This month Keppel
O&M and Semb Marine had announced orders of US$770mil and US$1bil
respectively. Keppel was awarded FLNG and liftboat orders while Semb Marine was
awarded a Heavy lift Semi-Sub Crane Vessel. For the two leading O&M
companies in Singapore, these are orders after some very quiet 2015 so far when
order intake is concern.
O&M and Semb Marine had announced orders of US$770mil and US$1bil
respectively. Keppel was awarded FLNG and liftboat orders while Semb Marine was
awarded a Heavy lift Semi-Sub Crane Vessel. For the two leading O&M
companies in Singapore, these are orders after some very quiet 2015 so far when
order intake is concern.
The last time
Keppel O&M announced order intake was in January this year when they were
awarded a S$265mil contract to build an ice class vessel and S$65mil contract
to build an Anchor Handling Tug and providing of technical services for the
construction of a liftboat. As for Semb Marine, the only other order for the
year was a FSO conversion contract worth S$56mil.
Keppel O&M announced order intake was in January this year when they were
awarded a S$265mil contract to build an ice class vessel and S$65mil contract
to build an Anchor Handling Tug and providing of technical services for the
construction of a liftboat. As for Semb Marine, the only other order for the
year was a FSO conversion contract worth S$56mil.
Exploration Halted
The number of Oil
Rigs required is closely related to the capital expenditure (Capex) programs of
Oil companies. Due to the low oil price, capex and other exploration works on
new fields all come to a halt. So SGX listed O&M rig builders such as Keppel O&M, Semb Marine, Cosco etc
will continue to feel the pressure of NO Rig orders.
Rigs required is closely related to the capital expenditure (Capex) programs of
Oil companies. Due to the low oil price, capex and other exploration works on
new fields all come to a halt. So SGX listed O&M rig builders such as Keppel O&M, Semb Marine, Cosco etc
will continue to feel the pressure of NO Rig orders.
With oversupply of
oil rigs, Offshore Support Vessels (OSV)’s demand also dropped in parallel drastically.
OSVs typically include vessels such as Anchor Handling Towing Supply Vessels
(AHTS) and Platform Support Vessels (PSV) etc. Similarly, we will also see less
offshore construction work, due to the low levels of new oil field
developments.
oil rigs, Offshore Support Vessels (OSV)’s demand also dropped in parallel drastically.
OSVs typically include vessels such as Anchor Handling Towing Supply Vessels
(AHTS) and Platform Support Vessels (PSV) etc. Similarly, we will also see less
offshore construction work, due to the low levels of new oil field
developments.
Specialized Vessels!
So as alternative,
yards will be counting on specialized vessels. What are specialized vessels,
and why are they still in demand?
yards will be counting on specialized vessels. What are specialized vessels,
and why are they still in demand?
Operational &
Maintenance activities Ramped Up
Maintenance activities Ramped Up
To compensate for
the low oil price, production of oil has to increase. Therefore specialized vessels
are employed to support the operational/production and maintenance side of the
oil and gas value chain.
the low oil price, production of oil has to increase. Therefore specialized vessels
are employed to support the operational/production and maintenance side of the
oil and gas value chain.
Floating Production
Storage Offload (FPSO) vessels will store and process the extracted crude oil
of existing oil wells, before the processed oil is transferred to a shutter
tanker. Then there will be Pipelay vessels that lay offshore pipes to transfer
oil and gas from one place to another. With almost little or no new
developments of oil fields, older oil fields will need maintenance or well
stimulation to increase production. Liftboat, Well Stimulation Vessels, Diving
Support Vessels or Multi-purpose vessels will then be needed.
Storage Offload (FPSO) vessels will store and process the extracted crude oil
of existing oil wells, before the processed oil is transferred to a shutter
tanker. Then there will be Pipelay vessels that lay offshore pipes to transfer
oil and gas from one place to another. With almost little or no new
developments of oil fields, older oil fields will need maintenance or well
stimulation to increase production. Liftboat, Well Stimulation Vessels, Diving
Support Vessels or Multi-purpose vessels will then be needed.
Fleet Renewal
Some ship owners
may also take this opportunity to renew their older fleet at an attractive
price. This is the case for Hereema when they awarded the US$1bil contract to
Semb Marine just this month, mentioned earlier.
may also take this opportunity to renew their older fleet at an attractive
price. This is the case for Hereema when they awarded the US$1bil contract to
Semb Marine just this month, mentioned earlier.
