Singapore's Keppel Posts Lower 2Q Profit, Says Rig Market Outlook Muddy
SINGAPORE, July 20 (Reuters) - Singaporean conglomerate Keppel Corp posted a 21 percent drop in its quarterly profit and warned it did not expect a speedy recovery in the offshore and marine market.
The conglomerate and its smaller cross-town rival Sembcorp Marine have been hit by an oversupply of offshore oil drilling rigs, with customers delaying contracts and refraining from placing new orders with oil prices expected to stay lower for longer.
"Despite some pick-up in activity in the offshore market, the general consensus is that, with the prevailing uncertainty in the oil market, and oversupply in the jackup market, a quick recovery is unlikely," said CEO Loh Chin Hua.
Keppel - which got most of its earnings from its property division in the quarter - reported a net profit of S$161 million ($118 million) for the three months ended June, versus S$205 million a year ago.
Revenue from the Offshore and Marine (O&M) division, that builds offshore drilling rigs and support vessels, fell 38 percent to S$449 million due to a drop in work volumes.
Keppel has outlined the liquefied natural gas (LNG) market as a focus area as it tries to boost O&M returns.
The company is betting on expectations that demand will grow for the fossil fuel, which is cleaner than oil or coal and is also versatile, with potential uses ranging from power generation to heating and as a transport fuel.
This year Keppel is on track to deliver the world's first conversion of a ship into a floating liquefaction vessel to Golar LNG and is building small-scale LNG carriers. It has a joint venture with Royal Dutch Shell to supply LNG bunkering operations services in Singapore.
The O&M division recorded a net order book of S$3.4 billion as of June 30. That excludes orders from one of its biggest customers, rig leaser Sete Brasil Participacoes SA, which filed for bankruptcy protection amid a corruption scandal.
"We will continue to build new capabilities, look for new markets in the gas industry and non-oil and gas plays such as Jones Act vessels and dredgers," Loh said.
The Jones Act mandates the use of U.S.-flagged vessels to transport merchandise between U.S. coasts.
"We will also explore opportunities to re-purpose our offshore technology for other uses," Loh added.
Keppel's property division posted a 16 percent rise in quarterly revenue, helped by higher home sales. Keppel sold about 2,470 homes in the first half, up 15 percent from a year ago.
Ang Wee Gee, CEO of its property business, said Singapore's residential real estate market, which has been hit in recent years by cooling measures, was bottoming out and that the company would look at opportunities to increase its land bank in the city-state.
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- BP Buys 61 Percent Stake In Azerbaijan's Gobustan Onshore Project
- Prices For November Soften After Earlier Strong Weeks
- China's Sinopec Plans To Build Canadian Oil Refinery
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three