UOB has reiterated its “hold” calls for Keppel and Sembcorp Marine, with target prices of $6.40 and $1.27 respectively, according to Wednesday report.
The previous rig-building boom of 2004-14 saw the fleet expand by 36%, and with another 191 rigs awaiting delivery through till 2020, there is an oversupply in the rig market. Rig utilisation has also slumped 61% due to a lack of work.
Given the current rig oversupply, rising oil prices and growing oil demand alone are not enough to stimulate another rig-building boom, says UOB lead analyst Foo Zhiwei.
Using the boom period of 2005-2014 as a reference, Foo believes that it will take a similarly large-scale event such as China’s demand for oil in 2000 and a corresponding low interest rate environment to stimulate another boom.
To balance the market supply, the research house estimates that a total of 195 units need to be scrapped to balance the market but only 36 have been scrapped since 2014.
Moreover, close to 85% of stacked jackups (JUs) have to be scrapped for market balance. However, the research house warns that the next rig-building boom may not happen even if the market balances.
The research house notes that rig orders are likely to average 4 units a year, using the building lull of 1986-2004 as a reference.
“However, an average of 4 units/year is a pittance to the average of 34 units/year during the boom of 2005-14,” says Foo.
With the rig building business resetting to a new normal, Singapore shipyards will have to depend on other earnings stream.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
The previous rig-building boom of 2004-14 saw the fleet expand by 36%, and with another 191 rigs awaiting delivery through till 2020, there is an oversupply in the rig market. Rig utilisation has also slumped 61% due to a lack of work.
Given the current rig oversupply, rising oil prices and growing oil demand alone are not enough to stimulate another rig-building boom, says UOB lead analyst Foo Zhiwei.
Using the boom period of 2005-2014 as a reference, Foo believes that it will take a similarly large-scale event such as China’s demand for oil in 2000 and a corresponding low interest rate environment to stimulate another boom.
To balance the market supply, the research house estimates that a total of 195 units need to be scrapped to balance the market but only 36 have been scrapped since 2014.
Moreover, close to 85% of stacked jackups (JUs) have to be scrapped for market balance. However, the research house warns that the next rig-building boom may not happen even if the market balances.
The research house notes that rig orders are likely to average 4 units a year, using the building lull of 1986-2004 as a reference.
“However, an average of 4 units/year is a pittance to the average of 34 units/year during the boom of 2005-14,” says Foo.
With the rig building business resetting to a new normal, Singapore shipyards will have to depend on other earnings stream.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
0 comments:
Post a Comment