Sembcorp Marine in Talks with Sete Brasil Over Delayed Payments

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February 12, 2015

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

reuters logoBy LEE ROUURN and Rujun Shen

SINGAPORE, Feb 12 (Reuters) – Sembcorp Marine said it is in talks with Sete Brasil over delayed payments worth millions of dollars on orders that the Brazilian company has placed with the Singaporean rig builder.

Wong Weng Sun, Sembcorp president and chief executive, told reporters and analysts at a briefing that Sete Brasil now owes the company S$70-80 million ($51-$59 million).

Sembcorp Marine has won seven drillship orders, each worth about $800 million, from Sete Brasil, a company set up by Brazil’s national oil company Petrobras, along with a group of banks and funds, to develop a deep-water drilling rig fleet for Petrobras.

These orders account for more than half Sembcorp’s order book, which totalled S$11.43 billion at the end of 2014, its lowest since 2011.

Both Sembcorp Marine and cross-town rival Keppel Corporation Ltd have built shipyards in Brazil, and have heavy exposure to the country, where major offshore oil discoveries have promised to propel it into the ranks of the world’s top oil producers.

But Brazil is currently dealing with a corruption scandal at its state-run oil company Petrobras.

Wong declined to give more details, but said that the company was in negotiation with Sete Brasil about the situation.

“Sete Brasil is always in negotiation with shipyards,” Sete Brasil said in an emailed response to a request from Reuters to comment. The company said it was working to conclude a long-term credit line with the Brazilian Development Bank that was approved in 2013 in addition to trying to obtain new lines of short-term financing.

It declined to comment on questions related to specific shipyards.

The problems with Brazil coincide with Sembcorp Marine experiencing a sharp decline in revenue from rig building activity in the last quarter.

Sembcorp Marine’s quarterly net profit fell 4.6 percent as revenue from rig building activity dropped and as the year-ago quarter was boosted by a tax write-back.

It reported full-year profit of S$560.1 million, beating a mean forecast of S$549.4 million by 22 analysts, Thomson Reuters data showed.

Sembcorp Marine said fourth-quarter turnover from rig building, the biggest revenue contributor, fell 27 percent on the year, though offshore and conversion business grew 26 percent. It said it faced tough competition in upcoming tenders for new projects in offshore exploration and production.

Sembcorp Marine, part of Sembcorp Industries Ltd controlled by Singapore’s state investor Temasek Holdings , was the worst performer on Singapore’s benchmark Straits Times Index so far this year.

Its shares have fallen over 7 percent, lagging a 2 percent gain in the index.

($1 = 1.3598 Singapore dollars) (Additional reporting by Gustavo Bonato in SAO PAULO. Editing by Jane Merriman)

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