DEVELOPMENT

• Dialog Group (Dialog) has reached a final investment decision of USD235m for the field development and abandonment plan for the Baram Junior Cluster Small Field Asset Production Sharing Contract (BJC SFA PSC).
• This is an update from the PSC signed in 17 Jan 2023.

OUR VIEW

• Elevating integration within all divisions. Dialog's participation in BJC SFA PSC is in line with its strategy to continue to expand and diversify across the upstream, midstream, downstream and renewable businesses of the energy sector. We opine that Dialog's diversification across all divisions will be advantageous for the group to streamline its operations and mitigate any setbacks from the volatile oil prices as well as the uncertainties within the local and global economy, subsequently providing a stable long-term income for the group.
• Signalling a long-term robust upstream. We reiterate our positive view on the Baram Junior Cluster, given its feasible location and opportunity to further develop into deepwater plays. Given the unexplored regions within the Baram Delta in the Sarawak Basin, we opine that the 14-years of PSC given to Dialog is fair to progress the area, thus signalling a boost in upstream activities in Malaysia for years to come.
• Overall, we are optimistic on this update. We opine that this strategic move by Dialog will help the group to strengthen its upstream business. We anticipate that the upstream division will continue to be robust, given the expected higher demand for LNG within the region, as well as recent discoveries of oil and gas fields within offshore Peninsular and East Malaysia. Nevertheless, we continue to be vigilant of the possible risks of this PSC, including: (i) complex subsurface geology, (ii) availability of skilled workers, experts and materials, (iii) price volatility of raw materials, and (iv) changes in politics, economy and regulations.
• Considering that the commercial production has yet to commence, we make no changes to our forecast projection for Dialog, and maintain our BUY call, with a target price of RM2.72.

Source: MIDF Research - 10 Jan 2025