by CIMB-GK (8 July)
SEMBCORP Marine (SembMarine) announced that Houston-based Atwood Oceanics has exercised an option to build a deepwater semi-submersible rig at US$565 million.
The contract comes with a non-fixed price option (expiring end-2008) for a third unit. The semi-sub rig will be delivered in mid-2012 and does not include certain owner-furnished equipment and owner-related costs.
The current contract value is double that of the first rig ordered by Atwood in January 2008 worth US$280.5 million, for 2011 delivery. The higher value stems from the second rig's more sophisticated specifications for its dynamic positioning system to facilitate operations in harsher environments and deeper water depths of 10,000 feet. The first unit will be built on a conventional mooring system operable at only 8,000 feet.
A week into July, SembMarine has already secured contracts worth US$1.6 billion (about S$2.2 billion), boosting its YTD orders to S$4 billion. It is fast catching up with Keppel Offshore & Marine's order momentum. The second rig order from Atwood supports our belief that prospects for deepwater drilling remain strong.
SembMarine remains our top pick in the offshore & marine sector for its pure exposure and successful order-book expansion. We believe y-o-y margin expansion could be a key catalyst for the stock.
-Research Report by CIMB-GK (8 July)
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