The Straits Times / The Business Times News on Cosco

SembMarine and Cosco clinch massive rig contracts

The former's deal is worth $805m and the latter's order comes to $307m

THE year has barely begun, but fresh orders of an eye-popping magnitude are landing in shipyards' already bulging order books.

SembCorp Marine (SembMarine) yesterday announced an order for a US$524 million (S$804.5 million) semi-submersible drilling rig - the largest-ever contract of its type here.

It is to be built by its wholly owned Jurong Shipyard.

Also on a winning streak was Cosco Corp, whose 51 per cent-owned unit, Cosco Shipyard Group (CSG), signed a US$200 million (S$307 million) contract to build a semi-submersible vessel last Friday.

This spike in orders has been spurred by anticipation in the market that average rates for leasing these rigs will enjoy further hikes this year, given the excellent take-up rates of new rigs on offer.

Merrill Lynch, for instance, expects average daily rates for jack-up rigs and semi-submersible rigs, which range between US$50,000 and US$163,000 per rig, to rise by almost 50 per cent this year.

This is despite oil prices falling by as much as 19 per cent so far this year to below US$50 a barrel, before staging a mild recovery. Yesterday, crude oil rose 33 US cents to US$55.37 a barrel.

The latest deal boosted SembMarine's total order book to $7.7 billion.

Besides the order for the semi-submersible rig, SembMarine also recently secured a contract for a US$190 million rig.

Altogether, these deals bring its new orders secured in the first few weeks of the year to $1.1 billion.

SembMarine said that 'this is the third new-build deep-water semi-submersible drilling rig placed with Jurong Shipyard' by the same buyer, Norway's PetroMena.

'We are pleased with the confidence that PetroMena has placed with us,' said Mr Don Lee, senior general manager of SembMarine's offshore division, in a statement.

Construction will start immediately, with delivery of the rig scheduled for the first quarter of 2010.

On completion, the semi-submersible rig can operate in water depths of up to 3,000m.

PetroMena had earlier ordered two rigs with 'substantially identical' designs - one for US$423 million in October 2005 and another for US$480 million in March last year.

And even though deliveries for them will be taken only in 2009, one rig is on a long-term contract to drill in the Gulf of Mexico, while the other is contracted for drilling in offshore Brazil.

In a separate statement yesterday, Cosco said that CSG had signed a contract with Marine Accurate Well (Maracc) to build a semi-submersible vessel for US$200 million. SembMarine's share price yesterday closed four cents down at $3.28 on a volume of 3.43 million shares, while Cosco fell four cents to $2.71, with 9.16 million shares traded.