Singapore’s Sembcorp Marine last year was hit by the fallout of the Covid-19 pandemic, the reduction in oil and gas industry spending and deferment of final investment decisions - posting a S$583 million (US$442 million) net loss despite higher revenues from the renewables sector.
“We were unable to overcome the onslaught of the 2020 economic turmoil,” admitted chief executive Wong Weng Sun on Tuesday.
Sembmarine expects its financial losses to continue into in 2021 and was unable to say when there might be a turnaround in its fortunes given the disruption in global supply chains and that ongoing pandemic containment measures are unlikely to be lifted soon.
Rig-building revenues last year slumped to S$158 million versus S$821 million in 2019, with most of the 2020 revenues coming from milestone payments for two Transocean drillships.
Meanwhile, Sembmarine’s revenues from production floaters in 2020 totalled S$517 million, down 59% year-on-year, not least because of the impact of Covid-19 which saw work halted in mid-April at its Singapore yards before a gradual return to work from early July. Almost full workforce levels had been reached by the end of November.
In contrast, revenues from offshore platforms including renewables solutions more than doubled to S$310 million compared to S$131 million in the previous year.
On another bright note, none of Sembmarine’s contracts was cancelled in 2020.
However, the company expects this year there could be job losses from its direct workforce in line with the size of its order book and fabrication requirements. The contractor is keen though to retain engineering expertise, as it would take too long to rehire such talent when it is chasing new work.
Group finance director William Goh mentioned during the company's 2020 results announcement that the requirement of personnel at the operational level is tied to business activities.
"The group has seen resumption of production activities gradually from early July 2020 to reach almost full workforce levels near the end of November," Goh told Upstream.
"Given the overall improvement in sentiment, there are active discussions with customers on the resumption of activities, including FIDs on deferred projects. New opportunities are also opening up with an increase in tender activities since the third quarter of last year. As such Sembcorp Marine management is hopeful they have seen the worst."
Sembmarine’s net order book as of end-2020 was S$1.82 billion, comprising S$1.51 billion of projects under execution and S$310 million-worth of ongoing repairs and upgrading work.
The contractor has 15 projects under execution, 11 of which – including the two drillships for Transocean - are now scheduled for delivery in the 2021 financial year. The first of these ultra-deepwater drillships based on Sembmarine’s proprietary Jurong Espadon 3T design is 85% complete and due for delivery in the second quarter, while the second unit is not quite so advanced and will be delivered in the third quarter.
Due for delivery next year – all in the first quarter - are wellhead platforms for the Gallaf field offshore Qatar, the newbuild P71 floating production, storage and offloading vessel for Petrobras and an FPSO conversion for Shapoorji Pallonji and Bumi Armada. Meanwhile, Shell’s Whale floating production unit is scheduled for delivery in the first quarter of 2023.
One of the key upstream projects on Sembmarine’s shorter-term radar is the FPSO destined for Siccar Point Energy’s Cambo field development West of Shetland offshore the UK. Sembmarine is continuing with pre-final investment decision work on the Cambo FPSO “in anticipation of development sanction on the project in late 2021”.
Sembmarine in 2019 was awarded the front-end engineering and design contract for the Cambo floater, for which it is proposing a Sevan cylindrical FPSO with production capacity of 60,000 barrels per day of oil.
The contractor also believes it is “well positioned to seize opportunities in Brazil, leveraging its EJA integrated yard – the largest and most advanced” [facility] in the South American nation, said Wong.
Sembmarine too is RWE Renewables’ preferred supplier for its 1.4-gigawatt Sofia offshore wind farm’s high voltage direct current electrical transmission system.
Looking further ahead, Sembmarine believes there will be a rebound in the drilling rig market, with a likely demand for units that are much greener in their operations and their carbon footprint.
Although Sembmarine last year took a S$34 million write-down on inventory related to jack-up rig fabrication, the contractor was able to repurpose some of that kit to be used for wind installation vessel construction work.
Chief executive Wong last year took a 50% pay cut and Sembmarine’s senior executives accepted a 15% reduction in salary to help the company weather the prevailing market conditions.
Updated to include clarification from Sembcorp Marine group finance director William Goh.