Sete Brasil’s Drillship Order a “Pleasant Surprise”

Dow Jones
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November 30, 2012

The new rig is based on Jurong Shipyard’s proprietary Jurong Espadon drillship design. Image: SembMarine

[Dow Jones] SembMarine’s (S51.SG) new drillship order from Sete Brasil for US$806 million was a pleasant surprise, Barclays says.

“The seventh drillship order from Sete Brasil demonstrates its confidence in Sembcorp Marine delivering on its drillship orders. This new order is expected to be delivered by 3Q16, ahead of the previous order’s first delivery in 1Q17.”

It notes the contract price is a slight premium over the first two orders at US$793 million and US$805 million.

“With a higher contract value and the likely improvement in margins from a repeat design, we would expect the margins to improve on the second and following units.” Barclays expects SembMarine’s order momentum to pick up going into 2013, with the likely return of drilling semi-sub orders. It rates the stock at Overweight with S$6.50 target. “Sembcorp Marine is our preferred pick in the rig-building space,” it says.

“With Sembcorp Marine’s shares trading at 11X 2013E P/E, we believe valuations remain attractive for a pure-play rig-builder leveraged to a continued increase in oil industry spending.” The stock is up 4.6% at S$4.58.

(c) 2012 Dow Jones & Company, Inc.

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