Why COSCO cannot fully celebrate its $400m new win orders

$500m contract termination casting a long shadow.

"We doubt the simultaneous string of order wins announced by Cosco, amounting to US$400m, will mask the negative impact of the termination of a contract worth more than US$500m," said CIMB in its flash note.

Cosco’s only drillship order, due to be delivered in 3Q12, has been terminated by its owner, which is now seeking a US$110m refund.

CIMB cites a report from Riglogix, which suggests that Odjfell is the drillshp’s owner and the vessel’s status is “under inspection”.

"Cosco could sell the vessel for US$500m (vs. about US$600m built in Korea), but the sale may prove to be a loss as it could cost Cosco more than US$500m to complete the vessel. More modifications may be required to suit the new owner's requirements," said CIMB.

"Arbitration is likely to take long to reach a settlement and we expect any provision made in this regard to wipe out its FY13 or FY14 profits," it added.