“We cannot deny that there has been a stream of good news for the oil and gas sector that suggests upstream activity is turning more positive,” affirmed a representative from RHB Research Capital Sdn Bhd (RHB Research) when contacted by the Borneo Post yesterday.
“However, we believe that investors should view all news flow in perspective, given there was still underlying economic issues that could pull sentiments down.
“In the near term, we are concerned that a sharper-than-expected global economic slowdown will affect demand for oil. Our conclusion is that there is no real pressure for crude oil prices to move up, and therefore no rush for oil and gas companies to begin spending aggressively. Thus, in the near future, the sector remains very much driven by trading sentiment.”
This was in light of British Petroleum (BP) successfully capping the leaking well in the Gulf of Mexico. Stopping this leak, highlighted RHB Research, was a significant leap forward and relieved the pressure on the US government to impose further drilling restrictions, which in turn reduced the risk of offshore assets moving to this region looking for jobs.
The research house continued to highlight that Southeast Asia’s offshore activities outperformed the rest of the world as shown by the increase month-on-month (m-o-m) in the number and utilisation of working rigs.
NOTEWORTHY PACT: Bourbon Offshore is one of the world’s largest offshore support vessel
players, leading to conclude that the MoU will be a significant play for Petra Energy.
Among good news in the sector included UMW Holdings Bhd (UMW) expecting to revisit its proposal to list its oil & gas revision next year. This could potentially spur the revival of other proposed listings in the sector that were halted, said the research house.
In addition, RHB Research backed UMW to secure contracts for its Naga 2 and Naga 3 jack-up rigs in the near term. It was highlighted that charter rates appeared to be improving but were still below the peak in 2008.
ECM Libra Capital Sdn Bhd (ECM Libra) in a separate report yesterday shared the same view with RHB Research, noting that several oil & gas companies in the region was seeing more action in terms of contracts and boardroom action.
Dayang Enterprises Sdn Bhd (Dayang Enterprises) were among the updates, receiving two work orders under a contract with Petronas Carigali Sdn Bhd (Petronas Carigali) for the provision of hook-up and commissioning (HUC) services.
The two work orders, estimated at a total value of RM48.7 million, would bring the group’s earnings before interest and tax (EBIT) margins to the 20 per cent to 25 per cent levels. The group’s strong margins came from the fact that they owned their own workboats and barges as well as equipment, which were fully paid off, hence no third party charters which would eat into margins.
At this point, ECM Libra opined that the Dayang Enterprises still had an order book of roughly RM920 million with the bulk coming from Shell’s top side maintenance services.
Other news underscored by the research firm included Petra Perdana Bhd (Petra Perdana) managing to secure one board representation in Petra Energy Bhd (Petra Energy) during the extraordinary general meeting (EGM).
Although the board was planning to secure three seats, the one representation nonetheless meant that there was less likelihood of Petra Perdana selling their stake in Petra Energy.
Speaking of Petra Energy, the group formed an alliance with the Singaporean branch of Bourbon Offshore. The latter is one of the largest offshore support vessel players in the world, leading to conclude that this memorandum of understanding (MoU) would be a significant play for Petra Energy.
Under the terms of this MoU, Petra Energy would carry out topside maintenance works while Bourbon Offshore would supply the vessels necessary for the job.
In other news, Thailand’s Mermaid Offshore continued its divestment of Malaysian businesses, looking to sell a Petronas-licensed subsea business for US$23.4 million to their local partner. ECM Libra noted this to be a likely move to raise cash for other purchases.
Looking at downstream developments, Gas Malaysia Sdn Bhd (Gas Malaysia) signed an agreement with Petroliam Nasional Bhd (Petronas) for the supply of an additional 82 million standard cubic feet per day (mmscfd) of natural gas.
Pursuant to the second supplement of gas supply agreement, this additional supply of natural gas would be effective until December 31, 2011 and would be earnings accretive.
Apart from that, there was circulating news of a private company looking to build 4,000km of subsea liquefied natural gas (LNG) pipeline from Malaysia to South Korea. This project was valued at US$50 billion or RM160 billion.
ECM Libra viewed this news to be of potential for the likes of Wah Seong Corporation Bhd (Wah Seong) and SapuraCrest Petroleum Bhd (SapuraCrest Petroleum) should it come to fruition.
To conclude, both research firms maintained a positive outlook for the sector in the long term, backing several companies such as Dialog Group Bhd, Dayang Enterprises, Wah Seong and SapuraCrest Petroleum.
Source : The Borneo Post