US Market Dips Amid Hot Inflation; Seatrium Signs MOU with BP for Gulf Project

The US stock market stumbled on Wednesday, February 13, 2025, as investors grappled with the implications of hotter-than-expected inflation data and awaited the Federal Reserve's response. The consumer price index (CPI) increased by 3% in January 2025, the most significant rise since June 2023, and above the 2.9% expected by economists. This unexpected increase in inflation fueled investor concerns about the economic outlook and the potential impact on corporate earnings.



The hot inflation data injected uncertainty into the markets, leading to a decrease in investor confidence. Higher inflation typically means higher interest rates are incoming, which decreases stock valuations, irrespective of the profits and operational performance of a company. This uncertainty caused investors to pull back from the market, leading to a dip in stock prices. The benchmark 10-year Treasury yield shot up to 4.651% as prospects faded for lower rates any time soon.

Meanwhile, Seatrium Limited (SGX:5E2) announced that it has signed a Letter of Intent (LOI) with bp Exploration & Production Inc. (bp) to carry out early engineering works for engineering, procurement, construction, and commissioning work for bp's Kaskida Floating Production Unit (FPU) project in the U.S. Gulf of Mexico. The Kaskida project is a greenfield development located approximately 250 miles southwest of New Orleans, in the Keathley Canyon area of the Gulf of Mexico. Comprising a single topside module supported by a four-column semi-submersible hull, the Kaskida FPU is supported by subsea production wells located in a water depth of approximately 6,000 feet.

The Kaskida project is estimated to have recoverable resources of around 275 million barrels of oil equivalent from the initial phase. The topsides for Kaskida will be integrated and lifted to the hull using Seatrium's game-changing Goliath twin cranes with a combined lifting capacity of 30,000 tonnes. This method supports optimal readiness, thereby reducing safety risks during assembling topsides and enhancing overall project efficiency.

The signing of the MOU between Seatrium and BP for the Gulf project has significant implications for the company's growth prospects and valuation. The Kaskida project provides a substantial opportunity for Seatrium to expand its operations and revenue streams, with an estimated contract value of S$500m-600m. This project, along with other developments, has the potential to increase Seatrium's share price by 36.7% to S$2.80, reflecting the positive impact on the company's valuation (UOB Kay Hian, 2025-01-03).

However, it is essential to be aware of the potential risks and challenges that may arise during the project's execution and the broader market conditions. Delays or cost overruns in the Kaskida project could negatively impact Seatrium's financial performance and share price. The ongoing investigation by the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD) into Seatrium's financial reporting could also pose a risk to the company's reputation and valuation if any wrongdoing is found.

In conclusion, the US market's dip on February 13, 2025, was driven by the hot inflation data and the potential Fed response, while Seatrium's signing of the MOU with BP for the Gulf project presents significant growth prospects and valuation opportunities. However, it is crucial to manage the potential risks and challenges associated with the project's execution and the broader market conditions to ensure the company's continued growth and success.