersibles and drill ships at the two companies. Sete Brasil fell into financial distress after it was unable to secure long-term financing and its only client state-run oil producer Petroleo Brasileiro SA, or Petrobras, faced allegations of kickbacks.
Keppel wrote off S$230 million in the fourth quarter over delinquent projects.
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"Keppel wrote off S$230 million in the fourth quarter over delinquent projects."
more write-offs to come? :O
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR!
4) In BULL, SELL-SELL-SELL!
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(18-04-2016, 10:05 PM)brattzz Wrote: "Keppel wrote off S$230 million in the fourth quarter over delinquent projects."
more write-offs to come? :O
Further write-offs seem a sure thing, the question is how much more, IMO 
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡
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Singapore’s Keppel Offshore & Marine provided a dampener to festivities during Singapore Maritime Week with the revelation that the company has cut an additional 2,800 workers as the offshore downturn continues to starve the company of new orders.
The company said within its latest set of quarterly results that it has reduced its workforce by 9.4% since the beginning of 2016, with 500 of the workers let go in Singapore while 2,300 were at overseas yards.
http://splash247.com/keppel-offshore-and...0-workers/
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR!
4) In BULL, SELL-SELL-SELL!
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Keppel Singmarine has secured contracts from Jan De Nul Group to build dredgers worth S$100 million
Keppel Offshore & Marine Ltd (Keppel O&M)'s wholly owned subsidiary Keppel Singmarine Pte Ltd has secured contracts from Jan De Nul Group to build three Trailing Suction Hopper Dredgers (TSHDs). The TSHDs are worth about S$100 million in total.
The first two dredgers are expected to be completed in 2H 2018 while construction of the third dredger will require a notice within six months from Jan De Nul to exercise the option for the dredger.
To be built to Jan De Nul's design, the dredgers will be able to dredge to a maximum depth of 27.6m, and have a hopper capacity of 3,500 m3. The two dredgers will be built to the requirements of classification society, Bureau Veritas, in Keppel Nantong Shipyard, a subsidiary of Keppel O&M.
...
Specuvestor: Asset - Business - Structure.
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Keppel Sees Prolonged Dearth of Oil-Rig Orders Amid Glut
http://www.bloomberg.com/news/articles/2...deliveries
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Interesting quote from Credit Suisse analyst regarding Kris Energy :
"Keppel (UNDERPERFORM) has a 40% stake in KrisEnergy, which has a carrying value of S$490 mn on its balance sheet as of December 2015, above the market value of about S$71 mn".
Assuming that this is correct, then I am amazed, following the whole Noble saga, that auditors and regulators continue to allow companies to NOT mark to market large equity stakes in listed companies where there is a clear market. As far as I can see, the share price of Kris Energy was 17 cents on December 31st, 2015 (when, according to Credit Suisse, the carrying value was S$490) versus 11 cents today (where, according to Credit Suisse, the market value of the stake is S$71). If that is correct, then it appears that the value was significantly overstated even as of December 31st, 2015....
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17-08-2016, 02:55 PM
(This post was last modified: 17-08-2016, 03:00 PM by stilicon.)
(17-08-2016, 01:33 PM)GreedandFear Wrote: Interesting quote from Credit Suisse analyst regarding Kris Energy :
"Keppel (UNDERPERFORM) has a 40% stake in KrisEnergy, which has a carrying value of S$490 mn on its balance sheet as of December 2015, above the market value of about S$71 mn".
Assuming that this is correct, then I am amazed, following the whole Noble saga, that auditors and regulators continue to allow companies to NOT mark to market large equity stakes in listed companies where there is a clear market. As far as I can see, the share price of Kris Energy was 17 cents on December 31st, 2015 (when, according to Credit Suisse, the carrying value was S$490) versus 11 cents today (where, according to Credit Suisse, the market value of the stake is S$71). If that is correct, then it appears that the value was significantly overstated even as of December 31st, 2015.... I think he is right. KEPPEL CORP AR2015, page 165, Kris Energy is mentioned as equity accounted for a carrying value of 489 835 kSGD. An accounting practice typical of this kind of "fat cats", state sponsored conglomerate, I dare say.
Keppel later on declares :
"As at 31 December 2015, the fair values of Keppel REIT and KrisEnergy Limited are below the carrying amounts of the Group’s ownership interest. Management is of the view that no impairment is required as they are held for long term and their recoverable amounts are more than their carrying amounts.
