6262

operations review

financial and operations review

Amid the volatile global environment and competitive

market conditions, Sembcorp Marine delivered satisfactory

results underpinned by its rig building, ship conversion &

offshore and ship repair sectors. Turnover for the Group

was $4.4 billion with the rig building sector contributing

$2.4 billion followed by ship conversion & offshore sector

at $1.4 billion, the ship repair sector at $642 million and

others at $37 million.

Alliance and FCC partners together with regular clients provide a steady stream of repair projects at Sembawang Shipyard.

Capricorn Voyager, a tanker from Chevron Shipping Company, setting off from Jurong Shipyard after completing drydocking repairs.

Ship Repair Rig Building Ship Conversion/Offshore Others

FY2012 FY2011

$4.4

Billion

1% 14%

53%

32% $4.0

Billion

1% 16%

56%

27%

6363

Ship Repair 2012 2011

Number of vessels 337 264

Average value per vessel ($m) 1.90 2.44

Turnover ($m) 642 644

Repair Revenue Contribution (%) 2012 2011

Alliance/FCC partners 45 42

Regulars 37 40

Total 82 82

Others 18 18

Grand Total 100 100

Ship Repair Sector

Maersk Virtue, a LPG tanker owned by A.P. Moller, being ushered into Jurong Shipyard for repairs.

Taizan, a crude oil tanker owned by Kyoei Tanker Co., all set to go after completing repair works.

Legend of the Seas, a cruise ship belonging to Royal Caribbean Cruises, receiving drydocking repairs at Sembawang Shipyard.

2012 201118%

7%

4%

28%

6%

15%

7%

15%10% 31%

7%

17%

12%

13% 6%

4%

Support Vessel

Bulk CarrierTanker

Passengership Others

LNG/LPG Carrier

Drillship/FPSO Upgrading

Containership

6464

operations review

Rig Building Sector Deliveries 2012 2011

Jack-up 2 3

Semi-submersible 2 4

Total 4 7

Ship Conversion & Offshore Sector Deliveries 2012 2011

FPSO/FSRU 3 3

Newbuild 1 -

Offshore vessel - 1

Platform - 1

Total 4 5

Ship Conversion & Offshore Sector

Rig Building Sector

Successful conversion of Nusantara Regas Satu, Asia’s first Floating Storage and Regasification Unit, by Jurong Shipyard for Golar LNG.

Repair and upgrading of jack-up rig Galveston Key for Transocean at Sembawang Shipyard.

6565

Contracts SecuredContracts secured in 2012 was at a record high of

$11.0 billion as compared with $3.7 billion in 2011. As

at February 2013, $1.2 billion in contracts were clinched

since the start of the year.

Net Order BookThe Group’s net order book as at December 2012 was

at an all-time high of $12.7 billion as compared with

$5.1 billion in 2011. Including the new contracts secured

to-date as at February 2013, the net order book stood at

$13.9 billion.

Atwood Falcon semi-submersible rig after upgrading by Jurong Shipyard.

15000 _

12000 _

9000 _

6000 _

3000 _

0 _

2011 2012 2013 (February)

Jack-up Ship Conversion/Offshore PlatformSemi-submersible/ Accommodation Rig/Intervention Rig Drillship

5,096

12,728

13,883

12000 _

10000 _

8000 _

6000 _

4000 _

2000 _

0 _

2011 2012 2013 (February)

3,724

10,979

1,155

Jack-up Semi-submersible/Accommodation Rig/Intervention Rig Conversion & Offshore Offshore Platform Drillship

66

operations review

140 _

120 _

100 _

80 _

60 _

40 _

20 _

0 _

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F

2005 2006 2007 2008 2009 2010 2011 2012 2013

Outlook and Underlying Market Drivers The fundamentals in the offshore oil and gas sector

are expected to remain intact albeit macro-economic

uncertainty affecting global markets. Exploration and

production spending by major and national oil companies

is forecasted to increase, with oil prices trending above

US$100/bbl buoyed by growing world oil demand and

tight oil supply.

Growth in Global Oil Demand Continues

According to International Energy Agency (IEA), world oil

demand grew at an annual rate of 1.1 per cent in 2012

and is expected to increase another 1.0 per cent in 2013.

Oil demand growth continues to vary significantly by

region. For the Asia/Pacific region, oil demand is estimated

to grow more than 5 per cent between 2011 and 2013,

reflecting the strong economic growth occurring in

China and India.

Artist impression of an offshore platform topside to be fabricated and integrated by SMOE for Det norske oljeselskap as part of the Ivar Aasen project in the North Sea.

200 _

150 _

100 _

50 _

0 _

No. Orders 2008/12

No. Orders 2013/17

Low Forecast Most Likely High Forecast

114

Actual Orders Past 5 years 124

160

190Forecast Orders

Next 5 years

Source : International Maritime Associates, Inc

67

Oil Prices Remain Strong

Despite uncertainty and volatile market conditions, crude

prices continue to remain relatively strong with the Brent

oil price averaging US$111/bbl in 2011 and 2012. In the

first two months of 2013, the Brent oil price averaged

US$114/bbl. These strong oil prices will spur the oil

companies’ appetite for additional rigs, which augurs well

for the offshore exploration and production sector.

Golden Triangle Continues to Drive Deepwater Demand

The Golden Triangle – Brazil, the Gulf of Mexico and West

Africa – has constituted the majority of the deepwater

market and has largely driven worldwide demand in this

sector. In 2013, this trend will continue. New and emerging

basins in Australia, the Mediterranean and East Africa will

contribute to majority of non-Golden Triangle growth in

2013 and coming years.

Announced Discoveries in New Countries Continue to Climb

In the first nine months of 2012, offshore exploration

successes were reported in 12 different countries, up from

announced discoveries in five countries in 2008. While the

Golden Triangle still constitutes the majority of offshore

activity, the emergence of new basins will continue as

coastal countries endeavour to explore for hydrocarbons.

Growth in Global E&P Spending Continues

Global exploration and production expenditures are

expected to rise for the fourth consecutive year in

2013, driven by a projected 9.2 per cent increase in the

capital budgets of international markets on the back of

international and offshore cycles and attractive commodity

India, Asia & Australia: +11%

2013 Budget: $103,6202013 Budget: $103,6202013 Budget: $103,6202013 Budget: $103,6202013 Budget: $103,6202012 Budget: $93,3182012 Budget: $93,318

Supermajors: +9%

2013 Budget: $102,210

Africa: +5%

2013 Budget: $24,639

Latin America: +15%

2013 Budget: $72,819

U.S.: +0.7%

2013 Budget: $139,634

Canada: +0.6%

2013 Budget: $44,6962012 Budget: $44,4312012 Budget: $44,4312012 Budget: $44,4312012 Budget: $44,431

Europe: +6%

2013 Budget: $47,6702012 Budget: $45,0122012 Budget: $45,012

Russia: +7%

2013 Budget: $50,3462012 Budget: $47,1092012 Budget: $47,109

Middle East: +11%

2013 Budget: $29,8262012 Budget: $26,936

prices. Latin American companies are expected to lead the

way in 2013 with capital spending in the region forecasted

to increase by 15 per cent.

Orders for Production Floaters to Grow over the Next Five Years

Business conditions in the deepwater drilling sector

provide a barometer for future requirements for floating

production systems. Drilling operators continue to

report favourable underlying market fundamentals in

the deepwater drilling sector and strong demand for

deepwater drilling equipment, a positive leading indicator

for future production floater orders.

Note: $ in millionsSource : Barclays Research