Oil - Service, Equipment, Pipelines etc

Oil - Service, Equipment, Pipelines etc

Postby winston » Fri Dec 05, 2008 1:46 pm

From DBS:-

The lower breakeven level for production projects would continue to create jobs for oil service and equipment
providers.

DBS Research likes oil service and equipment providers like Ezra (BUY; TP: S$1.25), and Swiber (BUY; TP: S$1.00) as they support the production phase of offshore projects.

KS Energy remains at FULLY VALUED, with fair value of S$0.46 due to relatively high share price valuation.

We are cautious on offshore yards like Jaya, who is at risk to weaker asset sales and access to funding for its speculative new builds.

We prefer ASL Marine (BUY; TP: S$0.84), due to its more resilient ship repair and vessel chartering business.

http://www.remisiers.org/research//sgoi ... 051208.pdf
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Re: Oil - Service and Equipment

Postby kennynah » Fri Dec 05, 2008 2:43 pm

if CL stays depessed at <50 for a long time.... who will be keen to explore for oil, who will be keen to invest in rigs?
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Re: Oil - Service and Equipment

Postby winston » Fri Dec 19, 2008 8:53 am

BUSINESS TIMES - Brazil's Petrobras is expected to revise its outlook for oil rig investments later on Friday when it announces its strategic plan for 2009 to 2013, in a move that could affect Singapore's Keppel Corp and Sembcorp Marine , the world's two largest builders of rigs for offshore exploration.
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Re: Oil - Service and Equipment

Postby winston » Tue Dec 30, 2008 4:56 pm

by millionairemind on Tue Dec 30, 2008 4:45 pm

December 30, 2008

Rig order slowdown sets in for shipyards

Keppel, SembMarine didn't win any new rig building contract in Q4
By VINCENT WEE


THE last week of the year is bringing in the dregs of new contract announcements from the main shipyards here. And from the look of things, the slowdown in rig orders has well and truly set in, with neither Keppel Corp nor Sembcorp Marine announcing any new rig orders in the fourth quarter.

Keppel Offshore and Marine (KOM) said yesterday that several of its units have won contracts worth a combined $200 million for a floating production storage and offloading (FPSO) conversion and five tug-building jobs.

As of yesterday, Keppel has secured $5.9 billion of new contracts this year and has a net order book of $11.2 billion. SembMarine has won $5.7 billion of contracts and has a net order book of $10.1 billion.

The most notable figure, however, is one that is glaring by virtue of its absence. Keppel and SembMarine, which together build about 90 per cent of the world's rigs, did not win a single new rig building contract in Q4. Indeed, the most significant news in recent months was Keppel's revelation last month that $1.2 billion of orders from various clients were under review.

Although Q4 is traditionally a slow time for deals, at least some rig contracts were signed in Q4 2007. For example, Keppel won a US$780 million order for four jack-up rigs and a massive US$1.2 billion order from Brazil's Petrobras for a floating production unit (FPU).

'The fundamentals of the industry remain sound, even though the pipeline of projects has slowed down.'
- Keppel Offshore and Marine COO Tong Chong Heong

SembMarine was preoccupied with internal problems related to unauthorised foreign exchange transactions during much of Q4 2007 and saw few new orders.

In contrast, contracts secured in Q4 this year have been entirely for conversion and shipbuilding. Keppel's order flow seems to be still pretty good, with $690 million of mainly FPSO conversion and related work announced.

SembMarine announced just one $200 million FPSO conversion in Q4.

Both Keppel and SembMarine seem recently to be increasingly keen to highlight the continuing stream of contracts won by their shipbuilding and repair arms.

'The new orders are a creditable wrap-up for a year in which the second half has been ravaged by very negative financial and economic factors,' said KOM's chief operating officer Tong Chong Heong.

'The fundamentals of the industry remain sound, even though the pipeline of projects has slowed down,' he said. 'There are still projects in the market, but we will only take on those that are cashflow positive.'

SembMarine, when announcing an evergreen favoured customer contract (FCC) with International Gas Transportation Co to provide repair and life extension works, said: 'This is a significant achievement for SembMarine, as it is the first evergreen FCC contract signed between a renowned LNG ship operator and a Singapore shipyard group.

'As part of the group's strategy to become the world leader in the repair and life extension of LNG carriers, we have achieved an important step in getting into the big league of specialised LNG carriers refit and life extension work.'

