Singapore yards diversify products to stay competitive against Korean peers

Sembmarine's latest deal worth US$295m with Prosafe just reinforced this view.

According to CIMB, Sembmarine’s latest Letter of Intent from Prosafe for a semi-sub accommodation rig (estimated at US$295m) has reinforced its conviction that the cycle of rushing orders before the year ends will be dominated by a more diversified mix of vessels with higher contract values.

Here's more from CIMB:

Sembmarine has signed an LOI with a repeat customer, Norwegian-based Prosafe AS, for the construction of a semi-submersible accommodation rig. The rig will have the same design as Safe Boreas, being built at Jurong Shipyard. Delivery is expected in 2Q14.

In addition, Sembmarine has granted two options for further newbuilds, bringing to three the number of outstanding options it has with Prosafe. The two can be designed for either Norwegian Continental Shelf or worldwide operations.

What We Think

This LOI is one of two options granted by Sembmarine to Prosafe in Dec 11, along with the Safe Boreas
contract at US$291.6m. We estimate that the value of the final contract could be in a similar range. This
could bring Sembmarine’s YTD orders to S$9.5bn (Petrobras: S$6.9bn, non-Petrobras: S$2.7bn),
in line with our S$10bn expectation.

To stay competitive against the Koreans in the drilling rig market, Singapore yards have been
broadening their product mixes to cover harsh-environment products that command higher values. These
range from accommodation rigs (US$290m-300m) to heavy-duty and high-spec jack-ups (from
US$450m) and FPSO topside fabrication and integration. The latest contracts from Petrobras
amounted to US$674m for SMM and US$950m for Keppel.