Falcon Energy

Falcon Energy: CS has an unrated report on the Co. House hosted lunch with the CEO of Falcon Energy, which entered the offshore drilling market through ordering two jack-up rigs with Chinese yard CMHI in October 2011. Falcon’s mgt were positive on the jack-up rig market, noting that while the yard price of the rigs was US$180m, the current market price is closer to US$220m. The co further ordered a Super B class jack-up from Keppel in April 2013 for US$226 mn. While rigbuilding at the top-tier Chinese yards may appear attractive with low down payment required, management noted that they would require active supervision during construction, and a longer delivery track record before getting international acceptance. Falcon intends to place the bulk of future rig orders with Chinese yards, but will also build selected units in Singapore yards to meet specific customer requirements. Mgt focus in the medium term will be to grow the Marine and Drilling Services division, potentially entering the liftboat market. In the near term, management said profitability of the Marine division could improve with rising dayrates and vessel utilization.