Steer clear of struggling rigbuilders until 2016, investors warned

They're in deep trouble even if oil prices stabilize.

Rigbuilders will stay stuck in choppy seas even if oil prices stabilize, a report by Maybank Kim Eng revealed.

The report noted that an a rig oversupply situation has existed even prior to the current oil price rout.

This means that rig orders will remain few and far between until the supply glut is resolved. The glut is expected to last until 2016 as 94%/49% of new jackups and floaters scheduled for delivery in 2015-2016 delivery are still uncontracted.

"Rig supply-demand imbalance implies weak rig order intake for rigbuilders.A rig oversupply situation existed even before the oil price rout. The Street expects drillers to continue to suffer over 2015-2016. This spells trouble for
Singapore rigbuilders as drillers are unlikely to order new rigs. Yards are banking on production-related orders to make up for weaker rig orders," said the report.