The worst is yet to come for rig-builders

THE odds are stacking up against rigs finding near-term employment, which increases the exposure of Singapore-listed yards to further deferments in deliveries or cancellations of rig projects on their backlogs.

Some have harboured hopes of oil prices bottoming out late this year. Even if they do so, the general market consensus is that offshore drilling activity will take two years thereafter to recover, taking into consideration the project-planning cycle in the upstream oil-and-gas sector.

Historically, listed yard groups in Singapore have extended provisions primarily for contracts from clients undergoing financial distress. This was a prevalent practice at the height of the 2008 financial crisis and has been undertaken for the current outstanding rig-building order books of listed yard groups.