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6 Quick Things Investors Should Learn About Keppel Corporation Limited’s Offshore and Marine segment

Keppel Corporation Limited (SGX: BN4) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their earnings presentations.

Keppel Corporation organizes its business into four different units: Offshore and Marine (O&M); Infrastructure; Property; and Investments. There’s plenty of eyes on the O&M segment, as it has suffered multiple setbacks over the past few years as a result of the big drop in oil prices. The troubled business segment is important for Keppel Corporation as it currently makes up over 42% of the company’s revenue.

Below are six useful things about the O&M segment I learned from reading the transcript of Keppel Corporation’s 2016 fourth quarter earnings presentation that was held in late January:

1. In his opening remarks, Keppel Corporation’s chief executive, Loh Chin Hua, said that a key development for the oil & gas industry in 2016 was the decision by OPEC (Organization of Petroleum Exporting Countries) and some non-OPEC members to reduce their output of oil. However, Loh does not envision a quick recovery for his company’s offshore business due to weak utilisation and a supply overhang.

2. Loh noted that Keppel Corporation’s O&M segment was profitable despite the sharp downturn. Furthermore, Loh pointed out that the O&M segment’s operating profit was $412 million before impairments. He added that Keppel Corporation has cut overheads by as much as $150 million compared to a year ago. In 2016, Keppel Corporation reduced its direct workforce by 10,600.

3. The cuts also came in the form of mothballing two of the O&M segment’s overseas yards. Loh added that Keppel Corporation is in the process of closing three yards in Singapore as well.

4. Meanwhile, Keppel Corporation managed to secure a settlement with the guarantor for its customer, Parden. However, the conglomerate also received a request from Falcon Energy to defer a jack-up delivery.

5. Loh highlighted the 2016 LETOURNEAU acquisition that broadened the O&M segment’s suite of design solutions and aftermarket sales and services. Keppel Corporation is also looking beyond the oil market for business for the O&M segment.

6. For 2017, Loh said that Keppel Corporation is planning to deliver 20 newbuild and conversion projects. The firm has a net orderbook of $3.7 billion at the end of 2016. This is a decline from the $5.1 billion it had at the end of 2015.

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