Keppel FELS terminates rig contracts with 2 clients

GLOBAL offshore group Keppel FELS has terminated its rig contracts with an affiliate of Clearwater Capital Partners and Fecon International Corp.

These clients failed to collect the rigs it had ordered, even though it was ready to be delivered, and pay the outstanding instalments. They also did not provide reasonable or legal justifications for their failure, said BN4 in a bourse filing late on Wednesday (Apr 13).

Keppel FELS, a subsidiary of Keppel Corp's offshore and marine arm, will retain the payments it has received thus far as well as the ownership of the rigs, including the right to sell.

The offshore company had received 2 jackup orders from an affiliate of wealth management firm Clearwater Capital Partners in October 2013. One of the rigs worth about US$200 million still remains undelivered.

It also received an order to build 3 jackup rigs worth US$650 million for rigs provider Fecon International Corp in February 2014.

These contracts have been terminated on Apr 13, and Keppel FELS is currently exploring other options, such as the sale and charter of these rigs.

It added that the termination of these contracts is not expected to have any material financial impact on Keppel Corp's earnings per share and net tangible asset per share for the current financial year.

Market watchers opined that this development is not material enough to significantly affect Keppel.

Justin Tang, head of Asian research at United First Partners, said that given the current oil price environment, Keppel "should be able to sell the rigs and at worst lease it out".

DBS analyst Ho Pei Hwa is also not expecting any "material financial impact" from the terminations. She noted that these rigs have been impaired during the assessment exercise in 2020. Keppel O&M had then incurred approximately S$1 billion in provisions and impairments.

"With the improving rig market on the back of high oil prices, risk of further impairment is low. On the contrary, we believe the official termination is actually positive, allowing Keppel to gain ownership of these rigs and reap opportunities to resell these rigs," said Ho, adding that Keppel has 6 remaining jackup rigs on its orderbook - 1 for TS Offshore and 5 for Borr Drilling.

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