SMM

SMM: Transocean has deferred the delivery of two ultra-deepwater drillships to be constructed by Sembcorp Marine’s Jurong Shipyard by 24 months.

The contracts are worth US$540m per unit and were originally scheduled to be delivered in 2Q17 and 1Q18. The revised delivery dates are 2Q19 and 1Q20.

While Maybank-KE has previously expected delays, the 24-month deferment is longer than expected. This comes after Transocean delayed five jackup rigs contracted to Keppel FELS by 18 months.

Other rig contractors like Atwood and Ensco have also delayed their drillship orders with the Korean yards. These reflects the severe rig supply glut over the next two years, and underscores Maybank-KE’s negative view on rigbuilders.

Maybank-KE is cutting its FY15-17e earnings estimates by 3%/7%/1% to factor the delay, and maintains its Sell rating on SMM with an unchanged TP of $2.45. The house does not rule out further earnings revisions on further surprise delivery deferments.