Keppel renegotiates rig building contracts

The wholly owned subsidiary of Keppel Offshore & Marine Limited, Keppel FELS Limited, and Seadrill Jack-Ups Ltd have agreed to continue with the building of the two jackups on revised terms that are mutually beneficial. The contract value of the two jackups is $420 million.

It followed an announcement at the end of November that Seadrill Limited, Scorpion Offshore Ltd, and Lewek Shipping Pte Ltd would review options on their newbuilding contracts that were signed in the middle of this year. Keppel FELS Limited and Scorpion Offshore have agreed to terminate the US$405 million rig contract on mutually acceptable terms. Scorpion Offshore is working closely with Keppel FELS in the latter’s exploratory discussions with interested third parties to take over the building of the semisubmersible. The outcome of these discussions are highly uncertain.

Keppel Singmarine and Lewek Shipping are currently working towards an amicable mutual termination of their contract and this is expected to be finalised shortly.

The cancellation of the Scorpion and Lewek Shipping contracts are not expected to have material impact on the net tangible assets or earnings per share of Keppel Corporation Limited, the parent company of Keppel O&M, for the financial year ending 2009.

Excluding the Scorpion and Lewek contracts, Keppel O&M has a strong orderbook of about S$10.8 billion extending through to 2012.