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SapuraKencana Petroleum - Kick-Starting The Berantai Field

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Publish date: Mon, 03 Dec 2012, 11:18 AM
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News    SKPETRO announced gas production from the Berantai field ('Berantai'), offshore Peninsular Malaysia has commenced on 20 October 2012.

 Gas is exported by a 30km subsea pipeline to the PETRONAS Carigali-operated Angsi Field and onwards into the Peninsular Malaysian gas grid. 

Comments   Positive on the announcement as the gas production has been delayed from its initial date in early-2012. However, we are neutral on the financial impact as we had already imputed for earnings of RM30.6m in FY14. We believe that there will be minimal impacts in FY13 earnings given that there are only 2-3 months left to the financial year. 

 Recall, the first commercial production was delayed due to late delivery of the Berantai FPSO. 

Outlook   SKPETRO's MOU with Seadrill is targeted for completion in early CY13, and will lift its dominance in the tender rig market. 

 This coupled with the already strong presence and scale in the EPCIC market (both domestically and globally) makes SKPETRO a prime suspect for securing further contract wins.

Forecast   Maintaining our FY13-14 net profit estimates of RM495.6m and RM744.3m respectively. SKPETRO is set to announce their 3Q13 in December.   

Rating    Maintain OUTPERFORM

Valuation    Maintaining our fair value of RM3.42 based on an implied target PER of 23.7x.

 Recall, we tactically raised our target price to accommodate the potential earnings accretion from the new rigs SKPETRO post the acquisition exercise with Seadrill.

 We are comfortable with the premium valuations accorded to the stock (versus 15x for the sector average and 18x for MMHE) due to its significant domestic market dominance and service scale range.

Risks   1) High capex plans for the company could strain balance sheet and growth prospects; 
 2) High competition as there is a multitude of players who are highly diversified, and 
 3) In the event of a downturn in the global economy and the demand for crude oil and gas, demand for its services will be jeopardised.

Source: Kenanga 
SAPNRG (5218)
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