Macquarie Equities Research (MER) released a research report on 13 June covering their bullish outlook for Singapore’s offshore marine in the second half of 2013, with the view that Singapore shipyards are well positioned to score most of the new Semisub orders in the later part of the year. Some excerpts from the research paper are shown below.
 
Event
Upstream has reported that as many as 12 established operators (contractors / drillers) are preparing to order new UltraDeepWater (UDW) Semisubs. MER has reiterated over the past six months that the next round of rig building will be dominated by Semisub orders, while Drillships and Jackups take a pause.
 
Impact
12 established operators re-focus on an overlooked segment: UK based “Stena Drilling” is expected to place 2 new Semisub orders by July and is eyeing the “Moss Maritime CS50 design”. In addition, operators like Awilco Drilling from Norway (3 CS50s), Seadrill from Norway, Ensco and Diamond Offshore from US are all looking for CS40 / CS50 / CS60 designs.
 
Semisubs were completely ignored in the ordering cycle from 2010-12: Only 12 new Semi-sub orders were placed globally (ex-Petrobras) in the last 3 years versus as many as 45 Drillship and 83 new Jackup orders.
 
Very few Semisubs under construction currently: Only 22 Semisubs are under construction currently in various yards in Korea, Singapore and China versus 72 Drillships and 109 Jackups.
 
Ultra Deep Water (UDW) / “High-spec” Semisub availability is very low: Only 65 out of the existing 220 Semisubs are UDW and all have contracts. In addition, out of the 22 “under construction” UDW Semisubs, only 5 do not have contracts.
 
Thus, operators have to start ordering now to book 2016-17 deliveries: Semisubs take three years to build. Any orders placed now will be delivered earliest by mid-2016.
 
Dayrates are an all-time peak; incentivises operators for better internal rate of return (IRRs): UDW Semisub / Drillship dayrates are at 2008 peak levels of ~600k/day. At a build cost of US$575-625m/rig, that translates into a 25% plus IRR for the operator, thus incentivising it to order newbuilds.
 
MER’s outlook
MER expects at least 10 new Semisub orders in 2H13: MER expects at least 13 new Semisub orders in 2013 (3 have been placed already) versus 12 placed from 2010-12 in total.
 
Most of these 10 orders should go to Korea and Singapore: Given the requirement of particular design and customization, MER thinks Korean and Singapore yards should be able to bag most of these orders.
 
Drillship demand has slowed down; Jackup demand will slow down in 2H13; Semisub demand is thus key: 2013 has seen only 1 Drillship demand versus as many as 34 new Jackups been ordered.
 
SG yards are sitting pretty with yards full until 2015; New Semisub orders would start filling their 2016-17 slots: SG yards are in a sweet spot, with order books at their peak at S$14-15bn each. KEP and SMM have won S$3.2 and S$2.7bn of new orders in 2013YTD. If both are able to win 2-3 new Semisub orders, MER’s numbers have to be raised.

Source: Macquarie Research - 4 Jul 2013