Tok Bali to boost Ahmad Zaki’s O&G revenue

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KUALA LUMPUR: Ahmad Zaki Resources Bhd (AZRB) (fundamental: 0.55; valuation 1.8) is expecting its oil and gas division (O&G) to contribute “very good growth” in the next few years in terms of revenue and profit after the expansion of its bunkering operations to the new Tok Bali Port in Kelantan.

“Seeing that Tok Bali is in a very strategic location, in three to four years’ time, we would see very good growth,” AZRB’s chief operating officer Datuk Haji Roslan Jaffar told reporters after the signing ceremony of the sub-lease and throughput agreement with Tok Bali Port operators yesterday.

Roslan said revenue contribution from the company’s existing bunkering activities in Kemaman Port in Terengganu and the new Tok Bali Port, could increase from 9% to approximately 20% in three to four years’ time.

In terms of profit, operations at the two East Coast ports would still contribute up to half of AZRB’s profits. In the nine months ended Sept 30, 2014, AZRB’s profit was RM9.9 million, while revenue was RM498.2 million — to which O&G contributed 7.46% or RM37.16 million.

The main reason for AZRB’s confidence in its Tok Bali Port bunkering activities is the port’s “unrivalled” location. It is only 160km away from land as well as key exploration areas such as the Malaysia-Thailand Joint Development Area (MTJDA) and the Malaysia-Vietnam Commercial Arrangement Area.

Roslan said once AZRB’s new bunkering facilities are in operation, up to 10 production service contract (PSC) customers, which are currently visiting the Kemaman Port and Songkhla Port in Thailand, could be diverted to Tok Bali. Some PSC customers expected to utilise the Tok Bali Supply Base are Petronas Carigali Sdn Bhd, Carigali Hess Operating Co Sdn Bhd, Talisman Malaysia Ltd, and Hess Exploration and Production Malaysia BV. “We see an extra 10% from the MTJDA area that we can capture. From Malaysia’s perspective, there is a leakage of vessels going to Thailand. We can capture that with Tok Bali’s strategic location,” Roslan said.

AZRB announced last week that it was leasing plots of land at the Tok Bali Port with fuel and water bunkering facilities from TB Supply Base Sdn Bhd and TB Realty for 32 years.

The company would be investing RM12 million to RM15 million to build two 3-litre marine gas oil tanks and one 5-litre water tank at the Tok Bali Port. Construction of these facilities are expected to be completed in two to three months.

AZRB’s expansion into a new supply base as well as its optimistic growth expectation may seem surprising at a time when the O&G sector is seeing a slump in global crude prices.

However, Roslan dismissed the threat of lower crude oil price to AZRB’s O&G earnings.

“People make a big deal out of declining oil prices. Yes, it affects us but it is not as if Malaysia started exploring and exporting oil when oil price was at US$100 (RM361) per barrel. Malaysia has been an oil and gas player even when oil price was US$20 per barrel. There will still be [exploration] activities [regardless of the low oil prices],” he said.

 

This article first appeared in The Edge Financial Daily, on January 29, 2015.