The strain of low oil prices on the offshore and marine sector was in full display as the world’s second-largest builder of oil rigs Sembcorp Marine Ltd posted its first quarterly loss in at least 12 years.
The company took impairment charges and provisions of S$609 million for projects of its client Sete Brasil Participacoes SA and others. It’s the first quarterly loss since the company started reporting data in 2003, according to Sembcorp Marine’s website.
Sete Brasil is a private company set up in 2010 to build, own and lease deepwater rigs to state-run oil producer Petrobras. But Sete ran into financing difficulties in 2014, after it was caught up in a corruption scandal involving Petrobras executives, Brazillian politicians and a number of other construction and engineering companies supplying Petrobras.
The impact of plummeting prices had rippled across the sizeable oil industry. Oil majors that had engaged costly rigs to drill for oil in remote locations were forced to cut spending and jobs.
Sembcorp Marine company also warned that it expects the downtrend to last longer than previous cycles as Singapore's $10 billion rig building industry faces cancellations and a dearth of new orders.
Sembcorp Marine warned that the current oil price downcycle is expected to be more protracted than previous cycles, but said that it remains well-positioned to ride out the downturn.
“Several of our customers have requested for delivery deferments in light of delays in chartering out their rigs. Given the current depressed environment in the upstream sector, we have tried to accommodate their requests, while preserving our commercial interests,” Sembcorp Marine said.
For the fourth quarter, Sembcorp posted a S$535.2 million ($383 million) attributable loss, excluding non-operating items, compared with a profit S$174 million for the same year ago period.
Sembcorp Marine, which competes with Singapore's Keppel Corp Ltd for building jack-up rigs, made a S$278 million provision in the fourth quarter for foreseeable losses on contracts in progress.