What’s New

• Sapura Energy’s exploration and production (E&P) unit has signed a series of farm-in agreements to 5 offshore exploration permits in New Zealand.

• The agreements, approved by the NZ government, would see Sapura partnering OMV New Zealand Limited (OMV) and Mitsui E&P Australia Pty Limited whereby Sapura will own 30% interest in all 5 exploration permits.

• All 5 exploration permits are located in shallow water of the Taranaki Basin with 2.5b barrels of oil equivalent. The agreement would provide access to an area of 8,900 square kilometres.

Comment

• We see the deal as positive and could lift the sentiment on the stock which was battered recently. We have not factor in the deal into our forecasts as it would take years before achieving first oil.

• The E&P is the only bright spot of the company as the Engineering & Construction and Drilling divisions are facing losses.

Earnings Outlook

• Earnings forecast maintained – We are keeping our EPS forecasts for FY18 and FY19 pending its upcoming 4QFY18 results.

• Risk – The group faces challenges in replenishing its orderbook amid tough operating environment despite stable oil prices.

Valuation & Recommendation

• Our recommendation is under review pending its quarterly results announcement later this month.

Source: JF Apex Securities Research - 27 Mar 2018