Keppel Offshore & Marine, Singapore’s largest offshore rig builder, still sees the offshore market as very challenging, despite the recent rise in oil prices after a 2014-slump. As a result, the company has cut half of its workforce since 2015.
“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 Keppel Corp. CEO Loh Chin Hua said.
The company, a part of the Keppel Corp., posted a breakeven result for the first quarter of 2017, meaning zero net profit, versus a net profit of S$95 million in the first quarter of 2016.
The CEO said the fall in net profit was due to the significantly lower volume of work.
As said by Keppel, due to the challenges in offshore market, and lack of demand for offshore drilling rigs by the oil companies, there have been no new rig orders in the already oversupplied market.
Thus, Keppel has decided to mothball several of its yards, overseas and in Singapore, in order to rightsize its business. The company has recently agreed to sell its Keppel Verolme shipyard in the Netherlands to Damen.
49 percent of workforce cut
As a consequence of diminishing workload, Keppel has been reducing workforce.
In the first quarter, Keppel O&M further reduced its global direct workforce by about 1,250 or 6% compared to the previous quarter, through natural attrition, early termination of contracts and retrenchments.
“Since the start of 2015, we have reduced our global direct workforce by close to 18,000 or about 49%. Following the latest reductions, the headcount in Keppel O&M is approaching a steady state that is appropriate for the level of work in our yards. Nevertheless, we will actively monitor market conditions as well as explore ways to achieve further cost savings and ensure that Keppel O&M remains profitable despite the reduced topline,” the CEO said.
With the lack of demand for its core, rig-building, business, Keppel O&M is looking for other markets and revenue sources as well.
“Gas will be an important market of the future, and we are priming Keppel O&M to be an industry leader with an extensive gas strategy that spans the value chain. We are actively pursuing opportunities in small scale LNG vessels with our customers and partners. We see many opportunities in this space, especially where Keppel-built carriers and regasification units can be deployed alongside small gas-fired power units. We are also re-purposing our offshore technology for applications in other areas including floating infrastructure assets,” the CEO said.
Keppel O&M’s net orderbook as at end-March 2017 stood at S$3.5 billion, S$2.2 billion of which in the FPSO/FLNG segment. In mid-2017, the company will deliver Golar Hilli, the first-of-its-kind floating liquefaction vessel conversion in the market.
The rest of the order book comprises S$900 million in jack-up rig segment, S$200 million in semisubmersibles, and S$200 million in specialized vessels and other work, such as modification, upgrading, fabrication and rig repairs.
Offshore Energy Today Staff