Wednesday 26 September 2012

SapuraKencana Petroleum - Secured US$25mil Thai offshore installation job HOLD


- We maintain our HOLD recommendation on SapuraKencana Petroleum (SapuraKencana) with an unchanged fair value of RM2.60/share, pegged to a FY14F PE of 18x– 20% above the oil & gas sector’s 15x currently. 

- As indicated in our report on 24 September, SapuraKencana’s wholly-owned TL Offshore Sdn Bhd has secured a US$25mil (RM77mil) contract to procure, construct and install a production/processing platform, pipelines and pipeline end manifold for the Manora Field development, Thailand from Pearl Oil (Amata) Limited, an affiliate of Abu-Dhabi-based Mubadala Petroleum.

- The contract comprises of procurement of equipment  and bulk materials, fabrication, transportation, installation and hook-up of a Wellhead Processing Platform and two 2km pipelines in the Manora oil field, which lies in 44 metres of water at 80km from the coast of Thailand. Pearl Oil (Amata) Limited is the operator of the Manora oil field in the G1/48 concession in the Gulf of Thailand with partners Tap Energy (Thailand) and Northern Gulf Petroleum. This is the first of three oilfields being developed by Mubadala Petroleum in Thailand. 

- Works for this contract will be carried out in a consortium with Clough Ltd’s Thai-based  subsidiary, which will undertake the procurement and fabrication at its yard in Sattahip, Thailand while TLO will undertake the transportation and installation. The contract work is scheduled to commence this month with completion in early 2014. Given its relatively small scale, this contract will not significantly raise SapuraKencana’s current order book of RM14.5bil. Hence, we maintain FY13F-FY15F net profit. 

- For the rest of the year, we expect a higher magnitude of newsflow for hook-up, construction and commissioning (HUCC) works vs. pure fabrication jobs. The tenders which the group is bidding for include the RM8bil-RM10bil Pan-Malaysian umbrella HUCC contract and RM600mil subsea maintenance job, which is scheduled to be announced by the end of this year. But the larger central processing platform and multiple wellhead platforms for the North Malay gas basin Phase 2 development and Bokor, Dulang and Semarang fields may only materialise next year. 

- SapuraKencana’s valuations are currently fair at an FY14F PE of 16x, which is at a 5% premium to the sector. We also do not discount the possibility of Seadrill disposing of its remaining 6% in SapuraKencana to fund its asset expansions in Brazil.

Source: AmeSecurities

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