SEMBCORP Marine (Sembmarine) has begun exploring alternative sources of skilled labour, which is likely to incur increased manpower costs for ongoing projects, as it continues to face a shortage with the increased restrictions implemented in Phase 2 (Heightened Alert).

In its Tuesday update, the marine and offshore engineering group also said that to date, there has been no cancellation of any of its existing projects, and it would continue to coordinate with customers to reschedule project completions.

This comes just a day after the group announced that its wholly-owned unit Jurong Shipyard has agreed to revise the delivery dates of two ultra-deepwater drill ships it has contracted to build for Transocean Offshore Deepwater Holdings, due to work disruptions arising from Covid-19.

Sembmarine said that the amendment agreements are not expected to have any material impact on its earnings per share for the year ending December 2021.

The delivery dates of the vessels, Deepwater Atlas and Deepwater Titan, have been rescheduled to December 2021 and May 2022 respectively.

They were originally slated for delivery in the second half of 2021, noted Citi Research analyst Chang Kwok Wei in a Tuesday report.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Transocean has already paid 35 per cent of the contract price for Deepwater Atlas - with about US$370 million payable remaining, and 30 per cent for Deepwater Titan - with a remainder of about US$440 million to be paid.

The agreements further provide that upon the respective delivery of the vessels, Transocean will make a partial delivery payment, with the remaining sums payable in quarterly instalments, with accrued interest of 4.5 per cent per annum within five years from the delivery date, according to Mr Chang.

He acknowledged that Sembmarine's net current liabilities position had finally been reversed in Q1 2021 post refinancing, but remains negative on the group.

"The deferment in delivery payments from Transocean will have an adverse impact on Sembmarine's cash flows," he said.

"We had previously expected an approximately S$1 billion boost to the coffers in FY2021. However, this amount has now been stretched over a five to six-year time frame and would delay a return to free cash flow-positive territory."

Mr Chang also believes that the group is chasing large new-build contracts to provide ample coverage of its enlarged fixed-cost base, which will affect working capital requirements.

With the likely impact on Sembmarine’s net gearing and the recent announcements, Citi has maintained its "sell" call on the group, with an unchanged target price of 14 Singapore cents.

Shares of Sembcorp Marine closed flat at S$0.20 on Tuesday.