Last October, Temasek offered to increase its one-fifth stake in Keppel to 51%, raising expectations of consolidation in the domestic rig building sector.

Temasek declined to comment on Keppel's results and the impact on its conditional offer.

Keppel's CEO Loh Chin Hua said: "We believe that the 20% threshold in the MAC (material adverse change) clause in respect of net profit after tax has been crossed."

The CEO said this meant that the pre-condition in Temasek's offer had not been satisfied but said Keppel was unable to comment on the offer or Temasek's stance.

"Following the impairments, Keppel's trailing 12-month results missed the S$557 million profit after tax target and hence breached the profit after tax MAC clause for Temasek's partial offer. As such, the transaction is unlikely to proceed unless the pre-conditions are waived (at Temasek's discretion)," Citigroup analysts said in a report.

Keppel reported a net loss of S$697 million for the quarter to June versus a net profit of S$153 million a year earlier. That marked its biggest quarterly loss in at least 15 years, Refinitiv data showed.

Keppel, whose businesses range from property development to rig-building, incurred impairments of S$919 million, mostly in its offshore and marine business. Excluding impairments, net profit would have been up 45% to S$222 million for the quarter.

"Given the continuing impact of COVID-19, 2H 2020 will probably remain very challenging," Loh said.

Keppel's shares closed 3.6% lower at S$5.40 ahead of the results. They have fallen 20% this year, nearly back to the same levels when Temasek made its conditional bid of S$7.35 per share.

By Aradhana Aravindan and Anshuman Daga