- The Edge reported that the award of the Pan-Malaysian hook-up, construction and commission (HUCC) umbrella contract, which could be valued between RM8bil-RM10bil, could be delayed by Petroliam Nasional (Petronas) due to the review process for the number of strong bids from local oil & gas players.

- The front-runners of the contract and in the short-list after meeting the pre-conditions of the tender are Dayang Enterprise Holdings and Petra Energy. But other companies which have made compelling bids include SapuraKencana Petroleum’s Sarku Resources, Shapadu Corp, TH Heavy Engineering (formerly Ramunia Holdings), Perisai Petroleum Teknologi-Ezra Holdings Ltd, Coral Alliance, PFC Engineering-Jasa Merin (M) S/B and Alam Maritim Resources..

- One of the conditions of the tender is that the bidders are required to own a fabrication yard, in contrast with the previous tender which allowed them to lease the yards. Companies bidding for the Sabah and Sarawak HUCC portion are required to have a work and accommodation barge while the Peninsula segment needs a work barge and anchor handling tug supply vessels,

- Perdana Petroluem, in which Dayang Enterprise has a 26%-stake, has been expanding its capabilities with the recent purchase of two accommodation work barges from Nam Cheong International last week. This is likely in anticipation for the huge contract awards for the HUCC scope of works, together with the rollout of enhanced oil recovery, gas cluster and deep-water projects over the next 2-3 years.

- According to The Edge, sources indicate that Petronas intends to give everyone a slice of the pie in the review process. But the bidders with the edge for the HUCC job in Sabah and Sarawak are Petra Energy and Dayang Enterprise Holdings. The award of the HUCC contracts, which were earlier expected in 4QFY12 and subsequently postponed to 1QFY13, now appears to be delayed longer. But this is no surprise to us as our reports have already indicated that the award could materialise in June this year. In our view, the surprise beneficiary from this project could be Alam Maritim Resources, which is new to this field of business compared to the incumbent operators, Dayang and Petra Energy. For SapuraKencana, this contract could be relatively less significant given the scale of its already huge order book of RM18bil, which includes the acquisition of Seadrill’s tender rigs.

- The rollout of the HUCC contracts is critical for the continuation of the excitement in the oil & gas sector, given that fabrication contracts domestically appears to be slowing down due to the complexities of the new projects underway. While we still expect the award of the Semarang CPP engineering, procurement, construction and commissioning contract in June this year to SapuraKencana, the rollout of the second phase of the North Malay basin gas cluster project, which will involve a large CPP at the Bergading field and multiple satellite well-head platforms, could be deferred towards the end of 2013.

- Nevertheless, the newsflow momentum will be further supported by contract awards emanating from the RM60bil RAPID project in Pengerang and tank terminal projects in Southern Johor, together with the massive gas cluster projects off Sabah and Sarawak, which are tied in to the completion of the Bintulu LNG complex expansion in 2015. In view of the multiple flows of contracts this year, we maintain our OVERWEIGHT call on the sector with BUY calls for SapuraKencana Petroleum, Bumi Armada, Dialog Group and Alam Maritim.

Source: AmeSecurities