Keppel Reports 2,800 Layoffs, Profitable Q1
Keppel Corporation announced its first quarter results on Monday, including an update on operation at its Keppel FELS offshore shipbuilding division. Keppel has cut its shipbuilding workforce by 2,800 positions (almost 10 percent) since the start of 2016, including 500 jobs in Singapore. The cuts come on top of 6,000 direct-hire staff and nearly 8,000 contractors let go over the span of 2015.
The yard said that despite challenging market conditions, it generated a profit of $80 million in the first quarter – despite declining revenue – thanks to a reduction in overhead of nearly one third over the same period last year.
Keppel faces headwinds from the downturn in offshore oil and gas, and has had several customers delay delivery of ordered rigs in recent months. Repeat customer Transocean said in March that it would put off taking delivery of five high-specification jackups worth a combined $1.1 billion; Ensco also delayed its rig projects; and Clearwater and BOT Lease have each recently delayed a jackup - in addition to two further semi-submersibles pushed back from 2017 to 2020, Keppel said.
In addition, last year, Keppel took an impairment against the contract value of $5 billion worth of rigs for Sete Brasil, following financial trouble at Sete and in the broader Brazilian market. The Sete contract and turmoil in Brazil’s petroleum sector continue to affect performance. "Brazil, which has traditionally been one of Keppel O&M's key markets, continues to be mired in economic and political challenges, as well as the Lava Jato corruption scandal. Shareholders of Sete Brasil have yet to reach a decision on the future of the company. As I announced at the start of the year, Keppel has stopped construction on Sete Brasil's rigs since end-2015 and we will not resume construction until payment recommences," said Loh Chin Hua, Keppel's CEO.
But the yard's operations - especially sectors other than rig-building - continue to generate revenue, and Hua is optimistic. Keppel recently won an FPSO conversion project for its Brazil yard and delivered three jackups, a derrick lay vessel and a floatel.