The contracts for both vessels are worth US$16m (or RM52.6m) for an initial operation period of one year firm, with four options of six months each at an aggregate value of US$32m (or RM105.2m) if the options are fully exercised by Interoil.

The PSVs will be supporting Total E&P Angola on the dirlling campaign on Block 32 offshore Angola and are expected to commence services in Jan14.

Comment

We are positive on the contract award as this will expand the company’s footprint in West Africa. Currently, Angola is a critical market in West Africa and produces 1.7m boe/day.

The contract value translates into US$22k of daily charter rate which is in line with our expectation or assumption. We maintain our earnings forecasts as we have already factored in the contract win for PSVs.

To note, we see upside risk to our forecasts from FY14 onwards if the company manages to secure the Madura projects (US$450m capex), which is still in the process of evaluation but the timing of result announcement is uncertain after recent Indonesia graft scandal.

We also understand that the company is looking at several projects in West Africa at an average US$1bn capex with one of the projects in Angola to be announced in 1H14. Overall, the company is bidding for 12 projects globally. 

FSRU and FLNG segments provide new growth opportunity going forward. The company will focus on small-scale FSRU and is currently tendering for several projects in Asia and East Africa. We have not captured any contribution from FSRU projects in our earning assumptions. This will be the wildcard for the company.