SBI Offshore has begun negotiations with a consortium of Middle East and Chinese parties to manage and build jack-up drilling rigs, to be deployed in the Middle East and Asia. Shares of SBI surged 20 per cent or four cents to 24 cents a share yesterday on the news, announced before trading opened.
The move follows a US$24 million (S$30 million) deal the Catalist-listed company announced last week to provide design and engineering services for up to five of these rigs. The move is part of SBI's efforts to transform the company into an integrated engineering solutions provider for the oil and gas industry to boost its profitability and revenue. The company was founded in 1994 as a commission agent for marine equipment manufacturers.
If the negotiations are successful, the first rig will be built in a regional shipyard, either in Singapore or China, the company said yesterday.
Each rig, to operate in water depths of up to 110m, will take two years to build and all five are expected to be completed in about six years.
"SBI Offshore has entered a new phase of growth. The recently concluded design and engineering contract serves as a catalyst for the group to secure larger onshore and offshore oil and gas projects. We are hopeful of a successful outcome in our negotiations for the rigs and intend to secure more of such higher-value projects in the future," SBI executive chairman Chan Lai Thong said.
The price of each rig will depend on its specifications, equipment type and make, fabrication yard, delivery and financing terms. Market sources peg construction costs at around US$200 million each.
SBI is also in talks with energy resource players in the Middle East and Russia for possible collaborations, and with regional shipyards to offer its drilling equipment systems and services, in a move to take on more of such larger-scale projects. This follows the firm's establishment of a 70 per cent-owned joint venture with US-based Axon Energy Products, a global oil field equipment maker.
"Our focus now is going into contracting for drilling equipment system and drilling units, which can be offshore or onshore," Mr Chan said.
"Since late 2012, we have repositioned the company, transformed it to move away from being a distributorship, and reorganised our factory. Last year was the beginning of SBI going into projects, instead of just being a commission agent representing equipment manufacturers."
This article was first published on August 28, 2014.
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