Uzma announced that it has been awarded a contract for the leasing of a Water Injection Facility (WIF) for SF30 Waterflood Phase 2 in North Sabah field from Sea Hibiscus. The scope of work comprises of: (i) supplying of a self-elevated floater with a water injection module and a bridge, (ii) hooking up the bridge and pulling all service lines from WIF to the battery limit of WIF services on the existing SFJT-D platform and (iii) operation and maintenance of the WIF. The duration of the contract is 5 years, effectively from the Final Acceptance Date of the WIF, which is expected within the next 15 months. We are positive on this development as it solidifies Uzma’s position in providing WIF solution for production enhancement after successfully operating D18 WIF for PETRONAS Carigali since 2016. There is no contract value given in the announcement, however, taking a cue from the previous D18 WIF, we estimate the contract value is about RM300m, which will increase its orderbook to RM2.7bn. Our Outperform call and RM1.70 TP is retained.

• Akin to D18 WIF. To recap on D18, Uzma is operating WIF in D18 fieldsince 2016 with the initial contract period for 5 years and estimated contractvalue between RM350m to RM400m. The contract then has been extendedin November 2022 for another 5 years until November 2027 with anestimated slight discount to the initial rate at range about RM300m for 5years due to the renewal terms after the initial investment has been fullyrecovered. D18 WIF has injection capacity up to 66,000 bbl/d and hasremarkable service without the need for drydocking from the time it beginsthe operation. It also provides zero capital expenditure (CAPEX) to its clientas it is in leasing contract. Nevertheless, Uzma spent about USD70m forD18 WIF to convert a rig with Bethlehem mat-type jack-up rig.

• New WIF to increase orderbook. Taking a conservative approach fromthe renewal of the D18 WIF, we estimate the contract value for the new WIFis about RM300m for 5 years and will increase its orderbook to RM2.7bn.The contract will provide recurring income to Uzma at an average ofRM60m/year for the next 5 years, starting from FY26F.

• Solidifying position in WIF solution. The contract award showcasesUzma’s capability in operating a full-fledge WIF after successfully operatingD18 WIF since 2016. The stable oil price at USD80/bbl has encouraged oilproducers to enhance its production. Based on guidance from Hibiscus, theSF Waterflood Phase 2 project will increase its production by 2,000bbl/d.and would extend the life of the producing field. A similar solution may applywith other fields and Uzma would be the frontrunner to secure such contractin tender process due to its experience with its existing successful operationof WIFs.

Source: PublicInvest Research - 1 Mar 2024