Investment Highlights Company/yard visits in Singapore/Batam. We met up with oil & gas companies last week in Singapore, with some fund managers, for updates on the rollout of global capital expenditures and rig/marine charter rates. The companies which we visited were Sembcorp Marine, Cosco Corporation, Ezion Holdings, Marco Polo Marine and Swiber Holdings. We also visited yards in Jurong and Batam. Anticipate stronger regional flows in 2H2012. In general, we felt a sense of anticipation of stronger order flows regionally compared to Malaysia in 2H2012. But this may partly stem from the difficulty that Singaporean players encounter in penetrating the Malaysian market, despite some liberalisation of policies aimed at encouraging more domestic participation. The key takeaways are detailed below. Record orders for Sembcorp Marine. There is a strong likelihood that the group’s net order book could soar from S$7.5bil currently to above S$10bil, surpassing its all-time high of S$9bil back in 2009. This will be propelled by massive orders expected to be awarded from Brazil, Africa and North Sea. The five Petrobras drillship contracts expected to be secured this year could reach S$5bil. Fast inflow of orders for Swiber. Swiber Holdings, which is involved in offshore construction and subsea installation works, affirmed that new orders are coming in fast this year, with the potential of securing US$1.5bil-US$2bil this year to double its current order book of US$2bil. The group is currently tendering for US$3-US$4bil of new projects. Over the next six months, the group’s most likely projects will be in Brunei (US$800mil), Indonesia (US$1.5bil-US$2bil) and India (US$800mil). Next year, Thailand, Vietnam and Myanmar will be active in further rolling out projects. The group is currently pondering the unwinding of its past sale & leaseback transactions via the contractual buy-back option given the high current yields. Management indicated its intention to raise its net gearing to 2x from 0.8x currently. Ezion’s liftboats accelerate earnings growth. Ezion is confident of an accelerated FY11-FY13F earnings momentum, as 9 of its 14 liftboat/service rigs are expected to be deployed in 3QFY12-3QFY13. Ezion is currently the only regional operator of liftboats, which are modified self-propelled jack-up rigs used for accommodation, production, maintenance and decommissioning of offshore platforms. But the new liftboats, each costing US$60mil, will raise the group’s net debt to 1x, which could constrain further asset growth in FY14F onwards, unless management adopts off-balance sheet financing such as sale- leaseback transactions. Pick-up in offshore marine charter could come next year. Contrary to earlier expectations that offshore marine charter rates are expected to rise in 2H2012, our channel checks indicate that this may begin to materialise only next year given the continuing mismatch between global demand and supply of new vessels from China’s fabrication yards. OIL & GAS Singapore players expect a stronger 2H2012 18 July 2012 OVERWEIGHT Alex Goh [email protected]+603 2036 2291 (Maintained) Rationale for report : Thematic Research TABLE 1 : SECTOR VALUATION MATRIX Market Fair ROE Stocks Call capitalisation value CY12F CY13F CY12F CY13F FY12F P/BV RMmil RM/share x x % % % x Alam Maritim Resources BUY 418 0.85 7.5 6.7 9.2 10.3 10.3 0.9 Boustead Heav y Industries HOLD 708 2.90 53.6 14.9 2.3 2.3 3.1 1.7 Bumi Armada BUY 11,743 4.65 25.1 20.3 0.6 0.7 12.4 3.4 Dialog Group BUY 5,750 2.85 27.6 22.9 1.3 1.3 24.8 8.1 KNM Group HOLD 681 U.R. 9.0 9.9 2.2 2.0 (5.2) 0.4 MMHE BUY 8,800 6.15 27.3 20.0 1.3 1.3 8.5 3.7 Petronas Gas BUY 35,617 21.60 23.3 20.3 3.1 3.3 18.0 4.2 SapuraKencana Petroleum BUY 11,510 2.68 23.0 15.9 - 0.6 7.1 2.2 Wah Seong Corporation BUY 1,470 2.45 13.4 11.7 3.5 4.0 10.2 1.5 Div yield PE Source: AmResearch PP 12246/05/2013 (032379)
Transcript
Investment Highlights
Company/yard visits in Singapore/Batam. We met up with oil & gas companies last week in Singapore, with some fund
managers, for updates on the rollout of global capital expenditures and rig/marine charter rates. The companies which we visited were Sembcorp Marine, Cosco Corporation, Ezion Holdings, Marco Polo Marine and Swiber Holdings. We also visited yards in Jurong and Batam.
Anticipate stronger regional flows in 2H2012. In general, we felt a sense of anticipation of stronger order flows regionally compared to Malaysia in 2H2012. But this may partly stem from the difficulty that Singaporean players encounter in penetrating the Malaysian market, despite some liberalisation of policies aimed at encouraging more domestic participation. The key takeaways are detailed below.
