Keppel Sets Up Private Fund to Exit Legacy Oil Rig Fleet

Monetising a Legacy Portfolio

Keppel announced plans to divest six operational oil rigs for approximately S$1.2 billion through a newly established private fund, marking the first phase of a broader strategy to exit its legacy offshore assets. The transaction, disclosed on July 27, will deliver around S$611 million in cash consideration to the Singapore-based conglomerate through its indirect subsidiary Rigco.

The deal structures Keppel as manager of the Keppel Offshore Fund while Apollo serves as investment manager. Both entities will hold limited partnership interests in the vehicle, allowing Keppel to collect recurring management fees, advisory fees, and distributions from its retained stake even as it reduces direct exposure to the volatile rig market.

Keppel will book an accounting loss of roughly S$92 million in its first-half results, scheduled for release on July 30. The loss includes the recycling of foreign currency translation adjustments to the profit and loss statement, a technical accounting treatment that does not affect the cash proceeds.

Four More Rigs in Pipeline

Beyond the initial six units, Keppel intends to progressively complete and potentially divest four additional rigs to the same fund between 2027 and 2028, subject to certain conditions. Construction will be funded using existing cash held within Rigco. If those four rigs are sold, Keppel expects to generate a further S$1.3 billion in cash proceeds.

The company said it is exploring various options for the remaining three of the 13 legacy rigs held by Rigco, which are not included in the current transaction. Those units represent the tail end of a portfolio that has weighed on Keppel's balance sheet since the offshore construction downturn that began in 2014.

According to Keppel, the transaction will lift its funds under management by approximately S$3.9 billion, bolstering its asset management credentials as it pivots from a traditional offshore engineering group toward a diversified infrastructure and property investment manager.

Tight Supply Outlook

Loh Chin Hua, chief executive of Keppel, said the transaction establishes a clear pathway for the progressive monetisation of the legacy rigs. He added that Keppel's stake in the fund positions the company to benefit from improving long-term fundamentals and tight supply in the rig market, even as it sheds direct ownership risk.

The offshore rig sector has shown signs of recovery in recent years, driven by higher oil prices and a multi-year underinvestment in new capacity. Day rates for modern jackup and semi-submersible rigs have climbed as operators compete for equipment to develop fields in Southeast Asia, the Middle East, and Latin America. Keppel's decision to retain an economic interest through the fund structure reflects confidence that asset values may continue to appreciate.

Regional Context

The divestment aligns with broader restructuring across Singapore's offshore and marine sector. Keppel merged its legacy offshore and marine unit with Sembcorp Marine in 2023, creating a combined entity now known as Seatrium. The deal allowed Keppel to exit direct operational exposure to rig construction while retaining a minority stake in the merged business.

Other regional players have pursued similar asset-light strategies. Sembcorp Industries spun off its marine arm before the merger, while COSCO Shipping has consolidated yard capacity in China. The shift reflects lessons learned from the 2014-2016 downturn, when excess capacity and cancelled orders left yards across Asia with unfinished hulls and strained balance sheets.

Keppel shares closed 0.9 percent lower at S$11.35 on July 27, before the announcement was released after market hours.