SembMarine: Offshore spending rising, but not for new rigs. New orders expected in production units segment

Singapore’s offshore platform and rig builder Sembcorp Marine sees improvements in global spending on offshore exploration and production, however, it does not expect this to reflect on its near-term business volume. The company will focus on offshore production units as this is where it sees an increasing number of inquiries.

Petrojarl Varg FPSO; Image source: Teekay Offshore
Petrojarl Varg FPSO; Image source: Teekay Offshore

The rig builder on Wednesday reported a net profit of $6 million for the fourth quarter of 2018, compared to a profit of $117 million in the fourth quarter a year ago. Worth reminding, the 4Q profit in 2017 was boosted by contract termination fees for three rigs, and the sale of Cosco shares.

“The lower net profit of $6 million reported in 4Q 2018, compared with 4Q 2017, was due to the continued low overall business volume, impairment of an asset and accelerated depreciation costs. This was partially offset by increased margin recognition from the newly secured floater projects and the write-back of provisions for completed projects,” Sembcorp Marine said.

For the full year, Sembmarine reported a net loss of $74 million, compared with a net profit of $260 million in FY 2017. New orders worth $1.2 billion were secured in FY 2018, bringing Sembmarine’s total net order book to $6.21 billion as at end December 2018.

Wong Weng Sun, President & CEO at Sembcorp Marine said: “The improved outlook for the offshore and marine sector continues. Offshore rigs utilization and day rates for most segments have continued to stabilize or improve, underpinned by more drilling activities.

“Offshore capex spending continues to improve with more production projects moving towards final investment decision (FID) stage.”

Wong Weng Sun said that while offshore drilling activities have increased, offshore rig orders will take some time to recover as the market remains oversupplied.

The CEO said: “While the overall industry outlook continues to improve, significant time and effort for project co-development with potential customers are required before new orders are secured, and competition remains intense.”

“Offshore production units are expected to dominate orders pipeline and Sembcorp Marine is responding to increasing inquiries and tenders for innovative engineering solutions.”

As reported earlier this week, Rystad Energy expects 33 floating, production storage and offloading (FPSO) vessels to be sanctioned from 2019 to 2021 as oil and gas activity picks up in the offshore sector.

Sembcorp Marine has significant experience in this segment. It is currently working to finalize to the agreement signed in October last year for engineering, procurement and construction works relating to the modification, repair and life extension of the Petrojarl Varg FPSO, in a deal valued $166 million.

The Singapore-based firm is also currently working on the construction of three offshore production units, two of which are FPSOs. The first newbuild FPSO hull and living quarters project is for Equinor, for the Johan Castberg field development in the Barents Sea, and the second is a newbuild FPSO hull, living quarters and topside modules, for TechnipFMC for deployment in the Energean-operated Karish and Tanin deepwater field in the Eastern Mediterranean.

The third production unit SembMarine is currently building is not an FPSO but a TLP platform for Shell’s Vito development in the Gulf of Mexico.

Apart from the production units, SembCorp is currently also busy with the construction of Sleipnir, the world’s largest semi-submersible crane vessel (SSCV) for Heerema; and the construction of two high-specification ultra-deepwater drillships for Transocean.

Overall, the CEO said on Wednesday that the business volume and activity for the Group, while stabilizing, is expected to remain relatively low.

“We will continue to take steps to manage our costs, cash flows and gearing to address our balance sheet to capitalize on new business opportunities,” Weng Sung said.

Offshore Energy Today Staff

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