Record orders for Sembcorp Marine. There is a strong likelihood that the group’s net order book could soar from S$7.5bil currently to above S$10bil, surpassing its all-time high of S$9bil back in 2009. This will be propelled by massive orders expected to be awarded from Brazil, Africa and North Sea. The five Petrobras drillship contracts expected to be secured this year could reach S$5bil.
Fast inflow of orders for Swiber. Swiber Holdings, which is involved in offshore construction and subsea installation works, affirmed that new orders are coming in fast this year, with the potential of securing US$1.5bil-US$2bil this year to double its current order book of US$2bil. The group is currently tendering for US$3-US$4bil of new projects. Over the next six months, the group’s most likely projects will be in Brunei (US$800mil), Indonesia (US$1.5bil-US$2bil) and India (US$800mil). Next year, Thailand, Vietnam and Myanmar will be active in further rolling out projects. The group is currently pondering the unwinding of its past sale & leaseback transactions via the contractual buy-back option given the high current yields. Management indicated its intention to raise its net gearing to 2x from 0.8x currently.
Ezion’s liftboats accelerate earnings growth. Ezion is confident of an accelerated FY11-FY13F earnings momentum, as 9 of its 14 liftboat/service rigs are expected to be deployed in 3QFY12-3QFY13. Ezion is currently the only regional operator of liftboats, which are modified self-propelled jack-up rigs used for accommodation, production, maintenance and decommissioning of offshore platforms. But the new liftboats, each costing US$60mil, will raise the group’s net debt to 1x, which could constrain further asset growth in FY14F onwards, unless management adopts off-balance sheet financing such as sale-leaseback transactions.
Pick-up in offshore marine charter could come next year. Contrary to earlier expectations that offshore marine charter rates are expected to rise in 2H2012, our channel checks indicate that this may begin to materialise only next year given the continuing mismatch between global demand and supply of new vessels from China’s fabrication yards.
OIL & GAS
Singapore players expect a stronger 2H2012 18 July 2012 OVERWEIGHT
Marco Polo’s leveraging on its Indonesian advantage. Marco Polo, whose major shareholder is an Indonesian with
diversified interests in coal mining, forestry and construction, has a natural advantage in penetrating the country’s offshore marine industry which is protected by cabotage regulations. But the group has shown a strong earnings track record in operating tugs & barges as well as offshore support vessels. While the group acknowledged that shipbuilding business is still burdened by over-capacity, ship repairs/conversion jobs continue to provide commendable gross profit margins of 30% for the yard. Its 34-hectare Batam facility, which has more developed and organised facilities (including three drydocks) than most Malaysian shipyards, is currently completing a dynamic positioning (DP) 3 offshore support vessel – a capability not demonstrated yet by many yards in the region.
Cosco’s largely focused on offshore segment. Cosco affirms its focus on building offshore rigs/structures, which currently account for 70% of its US$5.9bil order book. With its proven track record in building semi-submersibles, the group is aiming at US$2bil new orders this year. While the conversions/ship repair activities are stable, management acknowledged that the market for shipbuilding business remains challenging due to the large supply of new vessels amidst slowing economic growth in China and Europe. Cosco indicated that its shipbuilding margins will be under pressure and could take another five years to match rival Yangzijiang Shipbuilding’s cost efficiency. All in, Cosco’s earnings are likely to be flat this year.
Reaffirm bullish outlook. All in, our Singapore trip reaffirms our bullish stance on the sector, as the regional news flow in the second half of this year will escalate. For Malaysian operators, Petronas is pulling out all the stops to boost gas supply and security, including initiatives for enhanced recovery and liquefied natural gas import schemes.
North Malay basin rollout imminent. The fast-tracked North Malay basin project is going ahead as planned with first gas from the Kamelia field expected by 1Q2013. Petronas Carigali and US independent Hess have formalised the arrangements under which they will invest US$5.2bil (RM16bil) in the next five years in the new North Malay basin integrated gas development off Peninsular Malaysia. The project involves the development of nine stranded gas fields with a new gas gathering, processing and transportation hub to commercialise about 1.7 trillion cubic feet of gas. The required facilities will include a 350-kilometre gas pipeline and new first-of-its-kind onshore slug catcher with an acid gas removal system using the acid gas removal membrane technology that is co-owned by Petronas. We understand that SapuraKencana is already working on the first well-head platform for this project while the pipe-coating tender will be open next month.
Second phase of North Malay basin will be larger. Other fields in the North Malay basin project include Zetung, Gajah, Melati, Angerik and Kezumba. The full-field development, which is expected to centre on the much larger Bergarding field in Block PM 325, is due to come into operations in the second quarter of 2015, and this will yield about 250 MMcfd of gas.
