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Friday, October 26, 2018 

Sembcorp Marine has posted a revenue of $3.97 billion for the nine months ending September 2018, $1.85 million higher than the revenue generated in the same period last year, despite overall operating losses of $54 million.

The revenue increase reflects the delivery of 6 jack-up rigs to Borr Drilling, 1 jack-up rig to BOTL, the sale of the West Rigel semi-submersible rig (renamed Transocean Norge) and higher percentage recognition for ongoing drillship and offshore production projects in 9M 2018.

Turnover for Rigs and Floaters was $3.40 billion in 9M 2018, compared with $1.08 billion in 9M 2017. The higher revenue was related to recognition of the Borr Drilling and BOTL jack-up deliveries, sale of West Rigel (Transocean Norge) semi-submersible rig, as well as higher floaters revenue on percentage recognition of the ongoing Johan Castberg FPSO, Shell Vito FPU and Karish FPSO projects, and ongoing revenue recognition from the Transocean drillships.

Offshore Platforms revenue was $172 million in 9M 2018, lower than the $623 million in 9M 2017 due to fewer contracts on hand. During the second quarter, revenue from the remaining work for the three topside modules for the Culzean platform topsides were booked on their scheduled delivery in June 2018.

Revenue from Repairs & Upgrades totalled $336 million in 9M 2018 compared with $355 million in 9M 2017 on fewer ships repaired. A total of 230 ships and other vessels were repaired or upgraded in the nine months compared with 328 units. Average revenue per vessel was higher on improved vessel mix of relatively higher-value works.

Excluding the sale of West Rigel and rig deliveries to Borr Drilling and BOTL, Group revenue for the 9M 2018 would have been $1.8 billion, down 9 per cent year-on-year from $2.0 billion in 9M 2017. Revenue adjustments were also made in 9M 2017 due to the termination of two rig contracts with a customer last year.

The Group posted 9M 2018 operating loss of $54 million, and a net loss of $80 million due to continued low overall business activities and the sale of West Rigel at a loss of $34 million. This compares with a net profit of $143 million in 9M 2017, partly due to last year’s gain of $47 million from the sale of investment in COSCO Shipyard Group and the net positive effect of contract termination of two rigs last year of about $98 million.

On a quarterly basis, Group turnover for 3Q 2018 of $1.17 billion compares with $729 million in 3Q 2017. The higher revenue was due to higher percentage recognition of the two Transocean drillships, the Johan Castberg FPSO, Shell Vito FPU and Karish FPSO projects, as well as recognition of two additional jack-up rigs delivered to Borr Drilling. This was offset by lower revenue from Offshore Platforms following the completion of the Culzean Project earlier this year.

Looking ahead, Sembcorp Marine expects Capex spend on global exploration and production (E&P) to improve with firmer oil prices seen in the nine months of 2018. However, while offshore drilling activities have shown initial signs of improvement, offshore rig orders will take some time to recover as the market remains over-supplied.

Competition in the repairs and upgrades segment remains intense, underpinned by regulations that require ballast water treatment systems and gas scrubbers to be installed over the next two to five years.

Challenges in the offshore and marine sector persist, notwithstanding the improved industry outlook, with Sembcorp Marine expecting it to take some time before its sees a sustained recovery in new orders. Competition remains intense and margins compressed, it says.

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