Anyway, I have
included below some of the specialized vessels and their typical contract
value.
included below some of the specialized vessels and their typical contract
value.
Disclaimer: The values of these vessels provided below,
are very rough indications use as a guideline only. The actual values vary
depending on the specifications of the vessels and the complexity of the main equipment
installed onboard.
are very rough indications use as a guideline only. The actual values vary
depending on the specifications of the vessels and the complexity of the main equipment
installed onboard.
FLNG / FPSO / FSO conversions
FLNG conversion ~ US$700mil
FPSO conversion ~ US$100mil
and above
and above
FSO conversion ~ US$100mil
and below
and below
FPSO (source: Modec)
Heavy Lift Crane / Pipelay Vessel
~ US$300mil to
US$1bil
US$1bil
Heavy lift Crane / Pipelay Vessel (source: Hereema)
Reel Lay Vessel (source: Technip)
Flexible Pipelay Vessel (source: SapuraKencana)
Liftboat
~ US$60mil and
above
above
Refer to Rolf Suey’s
article “LiftBoat
Lifting Expectations?”
article “LiftBoat
Lifting Expectations?”
Cablelay Vessel
~ US$50-100mil
Cablelay Vessel (source: Van Oord)
Windfarm Installation Vessel
~US$200-300mil
Windfarm Installation Vessel (source: Deme-group)
Multi-Purpose Support Vessel
~US$100-200mil
Multi-purpose Vessel (source: Bourbon)
Well Stimulation Vessel
~US$200-300mil
Well Intervention Vessel (source: Island Offshore)
Diving Support Vessel
~US$80mil and above
Diving Support Vessel (source: Subsea 7)
Rolf’s Summary
Even if there is
still demand for specialized vessels, it is inevitable that the numbers of
vessels required will be greatly muted in the current pessimistic O&G environment.
Furthermore, profit margins will be squeezed since there will be so many
shipbuilders chasing for the so little newbuild vessels projects.
still demand for specialized vessels, it is inevitable that the numbers of
vessels required will be greatly muted in the current pessimistic O&G environment.
Furthermore, profit margins will be squeezed since there will be so many
shipbuilders chasing for the so little newbuild vessels projects.
Related Posts:
Will be worse than in GFC?
Oil crisis affects O&G directly. GFC affects banks which indirectly affects O&G companies.
End of the day, which is worse is going to depend on which has oil price more depressed over a longer period of time!
Hi Rolf
How you can get so technical with O&G? It sounded like an O&G lesson. I remembered you are from this industry?
May I know how much you are vested with O&G stocks?
Hi FD,
Ah… I am still learning to be more technical. Anyway you can find the answer from my "purpose" page why I am slightly more technical on O&G than the usual. 🙂
Regarding my O&G vested interest, refer to
https://rolfsuey.com/2015/04/my-portfolio-1q15-review.html?m=1
Suffering now.. haha!
Haha. I remembered reading somewhere but lazy to go through pages again to dig out.
Great portfolio size and diversity you have.
Hi Rolf,
I remembered you are holding to Ezion. May I know what is your view on it? I was about to do some bottom fishing but stopped by this article.
http://splash247.com/hollow-man-or-how-inattention-to-industry-fundamentals-can-kill/
Hi Chin Wei,
Thanks for the reference link. It is a very good article and I kind of agree with it. haha.
Yes U remember correct, which is BAD news for me. I hold Ezion, and my buy price is 1.5. It is suffering.
Frankly since oil price decline drastically, it is extremely difficult for even fundamentally good company even those like Keppel and Semb to turn around quickly. The only time the share price will go up is due to market reaction solely. Unless oil price rebound and orders come in. But even oil price rebound, the reaction of companies rebounding up profit will take awhile, bcos of the backlog order nature of the business.
The GOOD news is, Ezion is less than 1.5% of my overall portfolio of stocks. If includes my cash position, percentage is even lower.
The best news to me though, is Acceptance. I acknowledged that it is not a good decision now. The same applies to Sembcorp when I buy it over $4.
By not covering my shortcoming, or not creating too many stories why I do this and that then, this is the only way I will learn really fast going forward.
We find lots of learning after reading this very useful article . cara menggugurkan hamil