SINGAPORE TURNS A PAGE IN ITS HISTORY – KEPPEL EXITS OFFSHORE RIG BUILDING

January 29, 2021

Keppel positions for global energy transition, announces bold transformation of offshore & marine business
• Keppel Offshore & Marine will seize opportunities as a developer and integrator of offshore energy and infrastructure assets and exit the offshore rig building business.
• The company will be restructured into three parts, separating construction and ownership of legacy drilling rig assets from its core operations, which will be slimmer, asset-light and people-light.
• Keppel continues to explore inorganic options for its offshore & marine business
Keppel Corporation announced that amidst the global energy transition and major disruptions facing the oil industry, the Company will carry out a comprehensive transformation of its wholly-owned subsidiary, Keppel Offshore & Marine (Keppel O&M), to better align it to Keppel’s Vision 2030. This is part of Keppel’s strategic review of its offshore and marine (O&M) business, with the goal of creating a slimmer, and more competitive Keppel O&M that is well-placed to support the energy transition, even as Keppel continues to explore inorganic options.
Reflecting Keppel’s commitment to sustainability and combating climate change, Keppel O&M will exit the offshore rig building business, after completing the existing rigs under construction. In line with the Group’s more disciplined approach towards capital allocation, Keppel O&M will not undertake any new project requiring large upfront capex or without milestone payments. It will also progressively exit low value-adding repairs and other activities with low bottom line contribution, and focus on higher value-adding work.
Mr Loh Chin Hua, CEO of Keppel Corporation and Chairman of Keppel O&M said, “The share of renewables and new energy solutions in the global energy mix has been growing rapidly, driven by environmental concerns as well as technological advancements and the declining cost of renewables. Natural gas, as a transitional fuel, is also projected to overtake oil as the world’s largest energy source in the years to come. To seize opportunities in this fast-changing environment, we are making bold and decisive moves to transform Keppel O&M to ensure that it remains relevant and competitive, and fully aligned to Keppel’s Vision 2030.”
As part of the transformation, Keppel O&M’s business will be restructured into three parts: a Rig Co and a Development Co (Dev Co), which will be transient entities created to hold its approximately S$2.9 billion worth of completed and uncompleted rig assets; and most importantly, an Operating Co (Op Co), comprising the rest of Keppel O&M, which will be transformed into an asset-light and people-light developer and integrator of offshore energy and infrastructure assets.
• Rig Co: Keppel O&M’s completed rigs will be placed under the Rig Co, which will put the completed rigs to work, or sell them if there are suitable opportunities.
• Dev Co: Uncompleted rigs will come under the Dev Co, which will focus on completing the rigs, while prudently managing cashflow.
• Op Co: The Op Co, comprising the rest of Keppel O&M, will progressively transit to a developer and integrator role, focusing on design, engineering and procurement. It will be people-light and asset-light, with fabrication work subcontracted to its eco-system of contractors, including other yards.
Mr Loh Chin Hua added, “A key goal of the restructuring is to create a more competitive, asset-light and people-light Keppel O&M, focused on seizing opportunities with higher value capture as a developer and integrator of offshore energy and infrastructure assets. At the same time, the Rig Co and Dev Co will ring-fence Keppel O&M’s non-core rig assets, contain any further capital outflow beyond the initial funding, and work towards resolving this legacy issue. Through these changes, we aim to create a nimble industry leader that is well-positioned for the global energy transition and can be a strong contributor to Keppel’s target ROE of 15% as we progress towards Vision 2030.”
The restructuring will commence with immediate effect and is expected to be executed over the next two to three years. Reflecting its new focus, Keppel O&M will carry out a rebranding exercise and refine its vision and purpose.
Founded by the Singaporean entrepreneur KC Lee, Keppel Shipyard was incorporated in 1968 and became Keppel FELS two years later. Keppel FELS achieved a key milestone in 1974 with the delivery of its first semi-submersible, Penrod 74.
(Source: Keppel Offshore & Marine – Image: Keppel shipyard in Jurong, Singapore/AlSinbad)