SembMarine reports 3Q18 net loss of nearly S$30 million on low business volume

Rigbuilder Sembcorp Marine reported on Thursday a net loss of S$29.8 million for the third quarter, swinging from a year-earlier net profit of S$100.7 million, amid continued low overall business volume as the oil and gas sector remains sluggish.

That missed a forecast from CGS-CIMB for a narrower loss of S$20 million to S$25 million for the quarter, compared with the second quarter’s S$56 million loss.

Excluding non-recurring items, SembMarine said its net loss was S$22.8 million for the quarter.

Turnover for the quarter ended 30 September was S$1.17 billion, up 60 percent on-year, it said in a filing to SGX after the market close on Thursday.

“The higher revenue was due to higher percentage recognition of the two Transocean drillships, the Johan Castberg FPSO, Shell Vito FPU and Karish FPSO projects, as well as recognition of two additional jack-up rigs delivered to Borr Drilling,” SembMarine said. “This was offset by lower revenue from Offshore Platforms following the completion of the Culzean Project earlier this year.”

FPSO stands for floating production storage and offloading unit.

For the nine-month period, SembMarine reported a net loss of S$80.1 million, on low business volume and the sale of the West Rigel rig at a S$34 million loss, with the results swinging from a year-ago net profit of S$142.9 million.

The year-earlier nine-month net profit was due in part to a one-off gain of S$47 million after disposing of its investment in Cosco Shipyard Group in the first half of 2017 and the positive effect of contracts for two rigs being terminated in the third quarter of 2017 for a gain of around S$98 million from the down payments, it said.

The company’s net order book was at S$6.39 billion at the end of the first nine months of the year, with deliveries and completions through 2021, it said, adding that excluding Sete Brasil drillship contracts, the net order book was at S$3.26 billion.

Outlook

In its outlook, SembMarine was cautiously optimistic, saying that global exploration and production was expected to continue to improve amid firming oil prices this year.

“While offshore drilling activities have shown initial signs of improvement, offshore rig orders will take some time to recover as the market remains over-supplied,” it said in the statement. “It will take some time before we see a sustained recovery in new orders, while competition remains intense and margins compressed.”

SembMarine said overall business volume was expected to remain relatively low for the “immediate quarters,” with losses to continue.

It said most of the recent new offshore oil and gas orders were for production projects. “This trend is expected to continue and Sembcorp Marine is responding to an encouraging pipeline of enquiries and tenders for innovative engineering solutions,” it added.

It noted that the repairs and upgrades segment was seeing “intense” competition, but it expected the segment would be supported by regulations requiring ballast water treatment systems and gas scrubbers be installed over the next few years.

Wong Weng Sun, the company’s president and CEO, pointed to efforts to develop new businesses.

“We continue our strategy of diversifying into new product segments and providing innovative solutions across the offshore, marine, and energy value chain,” he said at the results briefing, according to his prepared remarks. “Commercialization efforts of our proprietary Gravifloat technologies for a variety of nearshore LNG terminal and gas infrastructure applications continue to progress positively.”

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