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SEOUL—Brazil’s push to find $135-a-barrel crude in water
more than 2 kilometers deep is prompting AIG SunAmerica
Asset Management Corp. to invest in Keppel Corp., the
world’s biggest oil-rig maker.
Jersey
City, New Jersey-based SunAmerica Asset, owned by
American International Group Inc., bought 865,000 shares
after a 24-percent decline in the first quarter,
according to regulatory filings. Since then,
Singapore-based Keppel has climbed 19 percent, five
times as much as the Straits Times index. The shares,
priced 19 percent below smaller competitor Sembcorp
Marine Ltd. based on estimated 2009 profit, may rise 27
percent to S$15 over the next 12 months, according to
Merrill Lynch & Co. analyst Melinda Baxter.
“Demand
for rigs and floating platforms will continue to be
robust for at least the next four to five years,” said
Soo Hai Lim, a member of the emerging-markets team
responsible for $12 billion of Asian equities, including
Keppel, at Baring Asset Management Ltd. in
Hong Kong.
“We
favor Keppel and Sembcorp Marine because they are the
leaders in the industry,” said Lim, whose firm is a unit
of Springfield, Massachusetts-based MassMutual Financial
Group.
Keppel
is selling more deep-water rigs, which are twice as
expensive as those for shallower water, as supplies
tighten amid an intensifying search for untapped
reserves further from shore. That helped the company
post profit margins last quarter that were 1.9
percentage points wider than Sembcorp Marine’s,
according to data compiled by Bloomberg.
Of 20
analysts surveyed by Bloomberg, 16 recommend buying
Keppel and four said to hold it. The company’s offshore
and marine unit accounted for half of first-quarter net
income.
Petroleo
Brasileiro SA, Brazil’s state-owned oil company also
known as Petrobras, plans to order 40 drill ships and
platforms worth about $30 billion for delivery by 2017
after finding the Tupi field, the largest Western
Hemisphere discovery since 1976. The field may contain 5
billion to 8 billion barrels.
“We are
likely to see order-book momentum picking up again in
the short term,” Winnifred Heap at JPMorgan Chase & Co.
in Singapore wrote in a May 21 note. The analyst rates
Keppel and Sembcorp Marine “overweight.”
An
offshore platform takes as long as 32 months to design
and build after a contract is signed. That means
Petrobras will continue to award orders until 2014 to
meet a 2017 delivery target, according to analysts.
Keppel
and Sembcorp Marine may capture 27 percent of the global
market this year for semisubmersible rigs, which use
anchors weighing more than 10 metric tons, JPMorgan
said.
Petrobras, based in
Rio de Janeiro, said May 21 it struck oil in a well in 2.1 kilometers
of water off the coast of
São
Paulo state. The company has leased about 80 percent of
the world’s deepest-drilling offshore rigs to explore
that find and other prospects.
The head
of Brazil’s oil agency said last month that the nearby
Carioca field may hold 33 billion barrels of crude,
making it potentially the world’s third-largest.
Petrobras is evaluating the field and hasn’t confirmed
the estimate.
Such
findings may require even more offshore-equipment
spending, Petrobras chief financial officer Almir
Barbassa said May 21.
Oil
companies including Exxon Mobil Corp., Royal Dutch Shell
Plc. and BP Plc .will spend a record $98.7 billion this
year on exploration and production, more than quadruple
the amount eight years ago. Crude oil rose to a record
of more than $135 a barrel on May 22 as Organization of
Petroleum Exporting Countries ministers said they could
do nothing to stop a rally that may be heading to $200 a
barrel.
“The
underinvestment in the 1980s and ‘90s in the industry
gave rise to this jump in the oil prices,” Choo Chiau
Beng, Keppel’s senior executive officer, said April 24.
“There will be demand for offshore equipment.”
Keppel,
whose Brazilian yard is the largest in the Southern
Hemisphere, has completed projects for Petrobras that
produce more than half the country’s output of 1.8
million barrels a day, according to Keppel’s Web site.
The
Singapore company’s S$11.8-billion ($8.69-billion)
backlog at the end of March includes a $1.2-billion
Petrobras contract for a semisubmersible platform.
Demand
for the offshore units has pushed up prices the past two
years. Samsung Heavy Industries Co., the world’s
second-largest shipbuilder, won a record $942- million
order for a drill ship earlier this month from Stena AB,
owner of Sweden’s biggest ferry company.
Higher
labor and material costs associated with construction of
the P-51 offshore platform for Petrobras helped push
Keppel’s fourth-quarter operating profit, or sales minus
the cost of goods sold and administrative expenses, down
40 percent. That prompted DBS Vickers Securities to
advise caution on the shares.
“We are
still avoiding Keppel for the moment,” the Singapore
firm said in a May 22 note. It has a “hold” rating for
Keppel.
Even so,
investors say the tight yard capacity and higher fuel
prices will translate into more offshore-equipment
orders, extending the industry’s boom.
“The
upcycle for offshore equipment, like drill ships and
offshore platforms, has just started,” said Park Hyoung
Ryol, who helps manage $1.2 billion, including Samsung
Heavy shares, at Consus Asset Management Co. in Seoul.
(Bloomberg) |
