It was held on February 22, in Aracruz - ES, visit of the CEO of EMGEPRON, Vice Admiral (RM1-IM) Edesio Teixeira Lima Junior, and entourage, to the Shipyard Jurong Aracruz Ltda (EJA), member of the Society of Specific Purpose (SPE) POLAR-1, selected to build the Antarctic Support Ship (NApAnt) for the Brazilian Navy (MB).



The general coordinator of strategic programs of the Navy, Vice Admiral (RM1) Antonio Reginaldo Pontes Lima Junior and the Project Manager NApAnt, Captain of Sea and War (RM1) Archimedes Francisco Delgado were part of the committee. The entourage was received by the President of the Shipyard, Mr. Thangavelu Guhan, Manager of the NApAnt Project of POLAR 1, Eng. Ivano Lery Santos, Commercial Manager of The EJA, Eng. Maicon Batista Pinto, and Manager of Administration and Security of The EJA, Mrs. Lani Tardin.

At the time, a presentation was held on the main aspects involving the NApAnt Project, the progress of the Construction Contract negotiations and also a visit to the EJA facilities.



By June of this year, EMGEPRON will sign, with SPE POLAR-1, the Construction Contract, which is in the final phase of negotiation, being also responsible for supervising the construction of the ship in the EJA, expected to be ready and be delivered to MB within three years.

UOB Kay Hian analyst Adrian Loh has maintained his &ldquo overweight&rdquo recommendation on the offshore & marine (O& M) sector as the industry&rsquo s fundamentals continue to firm up.

In his report dated March 14, Loh sees several positives for the sector&rsquo s outlook, including the higher demand for rigs amid the ongoing supply destruction.

&ldquo In the past six months, the offshore drilling industry has been able to maintain its relatively high utilisation levels as it attempts to progress past pre-Covid-19 levels. Together with these stronger utilisation numbers, we note that dayrate numbers have also risen on a y-o-y basis with the exception of drillships,&rdquo he writes.

On the back of the elevated demand, the global offshore rig industry has lost 52 rigs, or 7% less y-o-y to 712 rigs as at March 10.

&ldquo Importantly, this supply destruction was seen across all asset classes with semi-subs registering the largest decline in supply in percentage terms, down 12% y-o-y to 102 rigs while in absolute terms, jack-up rigs saw 27 units exit the industry,&rdquo adds Loh. &ldquo In our view, this removal of excess supply is clearly a positive one, and should lead to upward pressure on utilisation and dayrates going forward&rdquo .

Furthermore, the analyst sees upside potential for drilling activity in FY2022-FY2023.

Similar to his previous report on  Jan 14, Loh notes that offshore investments in 2022 are set to increase 7% y-o-y, from US$145 billion ($198.04 billion) to US$155 billion, according to independent research company, Rystad Energy.

He adds that the US$150 billion of greenfield projects sanctioned in 2021 (from US$80 billion in 2020) is likely to be repeated in 2022.

To Loh, this will underline the positive outlook for the O& M sector in the short- to medium-term. &ldquo Underlining the strong cash generation by oil companies in 2022, the seven supermajors (BP, Chevron, Eni, Equinor, Exxon, Shell, TotalEnergie) are forecast to return around US$38 billion to US$41 billion to their shareholders via share buybacks, double the US$21 billion in 2014 when oil last cost more than US$100 per barrel,&rdquo he writes.

To this end, Loh says the sector could see a cyclical upturn start in the near term should activity in the oil & gas industry strengthen in 2022 and 2023.

The estimate assumes that the variants of Covid-19 are less lethal, that governments are able to deal with Covid-19 as an endemic situation, and that oil prices are not sustained at US$150 per barrel or more which could engender demand destruction, he adds.

Looking ahead, the demand for oil is expected to grow, although forecasts are subjected to the uncertainty from Russia&rsquo s invasion of Ukraine.

&ldquo Currently, its forecasts are based on global GDP growth of 4.3% in 2022 and 4.0% in 2023, which could be negatively affected should sanctions negatively affect the supply of commodities produced by Russia,&rdquo says Loh.

Naturally, the sanctions on Russia will present downside risks to the forecasts for global oil demand.

&ldquo Given the enormity of the economic sanctions levelled at Russia for its invasion of Ukraine, the Institute for International Finance last week predicted a 15% contraction in Russia&rsquo s GDP in 2022, double the decline from the global financial crisis,&rdquo notes the analyst. &ldquo An example of how sanctions can bite is Venezuela&rsquo s experience, with the country seeing a 60% contraction in oil demand from 2014 to 2019. Applying this to Russia&rsquo s 3.24 million barrels per day (mmbpd) of oil demand in 2020 would result in a contraction of nearly 1.3 mmbpd, thus eliminating over 40% of the EIA&rsquo s global oil demand forecast of 3.1 mmbpd for 2022,&rdquo he adds.

  Loh&rsquo s top picks for the sector, Yangzijiang, Keppel Corporation and Sembcorp Marine (SembMarine) have remained unchanged from his previous report.
&ldquo Yangzijiang remains inexpensive at an FY2022 P/B of 0.6x and will see margin expansion over the course of the next six months,&rdquo he writes.

&ldquo Keppel Corp has undemanding valuations and potential positive newsflow regarding the merger or divestment of its O& M business unit and Sembcorp Marine&rsquo s risk-reward appears skewed to the upside post its successful $1.5 billion rights issue in 2021. In addition, the company&rsquo s management stated that 2022 will be significantly better than 2021 and we believe there is a high chance that the company will win some meaningful orders this year,&rdquo he continues.
Loh has recommended &ldquo buy&rdquo on Yangzijiang, Keppel Corp and SembMarine with target prices of $1.95, $6.94 and 11 cents respectively.
As at 10.36am, shares in Yangzijiang, Keppel Corp and SembMarine are trading at $1.35, $6.12 and 8.7 cents respectively.