For the investment in KrisEnergy Limited (“KrisEnergy”), management performed an assessment on the recoverable amount
using a discounted cash flow model based on a cash flow projection from 2016 to 2022 with a terminal value and applying certain estimates and assumptions, such as oil prices, discount rates, production volume, lifting costs, reserves and operating costs.
The assumption for oil prices, ranging from US$55 to US$80 per barrel (for 2016 to 2022), is determined by taking reference
from external information sources. The discount rate used is 10%. These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a possibility that changes in circumstances will impact these projections, which may impact the recoverable amount of the investment in KrisEnergy. If the estimated oil prices applied to the discounted cash flows had been 10% lower than management’s estimates, the carrying amount would be lowered by $64,000,000."
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(17-08-2016, 02:55 PM)stilicon Wrote: (17-08-2016, 01:33 PM)GreedandFear Wrote: Interesting quote from Credit Suisse analyst regarding Kris Energy :
"Keppel (UNDERPERFORM) has a 40% stake in KrisEnergy, which has a carrying value of S$490 mn on its balance sheet as of December 2015, above the market value of about S$71 mn".
Assuming that this is correct, then I am amazed, following the whole Noble saga, that auditors and regulators continue to allow companies to NOT mark to market large equity stakes in listed companies where there is a clear market. As far as I can see, the share price of Kris Energy was 17 cents on December 31st, 2015 (when, according to Credit Suisse, the carrying value was S$490) versus 11 cents today (where, according to Credit Suisse, the market value of the stake is S$71). If that is correct, then it appears that the value was significantly overstated even as of December 31st, 2015.... I think he is right. KEPPEL CORP AR2015, page 165, Kris Energy is mentioned as equity accounted for a carrying value of 489 835 kSGD. An accounting practice typical of this kind of "fat cats", state sponsored conglomerate, I dare say.
Keppel later on declares :
"As at 31 December 2015, the fair values of Keppel REIT and KrisEnergy Limited are below the carrying amounts of the Group’s ownership interest. Management is of the view that no impairment is required as they are held for long term and their recoverable amounts are more than their carrying amounts.
For the investment in KrisEnergy Limited (“KrisEnergy”), management performed an assessment on the recoverable amount
using a discounted cash flow model based on a cash flow projection from 2016 to 2022 with a terminal value and applying certain estimates and assumptions, such as oil prices, discount rates, production volume, lifting costs, reserves and operating costs.
The assumption for oil prices, ranging from US$55 to US$80 per barrel (for 2016 to 2022), is determined by taking reference
from external information sources. The discount rate used is 10%. These estimates and assumptions are subject to risk and uncertainty. Therefore, there is a possibility that changes in circumstances will impact these projections, which may impact the recoverable amount of the investment in KrisEnergy. If the estimated oil prices applied to the discounted cash flows had been 10% lower than management’s estimates, the carrying amount would be lowered by $64,000,000."
This is like the Olympics... you're in the semi finals... you're declaring in future you'll at least get a bronze, silver or gold... with a very slim chance of getting a 4th placing that means no medal.
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(17-08-2016, 01:33 PM)GreedandFear Wrote: Interesting quote from Credit Suisse analyst regarding Kris Energy :
"Keppel (UNDERPERFORM) has a 40% stake in KrisEnergy, which has a carrying value of S$490 mn on its balance sheet as of December 2015, above the market value of about S$71 mn".
Assuming that this is correct, then I am amazed, following the whole Noble saga, that auditors and regulators continue to allow companies to NOT mark to market large equity stakes in listed companies where there is a clear market. As far as I can see, the share price of Kris Energy was 17 cents on December 31st, 2015 (when, according to Credit Suisse, the carrying value was S$490) versus 11 cents today (where, according to Credit Suisse, the market value of the stake is S$71). If that is correct, then it appears that the value was significantly overstated even as of December 31st, 2015....
Don't forget that fair value marketing was blamed during GFC2008 for exacerbating the loss in confidence of the financial firms, when most of these firms intended to hold these "temporarily impaired" assets to maturity. There were also conspiracy theories that short sellers of the company indirectly attacked it by working to de-value the assets held on the company's books. A little while earlier, the S&L crisis was blamed for using historical cost to hide the losses.
End of the day, the rules were set (well meaningfully) but (abused) according to the flavor of the day by Man.
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