Apr 6, 2010


Review by ECMLibra

•  Crude oil driven by the USD
Crude oil prices have been strong over the month of March as the USD has been seeing some weakness. This can be viewed to be slightly worrying as concurrently, US has been reporting climbing crude oil stock levels. We view that despite this, crude oil prices could trend up higher depending on the USD but as some point will have do give due to issues with affordability. Stocks at home performed well in March. Wah Seong appears to be moving up at last while Dialog is also seeing positive attention. 
•  News and Views
Petronas continued aggressive expansion during the month. Besides
dishing out blocks in Sarawak, the group has also teamed up with Santos from Australia to bid for gas assets. On major global news, Exxon Mobil vouched to increase its capital spending nearly 4% this year to US$28bn (last year they kept spending flat). 

At home, there was only a trickle of contracts. Tanjung Offshore and Alam Maritim  got vessel charters while  Sumatec  got a small maintenance jobs. On corporate developments, Wah Seong continued to talk about their M&A plans, particularly with Socotherm and SapuraCrest noted a bid book of RM6bn for overseas jobs during  Invest Malaysia. To note, the company also announced results during the month which showed improvement in their installation and pipeline facilities segment but rather worrying numbers from their marine segment which has been seeing low vessel utilisation.

Also,  Petronas Gas announced the terms of their 4th  GPTA with Petronas. The outcome of the new terms has been viewed favourable and more clarity is to be had next week as the MD meets analysts. 

Beside this, the  KNM management buyout deal is supposedly to be
concluded in 4 weeks and there are speculations in  the market that the offer price could be revised downwards or that there could be regulatory intervention. On Petra Perdana, they managed to get RM49m funding for delivery of a workboat and also Tengku Petra was officially removed as CEO. 

•  Maintain Overweight
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Corporate Malaysia News and Views

  • Petronas is looking to team up with Australian firm, Santos Ltd., to bid for fellow Australian, Eastern Star Gas Ltd, to tap its reserves. According to sources, Eastern Star is looking to commercialise its gas, including domestic sales and a new project is New South Wales.
•  Another major deal was with Petrovietnam Gas and Chevron, Mitsui Oil Exploration Company and PTT Exploration & Production to build  a US$1bn 400km gas pipeline in southern Vietnam. We view jobs opportunities here for players like SapuraCrest (pipelaying) and Wah Seong (pipe coating) when the project comes into motion.
Corporate Malaysia News and Views
•  Wah Seong made headlines as its expansion plans are coming to fruition. Firstly, it is in talks to acquire a Nigerian pipe-coating business, the Orleans Group, to tap demand for its products amid increased exploration activities. Wah Seong will possibly provide technical assistance and may later take up an equity stake. With RM400m in cash,  Wah Seong is also looking to acquire Italian company, Socotherm SpA, having made a bid three weeks ago. The outcomes of both deals should be known by the end of April or May.
•  KNM’s  decided not to extend BlueFire Capital Group’s exclusivity period for due diligence but still aims to conclude talks in four weeks, raising speculation that a revised lower offer price could be made for the takeover.
•  Tanjung Offshore scored the biggest by clinching  an RM114.6m deal for two newbuild anchor handling tug supply vessels. The vessels will be used to support Petronas’ offshore operations. 
• Gulf Petroleum and its consortium formalised plans  to invest RM17bn in an oil & gas complex in Port Dickson, Negeri Sembilan, rather than previously reported plans to have the facility in Kedah.
•  Sumatec  got a small RM50m job from Asean Bintulu Fertilizer while SAAG said they were ready to start their 2 workover rigs on a job in June.  
•  SapuraCrest Petroleum is bidding for RM6bn worth of projects in Australia, Saudi Arabia and India, executive vice-chairman Shahril Shamsuddin said.
•  Scomi Engineering is exiting the machine shop business with its proposed disposal of subsidiaries Scomi OMS Oilfield Services Pte Ltd and Scomi OMS Holdings Sdn Bhd to an unnamed foreign-listed MNC for RM363m.

