Rig production deals set to rise in 2018

Thanks to oil prices higher than US$60/bbl and lower project costs.

Singapore's rig builders are poised to bag more deals for rig production in 2018, thanks to higher oil prices and reduced project costs, DBS Equity Research said.

According to a report, higher oil prices are a "harbringer" for contract flows, which is a company's leading indicator of earnings growth. Oil prices are currently sustaining above US$60/bbl.

Amongst the rigbuilders, Sembcorp Marine (Sembmarine) can bag over $3b, potentially translating to firm orders for the next 12 months.

Orders include letters of intent (LOI) with SeaOne Caribbean for two large Compressed Gas Liquid carriers, totalling $800m.

Sembmarine is also a preferred bidder to a semi-submersible production unit, estimated to cost $400-$800m, for Shell’s Vito project.

It is also waiting for the finalisation of its first Gravifloat modularised liquefied natural gas (LNG) exporting terminal for Poly-GCL worth $1b.

DBS analyst Pei Hwa Ho said, "We believe Sembmarine’s Gravifloat LNG terminal provides a unique cost efficient modular option to customers, and stands to be the next mainstream product of Sembmarine. The value of these units can range from $200-$300m for importing LNG terminals, and up to c.$1bn for exporting LNG terminals."

There is also a FPSO processing topside for Statoil’s Johan Castberg project valued at $200-$400m and other FPSO conversion projects and LNG importing terminals with a price tag of $150-$300m each.

Meanwhile, Keppel Corporation Limited (Keppel), which focuses on FPSO and gas solutions, is expected to win around six orders.

It is expected to secure four FPSO projects worth $150m-$200m each from its long-standing customer Modec, two LNG fueled containerships worth $500m for US’ Jones Act marke, a semisub production unit worth $300m-$400m.

DBS also projects the company to get orders for four specialised vessels worth $200m, LNG solutions for west Indonesian locations worth $200m, and FLNG vessel valued $900m.