This article first appeared in The Edge Financial Daily, on February 11, 2016.

SapuraKencana Petroleum Bhd
(Feb 10, RM1.79)
Maintain buy with a target price (TP) of RM2.72: SapuraKencana Petroleum Bhd (SapuraKencana) announced another slew of contracts for 2016.

The engineering, construction (international) and drilling contracts are worth US$382 million or RM1.58 billion. Total contract wins for 2016 are currently US$499 million.

The first contract under the engineering and construction division was awarded by Murphy Sarawak Oil Company Ltd (to SapuraKencana GE Oil & Gas Services Sdn Bhd) for the provision of comprehensive maintenance of General Electric (GE)-supplied turbo machinery equipment under a long-term service agreement of 10 years.

The second contract, also under the engineering and construction division, was awarded by Petronas Floating LNG1 (L) Ltd Facilities.

The contract, also for 10 years with extensions for up to five years, includes the provision of maintenance services for GE-supplied aeroderivative gas turbines, centrifugal compressors, and electric generators and motors.

The third contract announced under the drilling division is a contract extension for the semi-submersible tender assist drilling rig SKD Jaya with British Petroleum (BP) Trinidad & Tobago LLC.

SapuraKencana announced that the client, BP, has extended the use of the SKD Jaya rig for its development drilling campaign offshore Trinidad and Tobago for an additional one well and is expected to have the contract until April 2016.

No change to our earnings estimates at this juncture as the contracts are within our replenishment target.

We reiterate our “buy” recommendation on SapuraKencana with an unchanged TP of RM2.72 per share. — MIDF Research, Feb 5