Sembcorp Marine Q1 Profit Down, Challenges Coming

Brazil's oil and gas industry mired in uncertainty.

Singapore-based rig builder Sembcorp Marine (SMBMF) posted its lowest quarterly net profit in at least five years and forecast a challenging year ahead, as new rig orders dry up on weak oil prices and as a corruption scandal in Brazil brings uncertainty.

Sembcorp Marine said on Monday its first-quarter net profit dropped 13.6 percent on the year to S$105.9 million ($79.5 million), hit by lower contribution from rig building and repair work.

Sembcorp Marine, one of the world's top two offshore jackup rig builders alongside cross-town rival Keppel Corporation Ltd , said cuts in exploration and production expenses have resulted in few new orders for rig builders, as crude oil has fallen more than 40 percent since mid-2014.

Its net order book stands at S$10.6 billion, down from S$11.4 billion at the end of February.

Orders for drillships from Sete Brasil, a company set up by Brazil's national oil company Petrobras, along with a group of banks and funds, accounted for about half of the order book as of end-February.

There is uncertainty about these orders. Petrobras reported its overdue 2014 results last week, which showed its biggest-ever loss, the result of a $17 billion write-down in the wake of a massive corruption scandal.

"Brazil's oil and gas industry continues to be mired in uncertainty," Sembcorp Marine said in the statement.

"We continue to engage with our customers to find the best way forward for our drillship projects and are exploring all options including slowing down the construction."

Reporting by Rujun Shen