Singapore’s Sembcorp Marine is aiming to increase its revenue from sustainable solutions covering gas, renewables and cleaner energy which accounted for 30% of turnover in the 2021 financial year to 40% by 2030.

“While oil and gas remain critical resources, the outlook for energy transition, including areas such as offshore wind and hydrogen, is robust,” Sembmarine said, adding it is “actively developing emerging tender opportunities in renewables, cleaner energy and gas solutions”.

“Growing commitments by governments and companies around the world to achieve net zero will create strong demand for renewables and clean energy, including areas such as offshore wind, hydrogen and ammonia,” said the contractor.

Sembmarine admitted the past two years have been among the most challenging years for the offshore and marine industry.

“The outbreak of the Covid-19 pandemic in 2020 extended into 2021, pushing out the industry recovery and creating unprecedented disruptions. The 2021 financial year [which ended on 31 March 2022] marked the sixth year of a global oil and gas sector recession,” it said.

Severe under-investments

However, Sembmarine believes the outlook for this sector is anticipated to improve due to stronger oil prices, severe under-investments in exploration and production in recent years, and the critical need to replenish depleting production.

“The strengthening of oil prices has provided impetus for oil and gas companies to review plans for the resumption of deferred activities, final investment decisions and capital expenditures,” the company said in response to shareholders’ questions ahead of the company’s AGM on 20 April.

Sembmarine currently is actively pursuing multiple projects covering floating production, storage and offloading vessels; floating storage and offloading facilities; and floating production units with tenders in progress

Sembmarine, which made a S$1.171 billion (US$858 million) net loss in the 2021 financial year, is continuing to actively undertake measures to reduce the operational cash burn rate and carefully manage working capital, including deferment of all non-essential capital expenditure with the exception of maintenance capex to ensure yard safety and operability.

The company has also worked with external consultants to develop a holistic Performance Improvement Plan (PIP) to drive operational improvements and optimise its cost structure. The PIP includes strategic cost management initiatives, improved project execution and procurement processes, digitisation and overall reduction of overheads, intended to deliver significant savings and increase its competitiveness and profitability.

“Our profitability is driven mainly by the value of our projects, versus the cost of executing them. [But] we are not able to provide specific details on the rate of return/profitability of our projects due to commercial confidentiality,” Sembmarine added.

Merger still on the cards

The contractor is still working towards a definitive merger agreement with compatriot Keppel Offshore & Marine by the revised schedule of end-April 2022.

“By leveraging the respective strengths and track records of both Sembcorp Marine and Keppel O&M, the combined entity would be able to realise synergies, and deliver sustainable value over the long term for its shareholders,” said Sembmarine.

However, the company cautioned that – depending on the final structure of the proposed combination - the definitive agreement would be subject to various conditions, including relevant regulatory approvals.