This article first appeared in The Edge Financial Daily, on June 28, 2016.

KUALA LUMPUR: SapuraKencana Petroleum Bhd’s (SKP) wholly-owned subsidiary, SapuraKencana Energy Sarawak Inc, signed a gas sales agreement (GSA) to supply gas to Petroliam Nasional Bhd (Petronas) from the fourth quarter of 2017 (4Q17) onwards.

The GSA is related to the production of gas from the B15 gas field and the SK310 production sharing contract (PSC) contractors, therefore they are the joint sellers under the agreement.

SapuraKencana Energy Sarawak is the operator of Block SK310 PSC, which was awarded by Petronas on June 17, 2008. SapuraKencana Energy Sarawak holds a 30% stake in the PSC. The other partners are Petronas Carigali Sdn Bhd with a 40% interest, and Mitsubishi Corporation’s subsidiary Diamond Energy Sarawak Sdn Bhd (30%).

The first gas delivery is targeted for 4Q17.

However, the news did not lend support to SKP’s share price, which slid to a record low of RM1.32 yesterday after analysts slashed earnings forecasts for the next two financial years ending Jan 31, 2017 and 2018. The stock has shed 35% year-to-date. It was once traded near RM5 before crude oil prices crashed in the second half of 2014.

Analysts view the signing of the GSA positively, but it is not an instant boost to the group’s earnings.

Hong Leong Investment Bank Research analyst Lim Sin Kiat opines that SKP could generate steady cash flow from the gas sales from 2018 onwards.

“We are not sure about the pricing for the gas sales yet, but most probably would be based on the JCC (Japan Customs-cleared Crude) pricing. We cannot share any solid figure yet, until further management guidance,” he said.

Lim, however, also reminded that the GSA has no immediate earnings impact on SKP.

JF Apex Securities Research analyst Lee Cherng Wee concurred, and recommends his clients to wait until the release of SKP’s first quarter ended April 30, 2016 (1QFY17) results before making any investment decision.

“Definitely, it is a positive news for SKP, but it is more of a long-term thing, since the first delivery only happens [at the] end of next year,” he said.

The group has scheduled to announce its 1QFY17 results today.

SKP obtained the Field Development Plan approval from Petronas for the development of the B15 gas field in November last year.

The B15 gas field was discovered in December 2010, and it is located within the SK310 PSC area, offshore East Malaysia.

The development comprises a central processing platform with a 35km gas evacuation pipeline to be tied into existing infrastructure.

The B15 gas field will deliver gas to the Malaysia Liquefied Natural Gas complex in Bintulu, Sarawak.