Keppel cuts 3.000 jobs. Profit down

Singapore’s rig builder Keppel Offshore & Marine, hit by challenging market conditions and a drop in workload, in the third quarter 2016 cut its workforce by 3.080 people; 660 in Singapore and 2,420 in overseas yards.

This means that for the first nine months Keppel O&M has reduced its direct workforce by close to 8,000 or around 26%.

During the third quarter Keppel Offshore & Marine, part of Keppel conglomerate, recorded revenue of $516 million, down from $1.4 billion registered in the same quarter a year ago.

Net profit fell to eleven million, a 93 percent drop from $166 million in the third quarter of 2015.

The company’s CEO Loh Chin Hua has acknowledged that the landscape for the offshore and marine business remains challenging, despite the recent OPEC deal to stabilize oil prices.

“Despite the gradual recovery in oil price, demand in the offshore market is expected to remain tepid. Oversupply remains a key concern in the offshore market, worsened by the overhang of rigs still under construction,” the CEO said.

He said that with priority given to strengthening their balance sheets, the oil majors are expected to continue to hold back on offshore exploration expenditure.

As for the workforce reduction, the CEO said that this has mostly been done through natural attrition. However, this is now set to change, as Keppel will start looking into the early termination of contracts and “selective retrenchment” in Singapore, in line with the drop in workload. He described the measures as painful but needed to keep the company profitable.

The CEO said that there was still a chance for some of the workers “especially those with strong engineering and project management expertise” to be redeployed to other business units within the group.

For the first nine months, the offshore and marine division has secured new contracts worth about S$500 million. No too long ago, in early 2014, Keppel would earn a larger amount in a single jack-up rig order.

On a more positive note, the CEO said the company sees continued interest in FPSO conversions and production solutions such as tension leg platforms and semi-submersible production units, as well as opportunities for the development of specialized vessels. The company also plans to expand its LNG business.

“Rightsizing of our Keppel O&M business will continue as we prepare for an extended period of weaker demand for new oil rigs. We are not just cutting costs and surviving the downturn in the offshore industry, but are also investing prudently in new capabilities and exploring new markets and opportunities.”

“Our aim, as always, is to emerge from this downturn stronger. We are looking at re-purposing the technology that we have developed in the offshore industry for other uses such as floating power plants and floating desalination plants. We expect that our O&M business will be increasingly diversified beyond just oil and gas,” the CEO said.