Keppel Limited

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#11
Its Quality and Trust that Chinese yards cannot accord to customers for sometime coming... simply look at all the scams and sickening attitude towards environment and their own people, it will take years for an attitude revamp...

Rig-building giant unswayed by keener competition

To stay on top, Keppel Fels meets delivery deadlines, keeps to budget

Published on Jul 08, 2013


Keppel Fels is delivering a record 20 rigs this year, well over the previous peak of 13 in 2009. This comes amid reports of job layoffs at Chinese shipyards as they diversify into rig-building to offset a ship order slump. -- ST PHOTO: MARK CHEONG

By Alvin Foo

OIL rig-building yards in China may offer lower prices and more attractive financing, but Keppel Fels remains unfazed by talk of keener competition and tighter margins.

The world’s largest rig-builder has its own competitive edge – on-time delivery and costs that are kept within budget.

Keppel Fels managing director Wong Kok Seng told The Straits Times: “Look at our orders. The Chinese story has been there for at least two years now, but today, we’re still getting our B Class orders. This year alone, when the Chinese have been playing in full swing, we’ve already got eight jack-ups. It sends a clear message.”

This year, Keppel Fels is delivering a record 20 rigs, well over the previous peak of 13 seen in 2009.

Its Tuas yard was abuzz with activity during a recent visit by The Straits Times, with workers clocking overtime hours and the building docks fully occupied.

Mr Wong’s comments come amid reports of widespread job layoffs at Chinese shipyards even as they diversify into rig-building to offset their ship order slump. There has also been the recent credit crunch on the mainland.

The B Class is Keppel’s signature rig and is its most popular design. Since 2010, its B Class rigs have accounted for about 45 per cent of the total number ordered among rigs of its class globally.

Developed by its technology arm and launched in 2000, the rig is able to operate in water depths of up to 120m and drill to depths of 9,000m.

Keppel Fels just delivered its 45th B Class rig recently – a fitting milestone given that this year is parent company Keppel Corp’s 45th anniversary.

This rig was sent to Arabian Drilling Company 14 days ahead of schedule, on budget and with a perfect safety record, bagging Keppel Fels an early delivery bonus of US$210,000 (S$270,000). The rig will be chartered to Saudi Aramco for use in offshore Saudi Arabia.

Having on-time delivery and a more efficient rig could translate into substantial cost savings.

“In our industry especially, time is money,” said Mr Wong.

With usage rates calculated on a daily basis, and costing about US$150,000 to US$190,000 a day, having a more efficient rig can result in cost savings of several million dollars per drilling project. This could amount to many more millions of dollars, if one considers that the lifespan of a rig is typically at least 20 years.

A recent Credit Suisse report noted that the Chinese yards are catching up but have yet to establish a track record in rig-building.

The report followed a meeting with Singapore’s Falcon Energy, which entered the offshore drilling market through its ordering of two jack-up rigs with Chinese yard CMHI in October 2011.

Credit Suisse noted that the Chinese yards are becoming more competitive, as they are able to offer attractive payment terms with generous support from state banks and credit agencies.

It added: “They generally require down payment of about 10 per cent, lower than the 20 per cent required by Singapore yards.”

But Falcon’s management told Credit Suisse that they would require active supervision during construction.

Mr Wong said his customers are largely bona fide drilling contractors, as opposed to speculators who typically come in with a 5 per cent deposit and attempt to flip the rig in a short time span.

He added: “They do not come to us just because the market is hot.”

alfoo@sph.com.sg

Background story

STRONG TRACK RECORD

“Look at our orders. The Chinese story has been there for at least two years now, but today, we’re still getting our B Class orders.
This year alone, when the Chinese have been playing in full swing, we’ve already got eight jack-ups. It sends a clear message.”

– Keppel Fels managing director Wong Kok Seng
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#12
I heard that the ex-Keppel employees set up project mgt companies
to manage rigs building projects in China. so 'Keppel' quality is available out there at a cheaper price.
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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#13
(08-07-2013, 09:19 AM)opmi Wrote: I heard that the ex-Keppel employees set up project mgt companies
to manage rigs building projects in China. so 'Keppel' quality is available out there at a cheaper price.

ex-SIA or ex-Goldman or ex-Mackenzie guy come out to setup his shop will have their experiences as an advantage, but will take more effort than that to qualify as quality matching their previous employer. Even easily duplicated model of asset management/ hedge fund/ traders are not always true, not to mention operational assets where the value chain is much more complicated.

