News

• Uzma has secured a contract by Petronas Carigali for the provision of well services.

• The well services included provision of through tubing downhole tools and services.

• The contract value is estimated at RM50m with duration of 2 years from 1 Jan 15 to 31 Dec 17 with an extension option of 1 year.

Financial impact

• This will be part of and in line with our assumption on orderbook replenishment. We have factored in RM100m contract win in FY15 (YTD win is circa RM50m). Pros/Cons

• We are positive on the contract awards as this will help to replenish its contract backlog amid sluggish oil price. To note, in the past, this services was dominated by international oilfield services companies.

• However, we are cautious on the near term outlook as we expect oil price to continue to remained weak for next 6 months before seeing price rebound in 2H15 given the oversupply issue will only adjusted if there is any reduction from US shale’s production.

• Marginal oilfield project is also not viable at current oil price (we have not factored in any new RSC win in our earnings).

• Drilling campaign for Tanjung Baram is expected to begin in 1Q15 and expects to hit first oil in May 15. Substantial portion of the US$100m development cost by the JV will be contracted to Uzma.

Risks

• Delays in contract disbursement.
• Execution risk.

Forecasts

• Unchanged pending earning review.

Rating

BUY

Positives

• Direct exposure to brownfield and EORspending.

Negatives

• Small cap with low liquidity and plunged inoil price.

Valuation

• We maintained our BUY call with TP RM 2.52 under review.

Source: Hong Leong Investment Bank Research - 19 Jan 2015