How can Sembcorp Marine command higher margins?

Roaring demand and a capability to deliver in short notice are allowing the rig and shipbuilder to charge premiums.

This can be seen in its latest jackup order, the fifth of its kind for a Sembcorp Marine proprietary design, which it has promised to deliver in 10 months despite a construction period of 24 months.

Here's more from DBS:

New jackup order for SMM worth US$213m at premium pricing. SMM announced this morning that its subsidiary, PPL Shipyard, has secured a jackup order from Safin Gulf worth US$213m. Delivery is scheduled for November 2012, as SMM had earlier commenced construction of this second prototype unit, riding on the strong demand for newbuild, high spec, jackups.

Latest proprietary design gaining traction. This jackup will be the 5th order for SMM’s latest high-spec Pacific Class 400 proprietary design, first revealed in 2010. This unit will be capable of operating in water depths of 400 feet and drill up to 35,000 feet, with an accommodation capacity for 150 personnel. It will be equipped with technologically advanced drilling equipment, making it suitable for operations in most of the world’s challenging regions.

Rig demand buoyant, pricing power moving in yards’ favour. This latest jackup order underscores the rising demand for newbuild high-spec drilling units. This is a speculative build by the client, Safin Gulf which is capitalizing on the robust demand for jack ups to shorten the delivery timeline for this rig – 10 months completion vs construction period of 24 months. As a result, PPL is able to command premium pricing for this rig. At US$213m, this is close to peak price of S$220m achieved in 2007 and is at a 9% premium to the unit sold to Transocean in November 2010, and a 17% premium to the units ordered by Atwood Oceanics across October 2010 to January 2011. We believe the premium pricing can be attributed to not only a short delivery lead time, but also the yard’s pricing power as demand heats up. Margins on this unit is expected to be higher than 15%, to be booked in 2012.

Reaching the people who run Asia's businesses is harder than it used to be.

Inboxes are crowded. Attention is short. The executives you most want to reach — the founders, CFOs, and operators who actually move budgets — are the hardest to find through the usual channels. If you're building a company, a category, or a reputation, you already know this.

We've spent twenty years building the room they read. Singapore Business Review is where senior decision makers in Singapore and across Southeast Asia come for business coverage they can't get elsewhere — in print, online, and in person at the summits and roundtables we host across seven markets.

If you have something these readers should know about — a point of view worth publishing, a product worth their attention, an event worth their time — we'd like to hear what you're trying to do.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia