Stock Name: PENERGY
Company Name: PETRA ENERGY BHD
Research House: OSK

KUALA LUMPUR: OSK Research maintains Neutral on Petra Energy and upgraded its target price for Petra Energy to RM1.44 (previously RM1.15) based on a higher PER valuation of 10x (previously 8x). However, it is not changing its earnings forecast.

The research house said the upgrading of the target price was based on the improved outlook for brownfield services providers.

'This is on the basis that: 1) greater emphasis is being placed on environment concerns, especially after the BP oil spill; 2) modern TECHNOLOGY [] has to date made further drilling possible below the rock level in the sea to extract O&G, and 3) we gather from our sources that Petronas and its PSC contractors will continue spending a portion of their capex on rejuvenating existing and old platforms,' it said in a research note issued on Monday, Aug 16.

OSK Research said its valuation for Petra Energy based on 10x PE is also higher than that of Petra Perdana at 9x as it is more positive on the group's provision of brownfield services rather than vessel chartering based on the present O&G operating environment.

'In fact, this is also reflected in its current share price, whereby Petra Energy is trading at FY11 PE of 10x compared to Petra Perdana at FY11 PE of 7x,' it added.

Last Friday, Petra Energy announced that it had received three letters of awards from Petronas Carigali to provide hook-up and commissioning services to 3 oilfield projects, which include the PL-353, PL-357 and PL-70 SKO pipeline rejuvenation project, ERB West Development project (Phase I) and Phase II for the Betty Revisit 4 project.

OSK Research said works on all these three jobs began between April and July 2010 and are expected to last until end-2010. Cumulatively, all these three jobs are worth about RM26.4 million.