Here's what Keppel O&M needs to come back to black

Higher demand for gas vessels in two to three years could drive contract wins to $4b-$5b.

Keppel Offshore & Marine (Keppel O&M) is on the cusp of recovery, DBS Equity Research said, after it scored stronger order flows with $1.2b worth of new orders in 2017, up from $500m in 2016.

According to a report, the growth is expected to accelerate in 2018, with higher order win expectation of $3bn.

DBS analyst Pei Hwa Ho said, "We believe the pick-up in demand for O&G production-related facilities and Floating Liquefied Natural Gas (FLNG) vessels in the next two to three years could eventually drive contract wins closer to the norm of $4b-$5b per annum."

This would buck the declining trend of its current low order book of $3.9b.

The brokerage added that scrapping of old rigs over 30 years old, which constitutes about 15% of the current fleet globally, could help push the market back into balance.

An oil price rebound would also improve rig utilisation, spurring capex spending and order wins.

In terms of growth potential, Keppel’s first-mover advantage in the FLNG conversion market could provide earnings upside. Its customer Golar has already awarded Keppel a third FLNG project.

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