That said, China is hungry and not stagnant. Just look at their auto industry.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
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#14
Clients are operators themselves. Harder to bull sheet.
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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#15
Near market and Near customer strategy of Keppel Corp, is quite different from China yards...

Keppel Corp plans first yard in Mexico

INGAPORE – Keppel Corporation, the world’s biggest offshore jackup drilling rig builder, said it plans to build its first yard in Mexico jointly with its national oil company, to expand in Mexico’s fast-growing offshore oil and gas sector.

The first phase of the Mexican yard, Keppel’s 21st yard in the world, will cost about US$150 million (S$187 million), which will support the construction of six rigs for PEMEX Exploracion y Produccion (PEP), a subsidiary of Petroleos Mexicanos (PEMEX) , Keppel said.

Keppel has not signed construction contracts for the six rigs, and declined to give details on the timeline of development of the yard.
...
http://www.todayonline.com/business/kepp...ard-mexico
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#16
Keppel had secured another contract worth US$240M.

http://infopub.sgx.com/FileOpen/MR_Keppe...eID=259356
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#17
http://infopub.sgx.com/FileOpen/KCL3Q13_...eID=260003

Quote:
Keppel Corp FY13Q3 Financial Results
1. 3Q 2013 Net Profit increased 20% to S$403 million, compared to 3Q 2012’s S$337 million.
2. 9M 2013 Net Profit decreased 33% to S$1,080 million, compared to 9M 2012’s S$1,609 million.
3. 9M 2013’s Earnings per Share was 59.8 cents, down 33% from 9M 2012’s 89.8 cents.
4. Annualised Return on Equity of 15.4%.
5. 9M 2013 Economic Value Added decreased from S$1,245 million to S$648 million.
6. Cash outflow of S$1,647 million.
7. Net gearing of 0.23x.

(Not vested)
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#18
One thing that interest me in Kep Corp's 3Q report
Loans (6.6 Billion), interest paid 117M)
Cash & Short term equ (3.64B, Interest received 125M).

This too can be seen for the past FYs where their interest received is more than their interest paid, despite cash & short term being lower than their term loans (Kep Corp term loan is only 1.875%-2.5% per annum)

Borrowing money at low rates to fund working capital requirements & lending some of it out at a higher rate to effectively cover the interest expense of your borrowed money, and yet profit a little. Now that's good mgmt
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#19
(17-10-2013, 08:23 PM)CY09 Wrote: One thing that interest me in Kep Corp's 3Q report
Loans (6.6 Billion), interest paid 117M)
Cash & Short term equ (3.64B, Interest received 125M).

This too can be seen for the past FYs where their interest received is more than their interest paid, despite cash & short term being lower than their term loans (Kep Corp term loan is only 1.875%-2.5% per annum)

Borrowing money at low rates to fund working capital requirements & lending some of it out at a higher rate to effectively cover the interest expense of your borrowed money, and yet profit a little. Now that's good mgmt

It seems a common practice for shipbuilder under low interest credit market. Yangzijiang is doing the same, but profit much more, under the unique China credit market.
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#20
(17-10-2013, 08:23 PM)CY09 Wrote: One thing that interest me in Kep Corp's 3Q report
Loans (6.6 Billion), interest paid 117M)
Cash & Short term equ (3.64B, Interest received 125M).

This too can be seen for the past FYs where their interest received is more than their interest paid, despite cash & short term being lower than their term loans (Kep Corp term loan is only 1.875%-2.5% per annum)

Borrowing money at low rates to fund working capital requirements & lending some of it out at a higher rate to effectively cover the interest expense of your borrowed money, and yet profit a little. Now that's good mgmt

Part of this is probably achieved through a currency carry trade ie borrowing in a low rate currency like usd and lending in a high rate currency typically NOK or Brazilian real. So we have to assess currency hedging performance too.
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