Keppel's profit climbs as rising oil prices spur rig demand: Update

Keppel Corp., the world’s largest oil-rig maker, increased first-quarter profit 7.8% as higher crude prices stoked demand for drilling equipment.

Net income climbed to $346.2 million from a restated $321.3 million a year earlier, the company said today in a statement to the Singapore stock exchange. Sales were little changed at $2.42 billion.

The company has won $5 billion of new orders so far this year, surpassing the tally for the whole of 2010, as oil prices above US$100 a barrel prompt energy companies to buy more offshore and deepwater drilling equipment. Royal Dutch Shell Plc, Europe’s largest oil company, said on March 15 that it plans to spend US$100 billion on projects in four years through 2014.

“The improving global economy means that the prospects for our key businesses remain good,” Keppel Chief Executive Officer Choo Chiau Beng said in the statement. There has been a “strong flow of orders in the first quarter.”

Keppel rose 1.6% to close at $12.72 in Singapore before the earnings announcement. The stock has climbed 35% in the past 12 months, compared with the 30-member Straits Times Index’s 6.2% gain.

The new orders this year boosted the company’s total backlog to $7.5 billion, with deliveries stretching into 2014, according to the statement. The price of oil has risen about 20% this year to almost $110 in New York trading.

Selective Orders
Keppel’s offshore arm, which makes products including jackup rigs and deepwater equipment, has become more selective on contracts because of rising enquiries, Tong Chong Heong, the unit’s head, said on a conference call. Margins may fall this year after the company completed deliveries of contracts won at higher prices before the global financial crisis, Choo said.

The unit boosted first-quarter profit 5% to $216 million, while sales fell 20% to $1.2 billion. Operating profit gained 2% to $248 million, while the operating margin rose to 21% from 16% a year earlier.

Keppel’s property unit Keppel Land yesterday said first-quarter net income jumped 46% to $92.1 million on higher home sales. Sales more than tripled to $357.9 million. Keppel also has a utilities arm.