04 September 2012

Offshore and Marine Sector In Singapore

Yesterday I just went for 1 hour seminar regarding offshore & marine sectors in Singapore. Here I wish to note down some points here for reference:
  • There are increasing or at least consistent demand for rigs building, to replace the old rigs which have 20-25 years history. This gives benefit to the Singapore rig builders such as Keppel Corp and Sembawang Marine. Nevertheless, the share price of these two are co-relation to the oil price.
  • The research team expected to have another two more good years to this industry, barring any unforeseen circumstance (e.g. global economy recession or oil price sudden shock etc).
  • Chinese shipbuilders are picking up to venture into this industry. Cosco and Yang Zi Jiang are the two mentioned here. Nonetheless, the research team expected that the they would have to lower down their profit margin to get new projects and there is a steep learning curve for them to learn the technology of building rigs. 
  • There are three main categories of rigs: jack-up rigs, semi-submersible rigs and drill ships. It takes about 2-3 years to finish building a jack-up rigs and semi-submersible rigs. Singapore companies control main stakes in jack-up rigs while Korean companies are the main builders for drill ships. The research team forecast that there would be more ongoing deep sea activities now compared to few decades before due to better technology as well as depletion of oil in shallow water area and onshore.
  • Basically the rig building consists quite a low financing risk but they are facing credit risk or counter party risk, as their customers are the one who bear the financing cost and normally the rig builders would receive 20% down payment first before they are starting their projects and they can negotiate a progressive billing (cash flows) so that they can better manage their working capital. 
Below are some links which I think useful for us to better understand the offshore & marine industry:
Below are the charts for Keppel Corp, Sembmarine and Ezion for the past 5 years:

Source: shareinvestor.com

Source: shareinvestor.com

Source: shareinvestor.com

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