Keppel Corp

Keppel Corp: its Keppel FELS unit has been selected by Ukraine’s National Joint Stock Company, Naftogaz, to build 2 semi-sub drilling rigs. The co is now in further contract negotiations with Naftogaz on the price and delivery schedule before the final contract is signed. Based on recently transacted prices for semi-submersible newbuilds, the two semi-submersible rigs are likely to cost in excess of US$1.2b. This announcement of its win follows the closure of the tender on Oct 29, and confirms earlier reports that KEP had submitted the most competitive bid among four parties. Naftogaz is an established customer of Keppel, after taking over 2 Keppel FELS rigs from a previous Keppel customer Standard Drilling. The state-owned company recently took delivery of its second KFELS jack-up rig on Jun 30, with the rig to be deployed on the Ukrainian shelf of the Black Sea for its owner Chernomornaftogaz. According to Ukraine’s official estimates in 2011, the country has proven reserves of natural gas (1,200 b cubic metres) and oil and gas condensate (220m tonnes). Nomura reiterates Buy on KEP, with TP $13.80. Notes current FY13e/14e P/E of 13.2x and 12.8x respectively, are at the lower end of its historical P/E band of 8-22x and its div yield are attractive at 4.5%. Current orderbook as at end 9M12 was $13.1b with deliveries extending into 2019.