Petra Energy Bhd
(March 12, RM1.45)
Maintain outperform with a target price (TP) of RM1.88: Petra Energy’s wholly-owned subsidiary Petra Resources Sdn Bhd has been awarded a topside maintenance execution services for the Gumusut-Kakap floating production system (FPS).

The contract, awarded by the Sabah Shell Petroleum Co Ltd, is on a call-out basis with no firm value, for a duration of 14 months, commencing April 1, 2015 to May 31, 2016.

Considering the size of the Gumusut-Kakap project, which is expected to reach an annual peak oil production of about 135,000 barrels per day once fully ramped up, we believe the contribution to Petra Energy’s services would be sizeable.

Reiterating our “outperform” view with TP of RM1.88 pegged to a 15 times price-earnings ratio, the group will be supported by long-term services contracts in the areas of brownfield maintenance going forward, coupled with more contracts such as the Block PM9 (cluster of oilfields) enhanced oil recovery for which Petra Energy is a strong contender. Petra Energy will provide contract management, site execution and offshore maintenance services for the Gumust-Kakap FPS.

The contract is on a call-out basis with no firm value, pending work orders to be issued at the discretion of the client, based on standard schedule rates. The award is an addition to the offshore services contract awarded to the group in 2012 by Shell.

To recap, the call-out basis term refers to fees and rates to be based on the quotation at the requirement point of time that is during each work order bidding.

It is thus difficult to account for, but we are assured that Petra Energy would be engaged for its services and therefore can only benefit from potentially more jobs.

The 2015 drivers are the early activation of the topside major maintenance services contract by Petronas Carigali Sdn Bhd for its Sabah operations effective since July 4, 2014 and will last until May 20, 2018, higher work orders for the Pan Malaysia contract, the Kapal, Banang and Meranti cluster field risk service contract, whereby Kapal and Banang fields have produced four million barrels of oil to date, with an average of 700,000 barrels per quarter.

The group has taken key measures to manage costs and operation expenditures while exploring new opportunities to attain new revenue streams. — Public Investment Bank Bhd, March 12

This article first appeared in The Edge Financial Daily, on March 13, 2015.