Oil conundrum: Export oil pipelines are seen at an oil facility in the Khark Island, on the shore of the Gulf. An increase in oil supply from Iran is countered by deceases in Iraq, Nigeria and the United Arab Emirates.- AFP
KUALA LUMPUR: PublicInvest Research is keeping its Outperform call for pipe coatings specialist Wah Seong Corp with a target price of 94 sen after its unit secured another project worth US$18.2mil (RM73.9mil).
The research house said on Monday the contract was from Statoil Petroleum AS Norway, for the Johan Sverdrup Export Pipeline Project (JoSEPP) where Wah Seong will provide shipping and related services for the oil and gas pipes.
“We are encouraged by this award, as it reaffirms our Outperform view on Wah Seong, for its execution abilities as a leading pipe coating company amidst this challenging oil price landscape, while providing further extended earnings visibility.
“The main pipe coating activities for this award expected to be completed by mid-2017, will now see the further award to extend this project’s contract scope up to 1QFY18. Our TP of 94 sen pegged to 8.0 times price-to-earnings (PE) and FY17F EPS of 11.7sen remains intact,” it said.
PublicInvest Research said including this award extension, the JoSEPP award is worth US$57.7mil for the full scope of coating and pipe shipping and related services.
The further award includes shipping of pipes to a port at west coast of Norway and subsequent offloading.
To recap, the initial award involves the coating of about 430 km of 18 inch and 36 inch pipes. The job includes anti-corrosion coating, internal flow coating and concrete weight coating.
The contract is expected to commence in 4QFY16 and to be completed by mid-2017.
The latest contract is to provide transportation solutions for oil and gas from the Johan Sverdrup Field to the onshore O&G terminals of Mongstad and Kårstø.
The 36 inch pipe outside diameter (OD) oil export pipeline stretches about 283km which will go north to Mongstad. The 18 inch OD gas export pipeline is about 156 km and will go east from the Johan Sverdrup riser platform (JSRP) to a hot tap at Statpipe (S31) rich gas pipeline at approximately 130 metre water depth.
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