Keppel Corporation will carry out a “comprehensive transformation” of its wholly-owned subsidiary, Keppel Offshore & Marine (Keppel O&M), to align it to Keppel’s Vision 2030.
The move comes amid the global energy transition and disruptions facing the oil industry.
It also comes as Keppel seeks to create a slimmer, more competitive Keppel O&M that is well-placed to support the energy transition.
Following the transition, Keppel O&M will exit the offshore rig building business once it has completed the existing rigs under construction.
Keppel O&M will also cease to undertake new projects requiring large upfront capital expenditure (capex) or without milestone payments.
This is in line with Keppel’s commitment to sustainability and disciplined approach towards capital allocation respectively.
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Keppel O&M will also progressively exit low value-adding repairs and activities with low contribution to the bottom line.
As part of the transformation, Keppel O&M will be restructured into a Rig Co, Development Co and Operating Co. Keppel O&M’s completed rigs will go under Rig Co.
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Rig Co and Development Co will be transient entities created to hold its $2.9 billion worth of completed and uncompleted rig assets while the Operating Co will oversee the rest of the company’s operations.
Operating Co will also pivot towards an asset-light and people-light developer and integrator of offshore energy and infrastructure assets.
“Natural gas, as a transitional fuel, is also projected to overtake oil as the world’s largest energy source in the years to come. To seize opportunities in this fast-changing environment, we are making bold and decisive moves to transform Keppel O&M to ensure that it remains relevant and competitive, and fully aligned to Keppel’s Vision 2030,” says Loh Chin Hua, CEO of Keppel Corporation and chairman of Keppel O&M.
“We are also exploring inorganic options for the O&M business, but there is no assurance that any transaction will materialise. In the meantime, we believe that our organic restructuring of Keppel O&M will not only enhance its competitiveness, but also its attractiveness, if we were to undertake any inorganic action,” he adds.
“A key goal of the restructuring is to create a more competitive, asset-light and people-light Keppel O&M, focused on seizing opportunities with higher value capture as a developer and integrator of offshore energy and infrastructure assets,” Loh explains.
“At the same time, the Rig Co and Dev Co will ring-fence Keppel O&M’s non-core rig assets, contain any further capital outflow beyond the initial funding, and work towards resolving this legacy issue. Through these changes, we aim to create a nimble industry leader that is well-positioned for the global energy transition and can be a strong contributor to Keppel’s target ROE of 15% as we progress towards Vision 2030.”
The restructuring will begin with immediate effect and is expected to be carried out through the course of two to three years.
Shares in Keppel Corp closed 12 cents lower or 2.2% down at $5.46 on Jan 28.
