3 reasons why Singapore rig-builders are still in demand

Thanks to rising energy demand.

According to Phillip Securities, crude Oil price, a good sentiment gauge for the O&M sector, though fairly volatile, remains at a healthy level above US$80/bbl. 

This indicates a robust sector outlook. 

The rig-builders under our coverage, namely Keppel Corp and Sembcorp continue to register strong order book wins.

Here's more from Phillip Securities:

YTD order book wins total S$8.1bn vs PSR FY13F of S$10.6bn.

Management from both companies sees margin pressure to continue impacting the industry, due to competition from the Korean and Chinese yards.

However, we see limited downside risks from Chinese yards due to their lack of track record, late delivery concerns, as well as the anticipated recovery of the commercial shipbuilding market which should shift their focus from offshore back to shipbuilding. 

The demand for rig-builders also remains high due to: 1) Rising energy demand from emerging countries and 2) depletion in existing oil fields per Keppel Corp’s management. 3) 48% of global jack-up fleet over 30 years old, thus driving demand from replacements.