Keppel cuts more than 3,000 jobs in Q3 amid oil glut

SINGAPORE — Keppel Corp’s offshore and marine division slashed another 3,080 jobs worldwide in the third quarter, including 660 in Singapore, said the oil-rig builder yesterday, warning it will reduce more of its headcount as the persistent global oil glut forces a cutback in exploration and drilling operations.

For the first nine months of the year, Keppel O&M has reduced its global direct workforce by close to 8,000 or about 26 per cent of the total. Much of the reduction has been through natural attrition but Keppel will increasingly look into early termination of contracts and selective retrenchment in Singapore, in line with the drop in workload, said Keppel’s chief executive Loh Chin Hua.

The warning came as Keppel released a dismal third-quarter report card, with net profit for the offshore and marine, property and infrastructure conglomerate slumping 38.1 per cent in the three months ended Sept 30 from the corresponding period a year ago to S$224.5 million.

Revenue for the quarter plummeted 40.2 per cent to S$1.46 billion, largely because of the lower volume of rig-building works at its O&M division, deferment of some projects and the suspension of the Sete Brasil contracts. Its property division improved, with a pick-up in the Singapore market partly offset by lower revenue from China.

“The landscape for O&M remains very challenging,” said Mr Loh. “The big news for the oil and gas sector during the quarter was Opec’s announced deal to cut production. Although still scant on details, the news was welcomed by the oil market and we have seen oil recover to more than US$50 (S$69) a barrel. Despite the gradual recovery in oil price, demand in the offshore market is expected to remain tepid. Oversupply remains a key concern in the offshore market, worsened by the overhang of rigs still under construction. With priority given to strengthening their balance sheets, the oil majors are expected to continue to hold back on offshore exploration expenditure.”

On its operations in Brazil, he reiterated Keppel’s zero-tolerance stance against any form of illegal activity, including bribery and corruption, involving its employees or associates. Earlier this month, Keppel announced that following internal investigations, it recognised that certain transactions associated with the agent of some Keppel entities in Brazil may be suspicious. Keppel has since notified authorities in the relevant jurisdictions that it will cooperate and work towards the resolution of the underlying issues in connection with the transactions, said Mr Loh.

Keppel was more positive on the outlook for its property and infrastructure divisions. “Resilient amid the global slowdown are strong urbanisation trends, especially in Asia, driving demand for quality homes and offices, infrastructure and connectivity, which Keppel is well-poised to meet as a provider of solutions for sustainable urbanisation,” said Mr Loh.

As the weak O&M division weighs on Keppel’s performance, senior management across all of Keppel’s business units have voluntarily taken salary cuts, while the board will be proposing lower directors’ fees at next year’s annual general meeting, it said.

Before the aftermarket results announcement, Keppel shares rose 0.4 per cent to S$5.44, compared to the 0.1 per cent drop in the Straits Times Index.