Offshore Oil Rig Business Still Suffering, Top Rig Builder Warns … – OilPrice.com

Despite the fact that it posted a rise in first-quarter net profit, Singapores Keppel Corporation, the worlds largest offshore rig builder, has cautionedthat 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 Corporations 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 Keppels Q1 performance, DBS saidthat the O&M segment was a big miss and the net orderbook dwindled.

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

Keppels property business, which accounts for up to 70 percent of the groups 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

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Offshore Oil Rig Business Still Suffering, Top Rig Builder Warns ... - OilPrice.com