Persistent troubles from jack-up rigs continue to hound Sembcorp

It has stopped recognising revenue from five rigs.

Escalating headwinds await Sembcorp Industries as grief from its jack-up rigs continue to be the thorn in the conglomerate’s side.

According to UOB Kay Hian, earlier profit recognised from five drilling jack-up rigs, 2 Perisai units and 3 Oro Negro units, were reversed in 3Q.

“These rigs are on 20:80 payment terms. Only 20% has been collected by SMM. We had earlier flagged the risks of the seven jack-up rigs (2 for Perisai, 3 for Oro Negro, 1 for Marco Polo and 1 for Hercules),” UOB Kay Hian said.

Meanwhile, UOB Kay Hian said Sembcorp’s associate losses came in at $24.4m in 3Q due to COSCO Shipyard Group.

“A S$17.1m impairment charge was also made relating to SMM’s investment in CSG. The losses were offset by a forex gain of S$35.1m and a tax write-back of S$10.2m,” UOB Kay Hian said.

As for its troublesome Oro Negro rigs, UOB Kay Hian says there is a high probability that SMM might exercise its contractual right.

“Shareholders of Oro Negro – including Temasek Holdings which owns a 22.5% stake - might not pump further equity into the company. The three Oro Negro rigs are 95% completed, while the two Perisai units are estimated to be 90% and 50% completed respectively. Only 20% of their contract amounts have been collected for the 5 units,” UOB Kay Hian said.