A tale of two shipbuilders: Petrobras scandal rocks the boat for Singapore’s largest rig makers

Brazil-related orders account for almost half of their order books.

Bribery allegations at Brazilian multinational energy firm Petrobras have made ripples across the offshore and marine industry, with Singapore’s two biggest rig makers caught right in the eye of the storm.

Both Keppel Corporation and Sembcorp Marine have refuted bribery claims made by an ex-Petrobras executive. However, analysts warn that the negative news could have a big effect on the rig builders’ order books, with payment delays and order cancellations looming on the horizon.

OCBC analyst Low Pei Han noted in a report that Brazil-related orders account for 40-50% of both KepCorp and SembMarine’s order books.

Meanwhile, Maybank Kim Eng analyst Yeak Chee Keong stated that Keppel is contracted to build six semi-submersibles worth $6.63b (USD4.9b) for Petrobras subsidiary Sete Brasil, while SembMarine is constructing seven drillships worth $7.58b (USD5.6b) for the company.

"If this blows up into a corruption issue resulting in loans to Sete Brasil being withheld, we see greater risks for the projects," Yeak stated.

Low noted that SembMarine stands to lose more from negative developments at Petrobras, due to its greater exposure in terms of orders as well as the $645m capex sunk in its new Estaleiro Jurong Aracruz (EJA) yard in Brazil.

She also warned that SembMarine has completed more than 80% of the first drillship, 55% for the second, and 30% for the third. Meanwhile, KepCorp has finished 85% of the first semi-sub for Sete Brasil, 50% for the second and 25% for the third.

“The average contract price for each semi-sub secured by KEP (and SMM) from Sete Brasil was US$800m in 2012, higher than average at that time due to the local content requirement. The question is how much these rigs will fetch now should they be sold in the open market, if Sete Brasil cancels the orders. This is especially so during this current down market,” she wrote.

Both KepCorp and SembMarine’s share prices declined yesterday.

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