SembMarine unit lands $1.4b gas project

Sembcorp Marine announced yesterday that its offshore engineering subsidiary SMOE has secured a huge contract worth more than US$1 billion (S$1.4 billion) for a major gas project off Britain.

The contract, from Maersk Oil North Sea UK, involves building various facilities including a living quarters platform and wellhead platform in the North Sea off Aberdeen, Scotland.

The facilities will be installed at a water depth of some 90m in an area known as the Culzean field. The project is a high-pressure, high-temperature gas condensate development.

SMOE will provide engineering, procurement, and construction services, while detailed engineering work will be performed by a subcontracting partner, SembMarine said in a statement.

The Culzean gas field is expected to be capable of providing around 5 per cent of Britain's total gas consumption by around 2020.

The Sembcorp Marine Admiralty Yard in Singapore will be the main fabrication yard for the project, while the Sembmarine SLP yard in Lowestoft, Britain, will undertake the work for a power generation module, two bridges and a flare.

SembMarine executive vice-president and head of offshore platforms, Mr Ho Nee Sin, said: "We are pleased to secure this mega contract despite stiff competition from world-class yards. This is another prestigious North Sea project undertaken by the company where we will work closely with our UK subsidiary Sembmarine SLP as a team."

The contract is not expected to have any material impact on the net tangible assets and earnings per share of SembMarine for the year ending Dec 31, the company said.

Maybank said in a note that it expected operating margins for the project to be squeezed given SembMarine would have to provide equipment, engineering and procurement components, and subcontract detailed engineering work.

"This implies that despite a higher contract value than its traditional rig-building projects, we think that operating margins could be lower than the 10 to 12 per cent it has been generating."

The contract was also insufficient to ward off deeper concerns about an oversupplied rig market, weak drilling demand and deferred deliveries, it said, giving the stock a "sell" rating with a target price of $2. "Any positive stock reaction should be an opportunity to sell into strength," it said.

SembMarine shares closed unchanged at $2.39 after rising as high as $2.50 earlier in the day.

Jeremy Koh

A version of this article appeared in the print edition of The Straits Times on September 02, 2015, with the headline 'SembMarine unit lands $1.4b gas project'. Print Edition | Subscribe