• 4 minutes US-backed coup in Venezuela not so smooth
  • 7 minutes Why Trump will win the wall fight
  • 11 minutes Oil imports by countries
  • 13 minutes Maduro Asks OPEC For Help Against U.S. Sanctions
  • 1 hour Climate Change: A Summer of Storms and Smog Is Coming
  • 3 mins Itt looks like natural gas may be at its lowest price ever.
  • 2 hours Venezuela: Nicolas Maduro closes border with Brazil
  • 5 hours Teens For Climate: Swedish Student Leader Wins EU Pledge To Spend Billions On Climate
  • 35 mins Tension On The Edge: Pakistan Urges U.N. To Intervene Over Kashmir Tension With India
  • 3 hours Amazon’s Exit Could Scare Off Tech Companies From New York
  • 23 hours North Korea's Kim To Travel To Vietnam By Train, Summit At Government Guesthouse
  • 17 hours students walk out of school in protest of climate change
  • 2 days Washington Eyes Crackdown On OPEC
  • 1 day Europe Adds Saudi Arabia to Dirty-Money Blacklist
  • 1 day Some Good News on Climate Change Maybe
  • 1 day America’s Shale Boom Keeps Rolling Even as Wildcatters Save Cash

Offshore Oil Rig Business Still Suffering, Top Rig Builder Warns

Offshore

Despite the fact that it posted a rise in first-quarter net profit, Singapore’s Keppel Corporation, the world’s largest offshore rig builder, has cautioned that the offshore oil rig business continues to operate in very challenging conditions.

“Despite the increased optimism in the market following the rebound in oil prices, the offshore business continues to face very challenging conditions. This is due to, among other factors, the oversupply of rigs and support vessels. It will take some time before the industry fully recovers,” the corporation said in its Q1 results release.

Keppel Corporation’s net profit rose by 23 percent annually to US$186.4 million (260 million Singapore dollars), but its offshore and marine division barely managed to break even, due to significantly reduced volume of work.

“While the Division continued to make a profit at the gross operating level, it was insufficient to cover our fixed costs,” Keppel said.

In order to keep the offshore division fit, the rig builder said that it had mothballed two overseas yards in January and was in the process of closing three supporting yards in Singapore. In addition, Keppel is divesting its shipyard in the Netherlands, Keppel Verolme. In the first quarter alone, Keppel reduced its global direct workforce by 1,250 staff via “natural attrition, early termination of contracts and retrenchments”. Since the beginning of 2015, the total workforce numbers have been slashed by 49 percent, or by nearly 18,000 staff.

Analyzing Keppel’s Q1 performance, DBS said that the “O&M segment was a big miss” and the “net orderbook dwindled”.

Related: Did OPEC Shoot Itself In The Foot?

According to DBS, looking ahead, one of the main risks for Keppel is competition from Chinese and Korean peers that can impact the Singaporean group’s order intake and profit margins. Another risk is the possibility that oil prices will remain low¬¬—in this case, deliveries of newbuilds and conversions already under construction could be further delayed as oil majors and asset owners slash spending.

Keppel’s property business, which accounts for up to 70 percent of the group’s profits, is expected to remain strong and provide some cushion for the struggling offshore and marine business, DBS reckons.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com 



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News