Keppel shares closed six cents higher at $4.26 yesterday. SembMarine shares closed three cents up at $1.69.
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STI - Market Direction & Strategy (Nov 08 - Feb 09)

Postby millionairemind » Sat Feb 07, 2009 1:38 pm

Corporate Focus
Petrobras plan good news for rig builders here

The US$174b five-year plan could bring new rig orders, contract jobs. By Vincent Wee
BRAZILIAN oil giant Petroleo Brasileiro (Petrobras) recently announced its long-awaited US$174.4 billion business plan for 2009-2013. The plan, which had been delayed twice as the state-run company weighed its options amid the credit crunch and plunging oil prices, must be good news to Singapore's two main rig builders, Keppel Corp and Sembcorp Marine, which have had a very dry fourth quarter last year in terms of new rig orders.

STRONG FOOTHOLD
Keppel says through Keppel Fels Brasil, it has strong local presence, experience and track record in Brazil


Petrobras has previously said it plans to contract 40 drilling ships and platforms to operate in deep and ultra-deep waters by 2017. Of these, 12 have been contracted so far and the remaining 28 are expected to be built in Brazil. At least three production systems in fields such as Tupi and Guara are expected to go on stream in 2012-2013, which could stir demand for floating production units.

But the concern is how many of these contracts they will be able to win and at what price. Petrobras last month cancelled tenders for two oil production platforms citing too high-priced bids given current market conditions, in a clear sign that more austere times are ahead and budgets will be closely watched despite the need to expand production capacity. The lowest bid for one of these, the P-61, was from Modec for US$1.72 billion.

'We will implement upwards of 500 projects, ensuring investments and generating jobs at the lowest possible cost,' industry website Rigzone reported Petrobras president Jose Sergio Gabrielli de Azevedo as saying. 'The preparation of the plan took the prices that were in effect in the last quarter of 2008 into account, in a scenario that was quite different from the one we currently have,' he added. 'It is not feasible for any company to keep prices at the same levels as in 2008. The economy has changed.'

The 35 per cent of total projects that are still in their conceptual phases are those that offer the best cost-reduction opportunities, Mr Gabrielli noted. 'The market foresees a 30 per cent variation upwards or downwards for any project that is in its initial study phase, and that is certain to happen.'

Deals with Petrobras are typically done in one of two ways: through direct contracts with the company or by building for companies that are in turn contracted to work for Petrobras. The direct contracts often include local content requirements of 50 per cent and above, as the state oil company seeks to help boost the Brazilian economy through its investments.

Rigzone reported that Petrobras Exploration and Production (E&P) director Guilherme Estrella expects to make investments of US$92 billion for the E&P area in the 2009-2013 period, in Brazil alone, US$26.9 billion more than the US$65.1 billion laid out in the previous 2008-2012 plan.

Petrobras expects to have the P-62 and P-55 platforms, both in the Roncador field and P-61 and P-63, both in the Papa-Terra field, in operation for 2013.

Particularly for the big US$1 billion-range production unit-type projects, both Keppel and SembMarine will be in the running with their established track records of previous projects with Petrobras and in the case of Keppel a massive yard in Brazil.

Keppel has won a string of massive floating production unit orders in the last three years, while SembMarine has also been active in the market in the past through its joint venture Maua Jurong yard. SembMarine, through its Jurong Shipyard unit, now has a strategic alliance partnership with Mac Laren Shipyard in Rio de Janeiro. The two rig builders should also benefit indirectly through jobs from contractors that work for Petrobras.

But close attention must be paid to contract values and the attendant local content requirements. While the headline numbers may impress, higher operating costs and a challenging operating environment could affect both margins and productivity, especially as local content is increased with successive projects. For example, Keppel's latest US$1.2 billion P-56 project is believed to have an almost 100 per cent local content requirement.

'While direct contracts could possibly ensure some form of contractual certainty, given the Brazilian government's backing, the heavy reliance on local content element may possibly lead to erosion of earnings' margins. We believe that higher operating costs in Brazil had eroded the Singapore yards' operating margins as exemplified by two of Petrobras' projects built at Keppel yards. This is as recent as Q408 when Keppel O&M's (offshore and marine) operating margin declined to 9.3 per cent in Q408 as Petrobras' P56 FPU reached its first 20 per cent milestone recognition,' warned a recent DMG and Partners report.

