Keppel Corporation Limited’s 2016 Annual Report: 4 Key Things Investors Should Know About the Oil and Gas Industry

Keppel Corporation Limited’s (SGX: BN4) offshore & marine (O&M) segment has been decimated by prolonged low oil prices.

Crude oil brent prices was over US$110 per barrel in 2014, but has since declined sharply to around US$55 per barrel today. In fact, oil price has been below the US$60 per barrel mark since the start of 2015 till today.

Source: Keppel Corporation’s investor presentation  

Keppel Corporation chief executive Loh Chin Hua has summed up the dire situation as a “long and harsh” winter. In its 2016 annual report, Loh shared his thoughts around the current state of the industry.

1. Higher oil prices will not be enough – click here

2. There are more than one challenge – click here

3. All is not lost

Loh might sound pessimistic in the statement above, but he is optimistic when it comes to the long-term future of the industry. He said:

“Although the winter in the offshore business is expected to persist for some time, we remain confident of the longer term fundamentals of the sector.”

Loh believes that customers will still favour well-executed projects and seeks to expand its scope beyond the oil and gas space:  

“Projects that are well designed and executed in a smart and cost-effective way will be in demand. There will also be other markets to explore such as for gas and production solutions, as well as opportunities to re-purpose and maximise our offshore technologies for other non-drilling applications.”

4. Looking back, looking forward

This is not its first rodeo. Loh said that Keppel Corporation has been through four cycles in last few decades, and remains confident that the conglomerate with emerge as a stronger company at the end of it:

“We have been through four cycles in the past few decades, and have emerged stronger each time.”

In the meantime, it’s down to keeping costs low to ride out the dour period. Loh said:

“The key is to stay focused and nimble to tide through the difficult period, bring down our overheads to make Keppel Offshore & Marine (Keppel O&M) leaner and more competitive, and also strengthen the Division with new capabilities and innovations to take it into the future.”

On that note, Loh added:

“A good crisis is not to be wasted.”

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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.