Keppel could rake in $1.2-1.3bn worth of PEMEX rig orders

Estimate based on current rig prices.

According to Barclays, Keppel’s MOU with PEMEX to collaborate in the development and operation of a new yard in Mexico could pave the way for further opportunities for Keppel in Mexico.

The new yard is expected to support the construction of six new KFELS B jackups, "which we envisage will be partially built in Singapore," said Barclays.

"Based on current rig prices, we estimate this could be worth cUS$1.2-1.3bn for Keppel," it added.

Barclays also foresees a possible shift in production priorities for Keppel as Mexico faces energy reform initiatives.

"Keppel has already been a beneficiary of PEMEX’s development plans, with the company receiving orders for two jackups which are currently being constructed. Reform in the industry could shift PEMEX’s focus to its own shallow water operations while opening the door to private capital to develop deepwater prospects. This could drive increased demand for both deepwater and shallow water rigs," the research firm said.

Lastly, Barclays identified two key risks to the Keppel-PEMEX collaboration. First, the increasingly competitive landscape given the rising competition from Chinese yards may limit contract pricing upside or contract orders. Second, the quality of the current order backlog may be impacted by margins from Brazil contracts.