'Petrobras' investment plans are encouraging to Keppel O&M. We have worked on several important projects for Petrobras and have a win-win relationship with them. Through Keppel Fels Brasil, we have strong local presence, experience and track record in Brazil. This puts Keppel O&M in a good position to support Petrobras' plans to increase its production,' said a Keppel spokesman.

'Sembcorp Marine's venture into Brazil has been fruitful. So far, there have been notable FPSO conversion projects as well,' said a SembMarine spokesman.

Margins notwithstanding, some analysts are upbeat on the potential order flow from Petrobras. 'While direct exposure to Petrobras is around 15 per cent for Keppel and 0 per cent for SembMarine, indirect revenue through customers whose rigs are bound for Petrobras ranges between 20 per cent to 30 per cent of order book. Maintain 'buy' on Keppel Corp (target price $7.10) and SembMarine (target price $2.45),' said Deutsche Securities Kevin Chong.

CIMB-GK Research, while noting Keppel's spike after the Petrobras report, maintained its 'underperform' rating on continued cancellation and deferment risks and has a target price of $4.60 which incorporates higher O&M earnings for FY10.


'It is not time for sector optimism as downside risks persist. We advocate that it is still too early to turn buyers on the O&M sector. With no clear indication of the easing of credit markets, we opine that any significant newbuild contract will only occur in H209 soonest,' said DMG's Serene Lim, who has neutral ratings and target price of $4.48 and $1.75 on Keppel and SembMarine respectively. Keppel shares closed 15 cents higher at $4.32, while SembMarine shares closed six cents up at $1.55 yesterday.
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Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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Re: Oil - Service and Equipment

Postby winston » Thu Feb 12, 2009 9:43 am

From OCBC:-

Deepwater industry update: Recent news should uplift KEP, SMM, EZRA

Reports of sustained deepwater drilling.
Recent reports have revealed that Chevron, BP and other oil producers have been locked into drilling deepwater offshore wells with costs exceeding US$200m each because of high rig charter contracts that were signed when crude was soaring above US$140/barrel.

While the oil majors might consider cancelling brand new uncommitted projects, pledged jobs with daily rig contract rates of up to US$600k/day will likely proceed in view of the cancellation costs. This can
range up to US$219m to terminate a 12-month rig charter contract.

Deep pockets return deep profits. The last time oil prices plunged, producers which could afford a long-term view were paid off handsomely. For example, BP's 1.5b-barrel Thunder Horse field in the Gulf of Mexico
(GOM) was discovered in 1999, when crude traded as low as ~US$11/bbl.

The Thunder Horse wells eventually started producing in Jun 08 and it rode on oil's record highs of US$143/bbl.

Indirect beneficiaries to gain too.

Transocean's (owner and operator of rigs) most sophisticated rigs are also reported to be booked till mid 2010.

Another rig operator, Anadarko Petroleum, has plans to prospect the GOM for an estimated 100m barrels of oil (US$4b at US$40/bbl) as it projects that it can make a 10% profit in deepwater fields when oil is at US$30/bbl.

Singapore yards find some relief. This newsflow pushes the relief valve on KepCorp and Sembcorp Marine (SMM) that have sustained share price pressure due to news flow of possible rig order cancellations. KepCorp and SMM's current orders are primarily from established and long time customers. While payment postponements for near term deliveries of noncontracted rigs are still a possibility, we take comfort in the improving business direction clarity from the oil majors and larger drillers.

Offshore vessels will also benefit. Rigs deployed in deepwater will require offshore support vessels of higher specifications. About 77% of Ezra's young offshore vessel fleet are deepwater capable and this should provide some support for medium-term charter rates.

BUY SMM & Ezra. We prefer SMM (FV: S$2.00) and Ezra (FV: S$1.09) in view of undemanding valuations and the purer play on the O&M sector. While KepCorp will benefit from this development, we think its property sector will continue to put a cap on its share price in the medium term. As such, we keep our HOLD rating on KepCorp (FV: S$4.40).(Kelly Chia)
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Re: Oil - Service and Equipment

Postby winston » Fri Feb 13, 2009 11:36 am

Everyone is pushing O&M now. Oil gone up to US$150 meh ? Maybe it's because there's no more ideas in Spore. Cant push Banks, Properties, Plantations, S-Shares ( QDII ), REITS... So the only idea left is Valuation plays :P

=================================================

From DBS:-

• O&M stocks could find support upon any minor pullback


O&M stocks could find support upon any minor pullback in coming sessions, ahead of an anticipated short-term rebound in oil price later next week.

