THE BUZZ
Yesterday, Petra Energy announced that it had entered into a
Memorandum of Understanding (MOU) with
Baker Hughes (M) SB to undertake oil and gas projects in Malaysia. The MOU will
give Petra Energy a solid platform to vie for various projects in the local O&G value chain. Under the
MOU, both parties will co-operate to provide capability development
services, including deploying their respective expertise and knowledge in
O&G projects for operators in Malaysia.
OUR TAKE
A short take on Baker
Hughes. Baker Hughes is one of the
world’s top-tier oilfield service
companies that assists O&G operators to make the most out of their
reservoirs via high-performance drilling, evaluation, completion and production
technology and services as well as integrated operations and reservoir
consulting. Ultimately, the O&G operators will see the benefits of Baker Hughes's services in the form of lower production costs, lower operating risks
and higher productivity in their projects. Baker Hughes's scope of work covers deepwater
as well as unconventional hydrocarbons, apart from conventional hydrocarbons.
As a group, it has about 57k employees in more than 80 countries.
A potential foreign partner in future marginal oilfields? We would not
be surprised if this happens because: (i) Petra Energy's management had earlier
indicated its intention to participate in the marginal oilfield development
programme spearheaded by Petronas, and (ii) Baker Hughes fits the criteria as one
of Petra Energy’s foreign partners
since the former has the technology and
expertise in drilling evaluation and reservoir development. However, we
believe Baker Hughes is unlikely be
Petra Energy’s only foreign
partner since such a partnership should also involve O&G
operators responsible for getting the O&G
out of the reservoir.
Positive news but no
change to FY12-FY13 earnings forecasts. As the partnership is currently at
the MOU stage, we are still unsure of what developments lie ahead, as well as the
potential earnings contribution from such developments to Petra Energy going forward. Having said
that, we believe this MOU will be
positive for the company and its efforts to move up the value chain before
participating in marginal oilfield developments.
Maintain Buy. Our
fair value for Petra Energy remains unchanged at RM1.50 based on the existing
PER of 13x FY12 earnings. We think that after carrying out a 'kitchen-sinking’ last year, the company should expect better
financial performance moving forward. We
also believe that all the company has made all the necessary provisions and write-offs
to incorporate the true and fair valuation
of all its existing projects to
date. Ultimately, we expect the company to deliver consistent quarterly
performance as it can now focus on its core business in the provision of
brownfield services, which provide stable and recurring income.
Source: OSK188
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