The restructuring is aimed at separating construction and ownership of legacy drilling rig assets from its main operations
Keppel announces its plans to exit from offshore rig building business. (Credit: Keri Jackson from Pixabay)
Keppel has announced plans to exit the offshore rig building business, as part of a restructuring programme.
The company has cited the global energy transition and significant disruptions faced by the oil industry as the reasons for its restructuring move.
The Singaporean conglomerate said that the planned exit of its subsidiary Keppel Offshore & Marine (Keppel O&M) from the business will be after completion of the existing rigs under construction.
The company said that it will not take up any new project that would need large upfront capital expenditure (capex) or without payments based on milestones.
Furthermore, the company will gradually move away from low value-adding repairs and other activities that have low bottom line contribution. Instead, the company will look to concentrate on higher value-adding work.
Keppel O&M will however focus on securing work related to the development and integration of offshore energy and infrastructure assets.
The move from the Singaporean conglomerate in line with its Vision 2030, which was announced in May 2020, under which it will realign its portfolio to be an integrated business.
Keppel restructures offshore and marine business into three units
As part of this, Keppel will restructure its offshore and marine business to three parts that include Rig Co, Development Co, and Operating Co. The restructuring will enable the company to separate construction and ownership of legacy drilling rig assets from its main operations.
Rig Co will consists of the company’s completed rigs which will be put up for work, or sold when the opportunities are appropriate.
Dev Co will be responsible for the company’s uncompleted rigs and will focus on completing them, with priority given to those having firm contracts with customers.
The new business unit will be closed after the rigs are completed and supplied to customers or transferred to Rig Co.
According to Keppel, it has S$2.9bn ($2.18bn) worth of completed and uncompleted rig assets in its portfolio.
The Op Co unit will be made up of the rest of Keppel O&M. It will transit gradually to a developer and integrator role with a focus on design, engineering and procurement.
Keppel CEO and Keppel O&M chairman Loh Chin Hua said: “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.”