SapuraKencana announced that its wholly-owned subsidiary, SapuraKencana Energy Inc (SKE) has secured a Field Development Plan approval from PETRONAS for the SK310 B15 gas field development project. The first gas delivery is targeted for 4Q2017. The B15 field was discovered in December 2010 and is located within the SK310 PSC Contract area, offshore East Malaysia.

The development will comprise a central processing platform with a 35-km gas evacuation pipeline to be tied into the existing infrastructure. The B15 field is expected to produce 100 MMscfd of hydrocarbon gas for PETRONAS’ LNG complex in Bintulu, Sarawak. The SK310 PSC is 30% owned by SAKP, with the balance held by PETRONAS Carigali (40%) and Mitsubishi Corporation (30%). (Source: Bursa Malaysia)

Comments: The approval is positive for SAKP but the significance to its bottomline from 2018E will depend on the development costs, size of the reserve, cost of production and the price of natural gas when production commence in 2017. Natural gas prices, like crude oil, have remained weak, hovering in the range of US$2.00-US$2.40 per MMBtu after descending from a peak of around US$6.00 last year.

The B15 field is expected to produce the equivalent of 102,700 MMBtu per day. We will keep our 2015E-17E forecast and TP of RM2.00 unchanged pending further clarifications with SAKP’s management on the key financial parameters for the B15 field development project. SAKP is currently rated at HOLD.

Source: Affin Hwang Capital Research - 5 Nov 2015