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Keppel Seeks to Monetize Legacy Rigs as Offshore Energy Sector Rebounds
Opportunities are emerging in the offshore energy sector as the market improves prompting Singapore-based Keppel to announce it will take direct control of 13 offshore rigs that are part of its former offshore and marine business. The new transaction is a follow-up to the $3.3 billion combination of Keppel Offshore & Marine and Sembcorp Marine which created Seatrium Offshore & Marine in 2023.
Keppel highlights that the global drilling fleet is aging rapidly and that during the prolonged downturn, the sector experienced years of under-investment which is impacting new supply. They note that a shortage of premium jackup rigs is projected in the coming years.
The high cost and long lead times associated with constructing new jackup rigs, Keppel anticipates is likely to create attractive opportunities for rigs that are currently undelivered as well as the opportunity to reactivate rigs that have sat idle during the downturn in the offshore market. Keppel was once a leader in the shipbuilding segment but with the prolonged downturn decided to transform into an asset manager focusing on infrastructure, real estate, and connectivity while merging its legal shipbuilding and repair operations with Sembcorp Marine.
As part of the previous transaction, 13 legacy rigs including unfished construction projects, were placed into a holding company. Keppel currently holds 10 percent of the equity along with securities and vendor notes which it will convert to take full control of the holding company by the end of 2024. Keppel emphasizes that has no intention to re-enter the offshore market, but it will form a new private fund to hold and manage the rigs.
“Keppel remains focused on the monetization of legal assets,” the company highlighted in announcing this transaction. “This will provide Keppel with the greatest strategic flexibility to respond to market opportunities via directly managing the rig assets.” The company will also gain access to S$843 million in cash (US$643 million) which it says can be utilized to complete the unfinished rigs.
Loh Chin Hua, CEO of Kepple, highlighted that the rigs are among the most advanced fleet available in the market today. He said that about half the rigs are contracted and generating stable cash flow, while they will have the opportunity to complete the others and contract them into a strengthening market.
The company said the current trend in the market presents a prime opportunity for Keppel as an asset manager to unlock the potential of its legacy rigs. They said they will be able to offer operators a more cost-effective and quicker means of securing additional rigs for near-term drilling projects.
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