5 Quick Things Investors Should Learn Now About Keppel Corporation Limited’s Offshore and Marine Segment

Last week, Keppel Corporation Limited (SGX: BN4) released its fiscal first-quarter earnings. The earnings release contained a transcript of an address given by Keppel Corp’s chief executive, Loh Chin Hua. There was also a transcript of a question and answer session that took place after the address.

From those transcripts, I had picked out five useful things investors may want to note about Keppel Corp’s offshore and marine business.

For a brief background, Keppel Corp organizes its business into four different units: Offshore and Marine (O&M); Infrastructure; Property; and Investments. There’s a lot of attention being paid to the O&M segment though as it has suffered multiple setbacks over the past year. The O&M sector made up made up almost 47% of Keppel Corp’s total revenue in the reporting quarter.

Without further ado, here’re what I have picked out:

  1. Loh said that the O&M segment had delivered three jack-up rigs in the first-quarter of 2016. Chow Yew Yuen, the chief executive for Keppel O&M, added that there were another six jack-up rigs to be delivered this year. There are no further deferrals as of the date of the briefing. But, Chow said that Keppel Corp will work with its customers to arrive at win-win solutions if they do approach the company.
  2. Loh also said that Keppel Corp has won anti-trust approval for its acquisition of the LETOURNEAU jackup rig designs, rig kit, and aftermarket business from Cameron. LETOURNEAU is expected to broaden Keppel Corp’s suite of solutions to support end-to-end jack-up rig designs. The deal is expected to be completed in the second-quarter of 2016.
  3. It’s not all a bed of roses, though. Keppel Corp’s O&M global workforce had been cut in numbers. Loh said that the O&M headcount had been further reduced by 9.4%, or about 2,800 people, since the start of 2016. 2,300 are from Keppel Corp’s overseas yards. This comes after the O&M segment had reduced its headcount by 17%, or 6,000 workers, in the last quarter.
  4. Keppel Corp does not see an improvement in the O&M business in the foreseeable future. Loh said that the current level of oil prices is not sustainable over the long-term. Meanwhile, Chow commented that the repair and conversion FLNG (floating liquefied natural gas) business is doing quite well. The biggest challenge is the rig building division. Chow expects to have a prolonged famine there.
  5. At the time of the briefing, Loh said that Keppel had stopped all construction for Sete Brasil orders since the end of last year. No work will be done until payment from Sete recommences. Meanwhile, Sete had filed for bankruptcy protection last Thursday. To find out more, check out my colleague’s article here.

For more insights on investing and important updates about the stock market, sign up for The Motley Fool Singapore's free weekly investing newsletter, Take Stock Singapore. Written by David Kuo, it can help you grow your wealth in the years ahead.

Like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.