Belud also on a fast-tracked pace. Hess and Petronas Carigali are also fast-tracking development of the Belud oil discovery in Block SB 302 offshore Sabah, East Malaysia. This shallow-water project calls for an FPSO and wellhead platform. Upstream indicated that M3nergy with Emas is in a strong position to land this floater job against Malaysian rivals MISC and Bumi Armada. First oil from Belud is being targeted for 2014.
More marginal fields in play. Petronas has identified 23 marginal fields which are divided into 6 clusters. 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 Puncak Niaga, Bumi Armada, UMW Oil & Gas and Boustead Heavy Industries Corp. SapuraKencana Petroleum and Dialog Group, which secured the first two RSC, remain 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.
Oil & Gas 18 July 2012
AmResearch Sdn Bhd 3
TABLE 1: UPCOMING OIL & GAS PROJECTS
EPCIC jobs Location Scope of works RMmil Likely bidders
Ex x on-Mobil's enhanced oil recov ery Rejuv enation of Seligi, Guntong, Tapis,
Semangkok, Irong Barat, Tabu and Palas
oilfiields off Peninsula, Sabah & Saraw ak.
Central processing platforms, gas
compression sy stems, process equipment,
MPOU, tender rigs, offshore v essels.
7,000 MMHE, Kencana, Sime
Engineering, Wah Seong,
Tanjung Offshore, Alam Maritim,
SapCrest
Petronas Carigali's North Malay gas project-
fast track basis
North Malay basin (Blocks PM301 and
PM302), near JDA
Central processing plafform, 8 w ell head
platforms, 200km pipeline
15,000 MMHE, Kencana, Sime
Engineering, Wah Seong,
Tanjung Offshore, Alam Maritim,
SapCrest
Shell's deepw ater Malikai project Malikai field, off Sabah Fabrication of tension leg platform,
installation of pipelines and facilities
5,000 MMHE, Kencana, Sime
Engineering, Tanjung Offshore,
Alam Maritim, SapCrest
Murphy Oil Rotan, off Sabah Floating liquiefied natural gas carrier 4,500 Technip-Daew oo, MMHE
Petrronas Carigali Dulang, Semarang, Bokor 3 Central Processing Platforms for
enhanced oil recov ery .
3,000 MMHE, Kencana Petroleum
Shell Malay sia Baram Delta, off Saraw ak and North
PICTURE 2 : FPSO CONVERSION IN SEMBCORP MARINE YARD
Source: AmResearch
Oil & Gas 18 July 2012
AmResearch Sdn Bhd 7
PICTURE 3 : MARCO POLO’S BATAM DRYDOCK
Source: AmResearch
Oil & Gas 18 July 2012
AmResearch Sdn Bhd 8
PICTURE 4 : INTEGRATION OF DP3 SUPPORT VESSEL ON MARCO POLO’S YARD
Source: AmResearch
Oil & Gas 18 July 2012
AmResearch Sdn Bhd 9
PICTURE 4 : PRODUCTION BARGE ON MARCO POLO’S YARD
Source: AmResearch
Oil & Gas 18 July 2012
AmResearch Sdn Bhd 10
PICTURE 4 : MARCO POLO’S DEVELOPED & WELL-ORGANISED BATAM YARD
Source: AmResearch
Published by
AmResearch Sdn Bhd (335015-P) (A member of the AmInvestment Bank Group) 1 5 t h F l o o r B a n g u n a n A m B a n k G r o u p 55 Jalan Raja Chulan 50200 Kuala Lumpur Tel: ( 0 3 ) 2 0 7 0 - 2 4 4 4 ( r e s ea r c h ) F a x : ( 0 3 ) 2 0 7 8 - 3 1 6 2
Printed by
AmResearch Sdn Bhd (335015-P) (A member of the AmInvestment Bank Group) 1 5 t h F l o o r B a n g u n a n A m B a n k G r o u p 55 Jalan Raja Chulan 50200 Kuala Lumpur Tel: ( 0 3 ) 2 0 7 0 - 2 4 4 4 ( r e s ea r c h ) F a x : ( 0 3 ) 2 0 7 8 - 3 1 6 2
The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice.
![Crude Assay Report · 15 Vacuum Gas Oil Cuts - Gas Oil [325-370°C] 15 16 Vacuum Gas Oil Cuts - Gas Oil 1[370 - 540°C] 16 17 Vacuum Gas Oil Cuts - Heavy Vacuum Gas Oil [370 - 548°C]](https://static.documents.pub/doc/80x56/5e68681c2598ff04995c67bc/crude-assay-report-15-vacuum-gas-oil-cuts-gas-oil-325-370c-15-16-vacuum-gas.jpg)
