Journey to Wealth
Dialog Group In 2nd upstream project, Bayan OSC
News Dialog announced that its wholly-owned subsidiary, Dialog D&P Sdn Bhd, had entered into a Subscription and Shareholders' Agreement with Asia Energy Services Sdn Bhd ('AES', a wholly-owed subsidiary of Halliburton International Inc.) to subscribe for a 50:50 equity interest in Halliburton Bayan Petroleum Sdn Bhd (HBP) to jointly manage an Oilfield Services Contract (OSC).
HBP had on 7 Nov 2012 entered into an OSC with Petronas Carigali Sdn Bhd as an independent technical service contractor to provide Contractor Services required to enhance the recoverable reserves from the Bayan Field offshore of Bintulu. The estimated total project value is USD1.2b with a term period of 24 years.
Comments This came as no surprises as Dialog and Halliburton had earlier signed a MoU in June to explore opportunities in the redevelopment of mature oil fields in Malaysia.
This is positive for Dialog as it helps it to move up the value chain in its involvement in upstream oil & gas activities. Bayan OSC is the company's second upstream projects after Balai RSC.
In the initial stage, both Dialog D&P and AES will subscribe for a total of RM2.5m equity stake each in HBP. However, the eventual equity participation in HBP will be determined later.
Dialog will equity account for this venture as it is a 50:50 jointly owned entity.
HBP will share the incremental oil & gas production profit from the enhancement of the recoverable reserves. However, the USD1.2b capex is not guaranteed to be reimbursed like the marginal oilfield contracts.
Outlook This OSC will create a robust platform for generating long term (i.e., 24 years) sustainable revenue from its incremental oil & gas production.
Forecast We are keeping FY13E-FY14E estimates for now pending further updates from management.
Rating Maintain OUTPERFORM
Valuation Our new SOP-driven price target of RM2.79/share is maintained.
Risks The USD1.2b capex for this OSC, or USD600m capex at Dialog's end, is not guaranteed to be reimbursed like the RSC.
Source: Kenanga
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