Technically, oil price has limited downside near-term, with more upside than downside bias because:

1. Trend of oil price has followed and slightly lagged that of equity indices in recent months i.e. sideways. It is currently trading closer to the lower end of the trading band from USD33pbl to USD47pbl. Given
that equity indices in general have not broken down from their 3-mth long trading band, oil price should
also not break down from its 2-mth long trading band for now. Thus, at USD34pbl, oil price has more
upside than downside within the trading band in the near-term.

2. Within the current trading band, oil price tends to head down towards USD33pbl as the front month futures contract expiration date drew near and rebound back towards the upper band of its current range after that date. The expiration date for March delivery is next Fri, 20 Feb. If this pattern continues,
oil price should base build around USD33pbl in coming sessions and rebound starting late next week.

Among the O&M stocks, we see near-term technical support for Semborp Marine at near $1.53 and Ezra at $0.655.
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Re: Oil - Service and Equipment

Postby winston » Mon Feb 16, 2009 3:21 pm

DJ MARKET TALK: MS Cuts S'pore Offshore & Marine Targets

0204 GMT [Dow Jones] STOCK CALL: Morgan Stanley lowers target prices for Singapore-listed shipyards, reiterates Cautious view on sector. "We forecast a flat/negative three-year EPS CAGR driven by a two-year lull in new O&M order activity, a drought in dry bulk freight newbuilds, and risks to the existing order books."

Cuts Cosco Corp. (F83.SG) target price to S$0.50 from S$0.75, maintains Underweight rating as says shipbuilder faces sharp drop in earnings this year due to dry bulk ship order cancellations, delays, lack of new orders.

Cuts Keppel Corp. (BN4.SG) target price to S$3.90 from S$12.50, maintains Equal-weight rating as says valuation looks fair given tough outlook.

Cuts SembMarine (S51.SG) target price to S$1.40 from S$4.80; maintains Equal-weight rating as awaits better entry point.

Cuts Sembcorp Industries (U96.SG) target price to S$2.40 from S$6.00, but maintains Overweight call as says company has lowest shipyard exposure, attractive valuation.

Latest prices; Cosco flat at S$0.88, KepCorp +2.1% at S$4.28, SembMarine +1.3% at S$1.57, Sembcorp Industries +1.4% at S$2.25.
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Re: Oil - Service and Equipment

Postby winston » Tue Mar 03, 2009 11:36 am

DJ MARKET TALK: KepCorp Orders Healthier Than SembMarine's - CS

0155 GMT [Dow Jones] Credit Suisse remains cautious on demand outlook for Singapore rig builders as continued weakness in global financial markets suggests rig building demand to recover in late 2009 or 2010 at the earliest. Warns significant proportion of projects facing funding difficulty may have to be delayed, canceled or possibly funded by yard; "none of these alternatives appear attractive to us from the perspective of buying into rig-building stocks."

Says SembMarine's (S51.SG) exposure to Larsen Oil & Gas group worrisome, accounting for almost 30% of its order book, as it appears to be under some financial stress. But says Keppel Corp's (BN4.SG) net order book appears healthier with significantly lower customer concentration risk. Notes Keppel also trading at more attractive valuation on price/book vs SembMarine; rates Keppel at Neutral,
SembMarine at Underperform.

Also recommends Yangzijaing (BS6.SG) with Neutral cal, over Cosco Corp. (F83.SG), rated Underperform; notes former's better execution track record, profitability. Maintains Market-Weight call on Singapore offshore & marine sector
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Re: Oil - Service and Equipment

Postby winston » Wed Apr 22, 2009 10:49 am

From DBS:-

For rig builders, we expect the dissipation of order cancellation risk to gain momentum after mid-2009, and have cut the assumptions used in our earnings models by 15-20%. We are also re-rating the rig builders’ various businesses to that used in a normalized early recovery cycle, vs. trough valuation previously.

Our top pick is SembCorp Marine (TP: $2.57). SembCorp Industries (TP: S$3.13) is upgraded to BUY. Retain FULLY VALUED on Keppel Corp (TP: S$4.45).
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