Ramunia Holdings announced that it had been classified as a PN17 company.This is surprising given the company is in the midst of disposing its fabrication yard to Sime Darby for RM530m cash. Sime still hopes to complete the deal in April which will see them emerge as Malaysia’s top fabricator with a combined yard space of 284 acres. Also, Ramunia and its 51%-owned subsidiary, MS Herkules Sdn Bhd, have been served with an injunction by the Kuala Lumpur High Court to stop them from disposing of, or assigning assets owned by MS Herkules to either Ramunia or other parties.  

Alam Maritim’s 50/50 JV with Singapore’s Swiber Holdings may take delivery of a newbuild pipelay barge as early as mid-2010. The JV is due to operate the US$70m pipelayer, 1MAS-300m, due for delivery from a Chinese shipyard in the second quarter. The delivery of the pipelayer will  see Alam competing in a new market segment which they have no track record. However, with Swiber in tow, we are more confident of their success rate with contract wins as well as operating
profitability. The group also got a RM19m charter contract early March and has landed two other charter contracts totalling RM83.16m from unidentified established oil majors to provide an accommodation vessel and an accommodation work barge.

Perisai Petroleum Teknologi Bhd is selling a diving system worth RM11.17m to Olap International Ltd. The system was bought for US$4.25m and is expected to result in a net loss of RM713,461. Perisai appears to be still restructuring their operations and now going into the drilling business. In terms of success rate, the company’s track record has been marred previously (recall Allied Marine and the
Alpha Prime venture) hence it waits to be seen if new ventures into drilling will come into fruition. To note, gearing of the company can be viewed to be uncomfortable at close to 1.0x. 
Petra Perdana managed to get funding for their 169-crew workboat to provide brownfield maintenance. The RM49m financing would be payable over five years and looks to be the start of a fleet renewal exercise expected to be completed by the end of the year.
Kencana Petroleum announced that its RM250m Sukuk Mudharabah will be guaranteed by Danajamin Nasional with a rating of “AAA”, allowing Kencana to raise funds at a competitive rate. The funds will be used to acquire at least three offshore support vessels. 

• Talk of an initial public offering (IPO) of T Ananda Krishnan’s oil and gas support services company, Bumi Armada Bhd, has surfaced again, after years of speculation. Parties familiar with the situation said some investment banks, both local and foreign, have been pitching for the advisory, placement and underwriting work for Bumi Armada’s IPO.

•  A new wellhead platform has been installed at Newfield Exploration’s West Belumut satellite development off Malaysia  and the new oilfield remains on track for start-up in the fourth quarter of 2010. Derrick lay barge Sapura 3000 was deployed to install the platform on location after the offshore structures was loaded out from Kencana Petroleum’s shipyard in Lumut. West Belumut lies in the PM323 permit off Peninsular Malaysia, which also hosts the producing East Belumut field. Newfield operates PM323 with a 50% interest

Global Industry News and Views
•  ExxonMobil vouched to increase its capital spending nearly 4% this year to US$28bn as it evaluates new fields around the world, but it cautioned that the global economy remained unsteady, reflecting the views of the IEA and Opec.
•  PetroChina Co plans to spend at least US$60bn in the  next decade on overseas acquisitions,  challenging Exxon Mobil Corp and BP plc in the race to control oil and gas fields.
• From the NEM, it was said that Petronas would list 2 more units this year. Speculation is rife on those names. Some that have cropped up in the market include MLNG and Gas Malaysia. We have our doubts on Petronas Carigali being in the list however. 
•  Petronas signed a gas sales agreement with upstream contractors Sarawak Shell Bhd and Petronas Carigali Sdn Bhd for gas to be produced from three fields in Block SK308 offshore Sarawak. The gas from the fields will be delivered by the contractors to meet the needs of the MLNG Tiga plant within the Petronas LNG Complex in Bintulu.

source: ECMLibra