Sembcorp Marine Secures Foothold in Brazil With New Drillship Order

SINGAPORE (Dow Jones)–Sembcorp Marine Ltd. (S51.SG) Monday said it has secured a US$792.5 million drillship design and construction order, a significant step in its ambitions to service Brazil’s burgeoning demand for deep water rigs.

The contract was awarded by Guarapari Drilling BV, Netherlands, a subsidiary of Sete Brasil Participacoes SA, an entity formed by seven Brazilian finance investors including banks, Brazil’s four biggest pension funds and state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras.

“This is a very significant milestone as this order not only represents the first drillship that our group is building for Brazil but it is also the first project secured by our new shipyard in Aracruz,” Wong Weng Sun, president and chief executive of Sembcorp Marine, said in a statement to the Singapore Exchange.

“We believe this order will be the first of many orders in Sete Brasil’s ambitious drillship expansion program,” he added.

Sete Brasil was formed to put financing in place for Petrobras’ massive rig building program. Petrobras is seeking at least 21 new deepwater rigs, such as semisubmersible rigs and drillships, in order to develop the vast Brazilian pre-salt oil fields.

“A successful execution of the drillship contract could lead to more such contracts for Sembcorp Marine in the future, said Jason Saw, offshore & marine analyst at DMG & Partners.

He added that the contract price was around 30% higher than drillship prices from shipyards in South Korea, which “provides sufficient buffer to cater for the additional risk of building a drillship in Brazil.”

In December last year, Singapore-listed rival Keppel Corp. Ltd. (BN4.SG) secured a contract worth approximately US$809 million from a subsidiary of Sete Brasil, for the design and construction of a semisubmersible drilling rig.

The drillship in this contract, based on Sembcorp Marine’s proprietary Jurong Espadon drillship design, will feature a 40-meter wide main deck and will be able to operate at 10,000-feet water depth, drilling to depths of 40,000 feet. The vessel is scheduled for delivery in the second quarter of 2015.

At 0250 GMT, Sembcorp Marine’s share price was up 3.1% at S$5.00, their highest level since Aug. 5, 2011, becoming one of the top performers on Singapore’s benchmark Straits Times Index.

In December 2011 Sembcorp Marine broke ground on its Estaleiro Jurong Aracruz ship yard, in the state of Espirito Santo in Brazil. The yard is scheduled for completion by end-2014, and gives Sembcorp Marine a production foothold in the country. Petrobras requires that locally produced content feature in its massive rig expansion plan.

-By Matthew Allen, Dow Jones Newswires; Sam Holmes contributed to this article