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SembMarine faces tough year ahead on rigbuilding industry downturn

SembMarine faces tough year ahead on rigbuilding industry downturn
Singapore’s Sembcorp Marine (SembMarine) said it is facing a challenging year ahead as the volume of new rig orders has shrunk and charter rates have declined.

The ongoing cutback in global exploration and production expenditure by oil firms has led to a scarcity of new orders for the industry this year, the rigbuilder noted.

“Customers strive to conserve cash and consolidate their offshore fleet operations as charters are not renewed or are renewed at significantly lower rates. New rigs face the prospect of not securing charters despite their higher technical specifications and superior capabilities,” the company said.

“As a result, the group faces a challenging year ahead,” it added.

It further pointed out that the oil and gas industry in Brazil continues to be mired in uncertainty. SembMarine, which won seven drillship orders each worth around $800m from Petrobras’ Sete Brasil, is in talks with the Brazilian oil firm over delayed payments for the orders.

“We continue to engage with our customers to find the best way forward for our drillship projects and are exploring all options including slowing down the construction,” SembMarine said.

The comments came as the Singapore-listed company announced its first quarter results, with net profit falling 13.6% year-on-year to SGD105.87m ($79.63m) in the quarter ended 31 March 2015.

Revenue also dropped slighty by 2.4% to SGD1.3bn due mainly to the decline in rigbuilding and repair revenue.

SembMarine’s orderbook-to-date stands at SGD10.6bn with deliveries and completion stretching until 2019.

“Competition for new projects remains intense. The group will focus on cost and capital management and will continue to leverage on its strong track record, expanded product capabilities and alliance partnerships,” it said.