By Kyunghee Park

(Bloomberg) — Keppel Corp., the world’s largest builder of oil rigs, reported a 41 % decline in first-quarter revenue as weak oil costs led to supply delays of offshore tasks.

Net revenue dropped to S$211 million ($156 million) from S$360 million a yr earlier, Keppel stated in an announcement Monday. Sales slumped 38 % to S$1.7 billion from S$2.8 billion. The larger contribution from its property enterprise at 47% helped to partially offset decrease income from offshore and marine sectors, the corporate stated within the assertion.

Oil firms and rig operators face rising debt and spending cuts, and have deserted orders or requested shipyards to delay deliveries of offshore drilling rigs and manufacturing amenities. That’s brought on shipyards to publish losses or smaller income after writing off prices from tasks underneath building, and demand has fallen with crude costs nonetheless lower than half of what they have been three years in the past.

“The sustained low oil price environment continues to take a toll on the global oil and gas industry, which is in the midst of one of the most severe downturns in recent years,” Chief Executive Officer Loh Chin Hua stated within the assertion.

Keppel fell 2 % to shut at S$6 Monday earlier than the earnings announcement. The inventory has fallen 7.8 % this yr.

Brazil Challenge

Keppel and its smaller rival Sembcorp Marine Ltd. additionally face dangers from Brazil, the place debt-ridden Sete Brasil Participacoes SA accounts for a mixed $10.5 billion in orders for semi-submersibles and drill ships on the two firms. Sete Brasil fell into monetary misery after it was unable to safe long-term financing and its solely shopper state-run oil producer Petroleo Brasileiro SA, or Petrobras, confronted allegations of kickbacks.

Keppel wrote off S$230 million within the fourth quarter over delinquent tasks.

Brazil, which has historically been one of many firm’s key markets, “continues to be mired in economic and political challenges,” Loh stated.

Keppel stopped building work for Sete Brasil and gained’t resume till fee commences, Loh stated.

Oil costs have plunged greater than 60 % over the previous two years amid a provide glut and slower progress in China. Brent crude fell 4.2 % to $41.29 a barrel as of 4 p.m. in Singapore Monday. Members of the Organization of Petroleum Exporting Countries and different producers ended talks over the weekend with none settlement to restrict output.

More than $400 billion of proposed power tasks have been delayed since mid-2014 and pushed into 2017 and past as oil costs dropped, in line with consulting agency Wood Mackenzie Ltd.

© 2016 Bloomberg L.P