It might file for bankruptcy in a week.
The biggest customer of Singapore’s two largest rig builders might just have a week left before it finally files for bankruptcy.
A report by Reuters said that Sete Brasil plans to file for bankruptcy protection if Petrobras, its sole client, fails to present a final lease contract proposal within seven days. Sete Brasil had been mulling a bankruptcy filing after being embroiled in a corruption scandal, which was worsened by the collapse in oil prices.
Sete Brasil is the single largest client of local shipyards Keppel O&M and Sembcorp Marine. Keppel has $6.2 billion worth of contracts for six semi-submersible rigs, while SembMarine’s order book has seven drillships worth $7 billion in total from the company.
Both shipyards have taken hefty provisions for these projects in the fourth quarter of 2015, with Keppel and Sembcorp setting aside $230m and $329m, respectively, for the projects.
Analysts warn that the Sete Brasil saga will eat up an even greater chunk of rigbuilders’ profits in coming quarters.
“[For SembMarine], we now expect Sete Brasil to cancel at least 4 out of the 7 drillships given the corruption turmoil still embroiling Petrobras and the weakness in the Brazilian economy,” said KGI Fraser analyst Joel Ng.
“The uncertainty in Brazil is worrisome. O&M outlook is also plagued by the depressed oil prices. Rigbuilding is entering a prolonged cyclical downturn and competition is intensified,” said DBS analysts Janice Chua and Pei Hwa Ho in a report.
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