Oil Bears Boost Short Interest on Sembcorp Industries to Record

  • Rig business pressured by oil slump, Brazil customer's woes
  • Sembcorp Industries' shares down more than 20% this year

Bearish bets against Sembcorp Industries Ltd. are at the highest level ever as investors speculate the stock has further to plunge with slumping oil prices continuing to pressure the offshore rig industry.

Stock of the biggest shareholder of rig-builder Sembcorp Marine Ltd. has plummeted 22 percent in Singapore this year as oil prices slumped to the lowest in more than a decade. The shares are down more than 50 percent from an April 2015 high. Short interest, essentially a bet that the stock will fall further, reached the highest level on record Jan. 14,  according to Markit Group Ltd. data compiled by Bloomberg.

Concern is growing that the slump in oil prices and a potential bankruptcy at a key customer could lead to delivery delays or order cancellations for yards such as Sembcorp Marine, the world’s second-largest builder of rigs. Sembcorp Industries got more than half of its total revenue from offshore business in 2014, according to data compiled by Bloomberg.

Shareholders of customer Sete Brasil Participacoes SA are set to discuss whether it should file for bankruptcy protection after plunging oil prices slammed demand for drilling equipment at the South American company, which is also embroiled in a corruption probe. Crude prices are trading below $30 after international sanctions on Iran were lifted, paving the way for increased exports from the OPEC producer amid a global glut.

Bearish bets for Sembcorp Marine, 61 percent owned by Sembcorp Industries, rose to the highest in almost a year on Jan. 14. Those for Keppel Corp., owner of the world’s biggest rig builder and which received more than 60 percent of total revenue from offshore business in 2014, rose to the highest level since 2006, according to Markit Group.

Sembcorp Marine, which has slumped 25 percent this year, is the third-worst performer on the 30-member Straits Times Index, while Sembcorp Industries has the fourth-biggest decline. Keppel ranks No. 2 on the index for 2016, plunging 26 percent. Noble Group Ltd. has the worst record with a 30 percent loss.

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