Singapore-based offshore company Keppel is still hard hit by the downturn in the oil industry and will now shut down three yards in its homeland, writes the company in relation to the release of its 2016 annual report, which shows the company's lowest profit in ten years.

The bottom line landed at USD 552.1 million (784 million Singapore dollar), which is the lowest profit since 2006, according to a statement from the company.

A large part of Keppel's business comes from building rigs for the offshore industry. Several years of low oil prices have entailed that less orders are ticking in compared to before, and this is now reflected in the company's bottom line.

For all of 2016, Keppel Offshore & Marine (O&M) reduced its direct workforce by about 10,600 or 35 percent, with about 3,800 in Singapore and 6,800 overseas. The subcontract headcount in Singapore, which has already been lowered significantly, was further reduced by about 3,300.

"We have responded decisively to the challenging conditions facing our offshore and marine business, not just in anticipation of a long and harsh winter, but also to build a stronger, leaner and more competitive Keppel O&M. The painful but necessary measures to rightsize our O&M Division must continue," said CEO Loh Chin Hua.

Do not see quick recovery

Revenue for Q4, which ended Dec. 31, 2016, was 1.94 billion Singapore dollars, down 21.8 percent from the previous year.

"While spending by oil majors is expected to increase, we do not envisage a quick recovery for the offshore business, which continues to be under pressure from weak utilization of the existing operating fleet, coupled with a supply overhang of new builds," CEO Loh Chin Hua said

According to The Business Times, the group company did not extend any provision for other rigs on its order book even as it acknowledged delivery of several jack-ups will be deferred on clients' requests. The guarantor towards the jack-up placed by Parden, had agreed on a settlement with Keppel O&M to pay up for the remaining 80 percent outstanding, and push out the delivery of the rig to Q4 2017.

Keppel O&M has also received requests to defer the delivery of Falcon Energy's jack-up to Q2 2017 and a second BOT Lease Co's jack-up to January 2019. Falcon has paid up 20 percent in a down-payment and BOT 60 percent in milestone payments for their jack-up rigs. Delivery of a semi-submersible rig at Keppel O&M's Caspian Shipyard was also postponed two quarters to Q2 2017 due to additional modifications needed for its charter to oil company Total..

Keppel's largest shareholder is Temasak, controlled by the state of Singapore.

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