Seatrium CEO says ‘things looking very positive’, with $24.4b of projects in the pipeline

SINGAPORE – After years of struggles amid an energy market slump, Seatrium is seeing a strong pick-up in business, bringing down its debt and raising fresh funds for projects, the company’s top management said.

Its net order book stands at $24.4 billion comprising 30 projects with deliveries till 2031, as at end-September. Gross orders totalled almost $38 billion, to be delivered over the rest of the decade.

Seatrium has also reduced the cost of project funding and strengthened its ability to collect payment from customers, chief executive officer Chris Ong and chief financial officer Adrian Teng said on Nov 11.

In a business update on Seatrium’s third-quarter results, Mr Ong told The Straits Times that his team has done a “tremendous job” in turning the company around and setting it on the path to sustained growth and profitability.

“After many difficult years, the trend is in the right direction,” he said. “We now have to ramp up and deliver. Our business is multifaceted, our pipeline of projects is healthy and we have many customers inquiring to partner with us. Things are looking very positive.”

Seatrium has delivered three projects to customers to date in 2024, including the fourth newbuild jack-up rig to Borr Drilling and a refurbished floating production unit to Salamanca FPS Infra.

Another five projects are scheduled for delivery in 2024, worth $107 million in net contract value. 

Seatrium has also continued to make headway in its new energies business, it said.

Aragon, a technology company within the group, was selected as the engineering partner for Greenstat ASA’s planned hydrogen production facility in Kristiansand, Norway. 

Mr Teng the CFO said that the company’s balance sheet has dramatically strengthened over the past year.

“Our gearing is down, net current assets are growing, the net current liability-to-current asset ratio has come down, our debt maturity profile has improved and we have reduced the cost of funding with our banking partners,” he told ST.

He said the company is trending towards a net debt-Ebitda (earnings before interest, tax, depreciation and amortisation) target of two to three times.

“All parameters suggest a vastly different balance sheet now compared with a year ago,” Mr Teng added.

The company upsized its global syndicated bank guarantee facility in July from US$835 million (S$1.1 billion) to US$1 billion, through Mitsubishi UFJ Financial Group and Intesa SanPaolo, to further support its future project needs.   

Mr Ong said that unlike in the past, the company is more disciplined on its receivables.

“We have a strong ability to collect, and over the last 1½ years, we have collected over $1 billion in receivables and another $1 billion in down payments for projects.”

The company is also insuring projects against payments to tighten up receivables. The result is improved cash flow on projects, Mr Ong noted.

No financial figures were unveiled during the briefing.

In August, Seatrium posted its

first set of positive results in almost half a decade

for its first half ended June 30, with underlying net profit at $115 million. This came as first-half revenue rose 39 per cent to $4 billion on progressive revenue recognition from newbuild projects and increased repair and upgrade activities. 

Net profit came to $36 million, reversing a loss of $264 million a year earlier, after excluding a $79 million provision for a legal settlement. 

Asked about the ongoing Monetary Authority of Singapore/Commercial Affairs Department (MAS/CAD) investigations regarding business transactions conducted by Sembcorp Marine (Seatrium was formed by combining Sembcorp Marine and Keppel Offshore & Marine in 2023), Mr Ong said that he has no further information but hopes the matter will be resolved soon.   

Turning to the issue of dividend payments, he hinted that given its current trajectory, Seatrium could pay out a dividend for the full year.

“We had positive results for the first half and have gotten our fundamentals right,” he told ST. “Now it is about executing the margins. We always have our shareholders and dividends in mind. When we end the year on a positive note, we will discuss with our board the payment of dividends.”

Meanwhile, the company has already started doing share buybacks under its $100 million buyback mandate. To date since June, it has purchased some 16.9 million shares for $27.6 million.

Mr Ong added that the company is in a much more solid financial position with a good pipeline of projects, and enjoying strong support from customers and banks.

“I sleep well at night,” he quipped. “The key now is to execute safely and efficiently and continue competing on the global stage.”

Analysts appear generally sanguine about the company’s prospects.

In a report prepared by its analysts Lim Siew Khee and Meghana Kande on Nov 11, CGS International reiterated a buy on the stock at a target price of $2.69, citing tightness in global yard capacity, potential conclusion of the MAS/CAD investigation, sequential margin improvement and more order wins.

Shares of Seatrium closed down 2.5 per cent at $1.95 on Nov 11. The stock had risen 5.3 per cent in the previous four trading sessions.