What you need to know about Keppel's latest deal with its 'prodigal rig'

Falcon sealed a US$225m jack-up rig deal.

According to CIMB's report ''The Prodigal Rig," Keppel has secured a US$225m jack-up rig contract from Singapore-listed Falcon Energy. The rig is scheduled for delivery in 3Q15, with 25/75 payment terms.

China Merchants Heavy Industry (CMHI) is currently building two jack-up rigs (GustoMSC CJ-46) that Falcon awarded in Oct 2011 for delivery in Oct 2013. CJ-46 jack-up rigs are entry-level rigs that may not be widely acceptable in the market.

Here's more from CIMB:

Even though the rigs came with the option for two more units, Falcon still ordered a KFELS super B-class rig, suggesting that proven designs could be more in favour.

In early 2013, Falcon Energy entered into agreements with PetroVietnam Drilling and Well Services to set up JVs in Singapore, focusing on providing drilling services. The PetroVietnam JVs are likely to take on the jack-ups that are currently being built by CMHI. However, with more opportunities from international national oil companies in the pipeline, quality and proven track record could be the reasons why Falcon is returning to home ground and ordering the rig from Keppel.

Jack-up rigs make up more than 85% of Keppel Corp’s YTD orders, suggesting unabated demand in the industry. YTD, a total of 20 units have been ordered globally compared to a total of 15 in 2012.

Singapore yards have clinched 10 of the 20 units ordered YTD while Chinese yards secured the other 10.

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