Keppel eyes construction of three semisubmersible drilling rigs at $560m each

If the deal pushes through, total contract value could go up to $2.3b.

Analysts weigh a lower contract value of $2.3b due to specification and owner furnished equipment.

Keppel Offshore & Marine, through its wholly-owned subsidiary, Keppel FELS Limited (Keppel), signed a letter of intent (LOI) with Awilco Drilling PLC (Awilco) in relation to the proposed construction of a semisubmersible drilling rig for harsh environment use, with the option to build up to a further three units.

DBS Equity Research noted that the rig is valued at $560m (US$425m) each. Analyst Pei Hwa Ho noted that the contract value appears to be lower than the usual price tag of US$500m and above, “though it could be due to specification and owner furnished equipment, etc, which details are yet disclosed. Nevertheless, this is a very positive news for Keppel, marking a good start to the year. If Awilco exercises the options total contract value could go up to $2.3b (US$1.7b). We have assumed $3b contract wins for Keppel in 2018.”

According to Keppel’s announcement, the details and terms of an agreement relating to such transaction have not yet been finalized and are still subject to ongoing negotiations and discussions between the parties. “The Company will make the relevant announcement when the definitive agreement has been finalized and entered into,” it added.

Ho added that the contract should be firm up pretty soon given the planned delivery in 2021. “Awilco has also proceeded to propose equity raising of US$65m through a private placement to partially fund the payment for the newbuild contract.”