KUCHING: Analysts at Maybank Investment Bank Bhd (Maybank Research) maintain their overweight sector call for Malaysia and Singapore after attending two conferences on floating, production, storage and offloading (FPSO) services and drilling rigs.
Maybank Research in a report yesterday believes the FPSO market remains buoyant and is entering a more balanced risk-reward state for both operators and oil companies.
The FPSO market is also expected to see a consistent flow of contracts over the next three years at 10 to 13 jobs per annum.
“Majority of the awards will continue to be leased contracts as apposed to turnkey projects,” it said, noting that the top 10 global FPSO operators are consistently in bidding processes supported by their project management capabilities, sound balance sheets and track records.
“Post 2008, the FPSO market has consolidated and this is still ongoing,” Maybank Research added.
“FPSO operators are not less inclined to take extension, resevoir and counterparty risks, and would aim to fully repay their loans within the firm period of their contracts.”
Maybank Research observed that the requirement for local content is an increasingly critical criteria in determining project wins and execution.
The training of local or new staff is imperative to address potentially tight labour market conditions in the future.
“Cost management is also becoming a more important agenda. With several FPSO contracts expiring over the next few years, FPSO redeployments are becoming a stronger economical solution over FPSO conversions.”
Looking at the drilling rigs segment, the firm concluded that jack-up drillings market remains robust but deepwater rigs are experiencing temporary weakness in day rates.
The influx of new deepwater rig deliveries over 2014 and 2015, coupled with existing rigs rolling off contracts, have led to a temporary supply glut, it added.
Maybank Research said day rates should reverse their negative trends over the next 12 to 18 months.
Meanwhile, a replacement cycle of old rigs, especially jack up rifs, is still being played out.