SINGAPORE (Mar 5): CIMB is maintaining its "overweight" on the Offshore & Marine sector on expectations of $3 billion in order wins each for Keppel and Sembcorp Marine this year.
Upstream reported that Petrobras and local rig-chartering entity Sete Brasil have reached a key agreement that calls for the construction and delivery of four drilling units, likely to be those in advanced stages.
"We believe the units are likely semi-subs that belong to Keppel and SembMarine which are largely completed," says analyst Lim Siew Khee in a Friday report.
CIMB has Keppel and SembMarine at "add" with target prices of $10.00 and $3.01 respectively.
But Lim believes the finalisation of construction could still take a while depending on financing structure.
Sete Brasil, which has been under bankruptcy protection since April 2016, will keep the charter for four drilling rigs while terminating the contracts for another 24. Sete Brasil had originally ordered the construction of 29 rigs with five Brazilian shipyards for day rates of between US$344,000/day and US$357,000/day.
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Upstream now reports that the new 10-year charter agreement will be US$299,000/day.
The rigs were previously contracted with the Singapore yards for an average price of US$800 million each. The above four rigs are largely completed: Urca by 91%, Frade 70%, Arpoado by more than 90% and Guarapar by more than 80%.
Provisions were made in FY16 to the tune of $230 million and $329 million by Keppel and SembMarine, respectively.
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"Given the significant completion stage, we think total contract size to complete the two rigs will be in the region of US$200 million," says Lim although finalisation of the above contracts may take a while to conclude, depending on the financing structure.
As at 12.28pm, shares in SembMarine are down 9 cents at $1.93 or 64.3 times FY18 earnings while shares in Keppel are down 20 cents at $7.67 or 14.2 times FY18 earnings.
