Singapore yard Sembcorp Marine’s faces a S$633m ($443m) black hole from potential rig value write-downs, according to a report by UOBKayHian.
The bank also detailed the impact the loss of a number of Brazilian drillship contracts will have on Sembcorp.
“We have removed four of seven Sete Brasil’s drillships being built by SMM from our earnings forecasts,” UOBKayHian noted.
As such, the yard’s base-case earnings forecasts for 2016 and 2017 (assuming delivery of three drillships) have been knocked down by 53% and 60% respectively.
UOBKayHian warned a cash call is possible.
“The major negative impact would be rig value write-down which could lead to a huge loss in 2016. We estimate in the worst case, the total rig value writedown could amount to S$663m,” analysts said, assuming non-delivery of six jack-ups.
“We assume a 60% fall in rig values since 4Q14,” UOBKayHian noted, leading to a sizeable erosion in shareholders’ funds as well as a higher net gearing.
Sembcorp’s 2016 net gearing is likely to rise from 56% to 79%.
“Assuming net gearing to be brought down to 50%, this would necessitate a cash/equity injection of S$633m,” UOBKayHian noted, suggesting it could take the form of a rights issue or a share placement.
