Hyundai Heavy hurt by offshore rig business

South Korean rig builder Hyundai Heavy Industries (HHI) on Monday reported a net loss of 451.4 billion Korean won ($398 million) for the third quarter of 2015, hurt by delays in offshore projects. 

The company’s sales fell to 10.9 trillion Korean Won ($9.6 billion). On a quarter-on-quarter basis, sales declined 8.7%, while operating loss and net loss widened by 507.4 billion won (447.3 million) and 209 billion won ($184.2 million) respectively, due to delays in offshore projects and lackluster sales of the construction equipment business.

Comparing to the third quarter of 2014, the company’s net loss narrowed. To remind, the company’s net loss for the 2Q 2014 was 1.46 trillion won, or $1.28 billion.

Explaining the reasons behind the increase in operating loss the company cited early recognition of losses stemming from the contract cancelation of a semi-submersible rig, and loss provision for adverse changes in the offshore business environment such as the oil price decline. In its report issued Monday, the HHI also cited an increase in the restructuring cost from divestiture of underperforming subsidiaries, as one of the reasons for the increase in operating loss.

Hyundai in September lost a contract for the construction of the semi-submersible rig West Mira, destined for delivery to Seadrill. Seadrill exercised its cancellation rights citing to the shipyard’s inability to deliver the unit within the timeframe required under the contract. The rig had been ordered in 2012 with delivery scheduled for December 31, 2014. HHI will need to repay to Seadrill the $168 million in pre-delivery instalments to the shipyard, plus accrued interest.

Worth noting, Fred Olsen Energy on Tuesday informed the market it terminated the contract with HHI for the construction of the Bollsta Dolphin semi-submersible drilling rig, also citing delays in construction. According to the company, HHI will have to repay around $186.3 million, plus interest.

Offshore Energy Today Staff