O&M

O&M: CIMB has comprehensive report on Sector. Maintain Overweight, with an estimated 40% of rig-order forecast for this yr being met. Estimate orders for 167 rigs globally from 2011 to 2013. House maintain order forecast but increase estimation for total spending to US$111b from US$74b over nxt 3 yrs as assumptions replace some semi-subs with drillships, given the latter’s growing popularity…..

SembMarine remains house top pick, tipping more order wins in the near term to boost its share price. See sector catalysts from a stronger order momentum and higher margins. House stand firm in belief that both SG and Korean yards will preserve their lion’s shares of the jack-up and drillship markets respectively over next 3 yrs…..

Note that Chinese rigs are not cheap, contrary to current wisdom. E.g the last premium jack-up rig that Seadrill ordered from Dalian Shipyard in Nov 10 cost US$190m, comparable to contract prices for Keppel and SMM, given similar construction durations…..

Add that recent channel checks with Daewoo Shipyard reveal that the Koreans do not rule out SG rig-builders as competitors in the drillship segment but not large-scale offshore equipment (FPSOs, FPSO-LNG, wind turbines etc). House believe it is a matter of time before operators start to source from SG for drillships as Korean yards get progressively booked out. Drillship deliveries from Korean yards have been stretched till 2014.