As part of the agreement, Fernvale will take over ownership of the four uncompleted rigs which arose from the performance of the EPC contracts.
As for two other rigs under construction, a total sum of close to US$260 million ($358 million) will be recognised as part of the undisputed debt included in Sete Brasil’s court-approved Judicial Reorganisation Plan.
See: Keppel reaches settlement with Sete Brasil on semisubmersible drilling rigs
SembMarine later in the day followed with its own announcement that it had reached a settlement with Sete Brasil over seven drillship contracts.
The contracts, secured by various SembMarine subsidiaries from Sete Brasil’s subsidiaries, were worth a total of US$5.6 billion.
For five out of seven of the drillships, SembMarine will retain all the works performed.
Sete Brasil was noted to have identified a purchaser for the two remaining drillships, which have the most advanced construction progress.
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The purchaser is expected to negotiate with Sembcorp to enter into new contracts to complete the drillships.
See: Sembcorp Marine reaches settlement with Sete Brasil over drillship contracts
“Magni Partners (Magni), the investment company of Borr Drilling founder Tor Olav Troim, has struck a deal with Sete Brasil and its creditors to buy four unfinished ultra-deepwater rigs from Keppel and SembMarine’s two Brazilian yards,” says CGS-CIMB analyst Lim Siew Khee in a flash note on Monday.
She notes that these rigs will be chartered to Petrobras at US$299,000 per day over a 10-year lease.
“We estimate a range of US$102 million to US$316 million of new contracts each for Keppel and SembMarine to complete the Sete Brasil rigs for Magni Partners,” Lim says.
“On a more bullish note, the remaining two advanced completed rigs could also be translated to close to US$1 billion of new contracts each if there are new buyers,” she adds.
According to Lim, Keppel’s order book stood at $5.5 billion as of 1H19, with $1.9 billion of orders year-to-date, while SembMarine’s order win totalled $575 million with an estimated order book of close to $2.5 billion.
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CGS-CIMB is keeping its “add” call on Keppel Corp with an unchanged target price of $8.41 – representing an upside of more than 42% from its closing price of $5.91 on Monday.
“Keppel is trading at undemanding valuations of 0.9x CY19F P/BV, or -1 s.d. of its 10-year mean,” Lim says. “We see opportunity to accumulate for long-term investors. Yield is now decent at 4.2%.”
Meanwhile, the brokerage has a “hold” recommendation on SembMarine with a target price of $1.26.
“SembMarine is trading at 1.1x CY19F P/BV (below -1 s.d. of 10-year mean),” Lim says. “We think 3-month 20% share price weakness has priced in the guided losses for FY19F.”
As at 12.30pm on Tuesday, shares in Keppel Corp are trading 3 cents higher at $5.94 while shares in Sembcorp Marine are trading 2 cents higher at $1.21.
