Rig builder Keppel Corporation said Thursday that it took a $160 million fourth quarter writedown due to missing payments from Sete Brasil, the latest fall out in the Petrobras scandal.

The Singapore-based company said it received about $1.3 billion from Sete Brasil for six new rigs before milestone payments stopped.

The company added that it began slowing down construction work on the Sete rigs after it stopped receiving payments over a year ago.

“We have also made a provision of about S$230 million for these projects in 4Q 2015, after assessing our construction progress, payment status and amounts due to our vendors amongst other areas,” Keppel CEO Loh Chin Hua said.

Sete Brasil is a state-owned rig firm established to provide vessels to Brazil’s Petrobras.

Former Petrobras director Pedro Barusco alleged in a Brazilian court last June that a group of shipbuilding companies, including Keppel FELS, paid brides to win contracts with Sete Brasil.

Barusco, who also served as the director of Sete Brasil, has alleged that rig building firms used intermediaries to pay bribes to Sete Brasil in an effort to win contracts for 21 deepwater drilling vessels worth about $800 million a piece.

Keppel has refuted media reports claiming the company was involved in bribery and has denied any wrongdoing.

The company said in October that it will “extend its full cooperation to the authorities if approached.”

Those allegations are part of broader probe into alleged price-fixing and bribery tied to Petrobras contracts that has already landed several former Petrobras executives in jail.

Keppel said construction on four semi-submersible rigs for Sete has progressed less than 4 percent since the beginning of 2015 and only two of the rigs have been sent to the company’s yard in Brazil.

“Meanwhile, minimal work had been done on the last two semis,” Loh added.

Keppel halted construction work on all of the projects as of the end of 2015 as it awaits “further clarity on the situation.”

“We understand that Sete’s board will soon be meeting to discuss future plans for the company. It remains unclear when a final decision will be taken. Until we hear from Sete officially and the situation and options available to us become clearer, the above measures, in our opinion, are sound and adequate,” Loh said.

Keppel had expected to deliver 15 drilling jackups this year, but delivery on eight of those projects has been pushed back to 2016.

The delayed deliveriss include five rigs for Grupo R, and one each for Parden Holdings, FTS Derricks and Perforadora Central.

The company said the delays are “not extensive,” the contracts are still valid and that it is working to deliver several of the rigs in the early half of this year.

Keppel expects its yards to deliver 25 newbuild and conversion projects in 2016.

“Our yards will remain busy for the rest of this year, with the execution of both existing and new projects from our backlog,” Loh said.

Keppel reduced its direct staff headcount in Singapore and its oversea yards by about 6,000 positions, or about 17 percent, since January 2015 through a combination of optimization and natural attrition.

The company’s Singapore subcontractor workforce was pared down by about 24 percent, or about 7,900 positions, over the same period.

Keppel said it is preparing to meet the near term challenges facing the energy industry by “rightsizing our operations and resources,” but the company has not disclosed further details about those plans.

Keppel’s fourth quarter net profit fell 44 percent to about $283.57 million ,or S$405 million,  down from about $508 million in the fourth quarter of 2014.

The company full year 2015 net profit fell 19 percent to about $1.067 billion compared to $1.319 billion in 2014.

“The low oil prices we see today are not sustainable in the long run. How soon the new equilibrium will be reached remains to be seen. We have to plan for a longer winter,” Loh said.


Leave a Reply