Keppel Corp: According to Upstream and Tradewinds, Transocean is delaying the delivery schedule for five jackup rigs worth US$1.1b that it has placed with Keppel Corp, by about 6 months on average. Original delivery for the first unit was for 1Q16 and is now pushed back to 3Q16 reflecting the weakening conditions for jackup rigs.
Maybank-KE highlights that when Transocean first gave the order in Nov ‘13 for the quintet of jackup rigs, it came with options for 5 more units, but the house understands that the first few options have expired and believe that Transocean is unlikely to exercise the remaining options.
Separately, Sembcorp Marine is also building two drillships for Transocean and the house do not rule out that they may be subjected to deferment of delivery schedule.
Overall, Maybank-KE opines that some adjustments may be needed for recognition schedule of the jackups but is not expected to be significant. As long as the contracts are intact, Keppel would still get the expected profits.
The greater significance is the indication of a weaker demand even for jackups and where would new contracts come from in 2015 and 2016.
Maybank-KE has a Hold call on Keppel Corp (TP $8.60) and a Sell on Sembcorp Marine (TP $2.65)
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