7/31/2019 BIMBSec - Oil Gas News Flash 20120709

1/3

BIMB SECURITIES RESEARCH

MARKET INSIGHTMonday, 9 July, 2012

PP16795/03/2013(031743)

| 1

Oil & Gas Sector News Flash

Active Newsflow

Chiong Tong Chaichiongtc@bimbsec.com.my

03-26918887 ext 175

Petronas has awarded its third Small Field Risk Service Contract (RSC) to Canada

based Coastal Energy. The RSC involved the development and production of

petroleum from Kapal, Banang and Meranti cluster of small fields (KBM cluster). The

cluster is located 20km off peninsular Malaysia at water depth of 60 meters. First oil

is targeted from Kapal field within one year followed by Banang field a year later.

The development scheme will involve the deployment of Mobile Offshore

Productions units (MOPUs) and Floating Storage and Offloading vessel (FSO). The

general contract terms structure is similar to the early two i.e Berantai and Balai.

Coastal Energy is now finalizing an arrangement for a local companys participation.

This contract came after some delay where we first targeted this third RSC to be

awarded sometime in May. Pegged to the current two RSCs, we expect the capex

could come to the tune of USD1bn while development which will be taking place in

stages could take at least 3-5 years to complete. Given the lack of newsflow, as of

now it is rather too speculative for us to pick a name as Coastal Energys local partner

which could take up to between 30%-40% stake in the project though names like

Petra Energy and TH Heavy Industries have emerged. For small to mid-size domestic

companies to participate, we expect cash call would be required to fund their stake.

While Coastal Energy has yet to disclose the clusters full development scheme,

announcement by the company which has pointed towards utilization of MOPUs and

FSO are positive for local service providers though we wish to highlight that from the

development of Berantai and Balai, it seems to be a preference by the RSC players toown those assets rather than entering into leasing arrangement. As for the rest of the

5 marginal field clusters, we expect news to continue to flow-in though we do not

expect all of them to be awarded this year.

Petronas is expected to dish out the Front End Engineering and Design (FEED)

contract for the Angsi fields vessel based Chemical Enhanced Oil Recovery (CEOR)

contract by end of the month. The FEED is targeted to be completed in 3 months

time and focus on maturing the concept for a proposed CEOR vessel equipped with

15 days storage to support liquids injection at 150,000 barrels per day. The final

contract will also include work on the modification to the Angsi central processing

platform and a satellite platform, plus inter-platform pipelines. The vessel is also

targeted for deployment for Shell operated St. Joseph field.

With the FEED contract, market is now expecting the start-up of the project which

could cost up to USD1bn to slip into 2014 versus Petronas early target of by end of

2013. Uzma which was involved in the basic engineering study for the project is also

likely to be tapped for this FEED, however, we expect potential contribution (if any) to

be small. With Petronas looking at MISC for the supply of vessel, this would directly

disappoint other local players that are looking for the job opportunity, including Bumi

Armada. The level of disappointment is even higher for the other similar project i.e

Shells St. Jospeh CEOR project, where Shell seems to have written-off the first tender

round due to higher than expected cost quoted by bidders. Though the new plan is

not finalized yet, the giant has since then returned to market but apparently has

scaled down the size of the pilot project by looking at vessel capable of injecting 2,000

barrels per day of chemicals as compared to initial plan of 10,000 barrel. Given these

developments as well as the continuous delay in the dish out of FPSO/FSO contracts,

we recognized there is increasing risk to our estimates on Bumi Armada which we

would re-visit after the release of its second quarter result.

mailto:chiongtc@bimbsec.com.mymailto:chiongtc@bimbsec.com.mymailto:chiongtc@bimbsec.com.my

7/31/2019 BIMBSec - Oil Gas News Flash 20120709

2/3

9 July 2012

www.bimbsec.com.my | 2

Petronas is speculated to put up a tender for a processing platform of up to 25k

tonnes and 7 satellite platforms for the Bokor redevelopment programme by end of

this year. The redevelopment programme is part of the USD12bn production sharing

contract (PSC) deal between Petronas and Shell signed early of this year to realize

750m barrels of oil reserves and to boost the recovery rate for the Baram Delta and

four fields in the North Sabah development area from 36% to 50% through various

Enhanced Oil Recovery(EOR) initiatives. Bokor is a candidate for in-fill drilling plus

water-alternate-gas enhanced oil recovery development aimed at lifting output to

140,000 barrels per day (bpd), up from the current 60,000 bpd.

This tender is largely expected and should it be tendered out by end of the year, we

expect it would be awarded in the first half of next year. However, we were surprised

with the report that Petronas has extended the expressions of interest for the job to

regional yards i.e Singapore and Indonesia, a departure from its traditional policy on

local preference. Historically, international bids were only largely observed for field

developments in Malaysia-Thailand Joint Development Area and Malaysia-Vietnam

Commercial Arrangement Area. It was suggested that, Petronas intentions in doing

so is to put cost under control and to ensure fast project execution through EPCIC

contract. With this, we expect pricing is now getting even more competitive and could

also further put smaller domestic players into a more challenging position as they donot offer full suite of services to cater for EPCIC contract. It was also quoted that

tenders for two other billion Ringgit platform contracts i.e Semarang and Dulang, are

also likely to be issued out this year as both are targeting to hit production start-up in

2015.

Our view. We continue to Overweight the sector. Maintain Buy on Dayang (TP:

RM2.43), Dialog (TP: RM2.78), Uzma (TP: RM2.70) while Trading Buy on Wah Seong

(TP: RM2.28), Neutral on Bumi Armada (TP: RM4.44) and Sell on MMHE (TP:

RM4.37).

7/31/2019 BIMBSec - Oil Gas News Flash 20120709

3/3

9 July 2012

www.bimbsec.com.my | 3

DEFINITION OF RATINGS

BIMB Securities uses the following rating system:

STOCK RECOMMENDATION

BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months

OUTPERFORM The stock is expected to perform ahead of the market in the next 12 monthsTRADING BUY The stock is expected to outperform the market in the next 3 months

NEUTRAL The stock is expected to perform in line with the market in the next 12 months

TRADING SELL The stock is expected to underperform the market in the next 3 months

SELL An expected price depreciation of more than 10% in the next 12 months

SECTOR RECOMMENDATION

OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market

index over the next 12 months

NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary

market index over the next 12 months

UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market

ndex over the next 12 months

Applicability of ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings

are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do

not carry investment ratings as we do not actively follow developments in these companies.

Disclaimer

The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information

purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB securities Sdn Bhd

may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may

provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was

obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts

are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as

such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report

constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct,

indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X)

A Participating Organisation of Bursa Malaysia Securities Berhad

Level 32, Menara Multi Purpose, Capital Square,

No. 8 Jalan Munshi Abdullah,

50100 Kuala Lumpur

Tel: 03-2691 8887, Fax: 03-2691 1262 Kenny Yee

http://www.bimbsec.com.my Head of Research

http://www.bimbsec.com.my/http://www.bimbsec.com.my/http://www.bimbsec.com.my/