- IHS Petrodata has reported that jack-up rig rates in the US Gulf of Mexico experienced a moderate recovery on improved utilisation in July after a sudden drop in the previous month. Rig rates in other categories were largely unchanged on stable utilisation levels (See Chart 1-4).
- The recovery in the US Gulf of Mexico 250 to 300ft. Jack-up Day Rate Index, which rose 44 points month-on-month (MoM) and 93 points YoY to 326, was not surprising given the rising drilling activities in the region despite the pro-green stance of the current US government. This was propelled by a 5ppts MoM increase in fleet utilisation to 63%, the highest utilisation recorded for this category since May 2009.
- Northwest Europe Standard Jack-up Day Rate Index was unchanged at 540 in July, but this still represents a strong charter level, as it is 118 points higher than that recorded in July last year. No change was seen in its high fleet utilisation levels for the past three consecutive months. Utilisation has been consistently high at above 90% in this category for more than a year since May 2011.
- The Mid-Water Depth Semisubmersible Day Rate Index was unchanged MoM at 900 points in July. But it is 168 points higher YoY, with fleet utilisation at 79%, relatively unchanged since the beginning of the year. The Deepwater Floating Rig Day Rate Index was relatively stable in July, with a moderate decrease of six points to 886. This is still much higher that charter rates last year, up 215 points YoY. Utilisation for deepwater rigs remains extremely high at 99%, unchanged for the past four consecutive months.
- The continuing firm global rig rates underpin the medium- to long-term prospects for local rig operators such as UMW Oil & Gas, SapuraKencana Petroleum and Perisai Petroleum. Malaysia is pulling out all the stops to boost gas supply and security, including initiatives for enhanced recovery and liquefied natural gas import schemes. We expect fresh news over the next few months from Petronas' RM15bil fast-tracked programme to develop gas reserves from a cluster of fields in the North Malay basin, off Peninsular Malaysia with first gas scheduled in 1Q2013. Newsflow momentum is also gaining traction for Petronas Carigali's and Murphy Oil's floating liquefied natural gas vessels for the Kanowit and Rotan fields, respectively. The first risk sharing contract (RSC) for this year has been awarded to Coastal Energy, with the Malaysian partner likely to be Petra Energy. But other RSC hopefuls are UMW Oil & Gas, Puncak Niaga and Bumi Armada. SapuraKencana Petroleum and Dialog Group, which secured the first two RSC, remain as contenders for new marginal fields.
- We retain our OVERWEIGHT view on the sector with our top BUY being Petronas Gas, as its earnings growth will reach an inflection point with the commencement of the 530mmscfd Lekas regasification terminal (RGT) in September this year. Newsflow on multiple RGT projects in Lahad Datu, Pengerang and Lumut will likely spur on Petronas Gas' re-rating process. Our other BUY calls are SapuraKencana Petroleum, Malaysia Marine & Heavy Engineering Holdings, Bumi Armada and Dialog Group.