PETALING JAYA: Oil and gas services firm Wah Seong Corp Bhd has finalised an earlier agreement with Switzerland-based Nord Stream 2 AG and signed a 600 million euro (RM2.726bil) contract to provide pipe coating services to Nord Stream 2 AG.
The contract value comes within analysts’ estimates as they expected the contract to be priced at the US$600mil-US$700mil price band.
“We are extremely proud of the award of this contract as this is another testament of our capabilities and the strength of our brand in the competitive oil and gas industry. This is a milestone project for us as this is the single largest contract win to date that will give investors visibility of our order book for the next three years,” Wasco Energy group chief executive officer and Wah Seong deputy managing director Giancarlo Maccagno said in a press release.
This order would lift Wah Seong’s outstanding order book to about RM3.5bil, the company said.
The company said the first pipes would be delivered from the pipe mills to the coating plant in Kotka, Finland this month and Mukran, Germany next month.
It added that coating operations would commence early next year with completion planned for the third quarter of 2019.
The company’s shares closed 3 sen higher yesterday or 3.5% at 89 sen with almost 3.7 million shares changing hands. It closed off its intraday high of 91 sen.
Wah Seong’s shares have gained some 40% in three months since June 2016 on speculation of this contract win and positive macro factors.
The company’s unit in Netherlands, Wasco Coatings Europe BV yesterday announced the signing of the contract and this was expected to contribute positively to the earnings of the company over the contract period.
This contract will see the company providing concrete weight coating and storing of pipes for the Nord Stream 2 project spanning some 2,400 km of pipes.
The company had announced the winning of this tender in early July.
The project to coat concrete weight and store around 2,400 km of pipes would commence this month and be completed by the third quarter of 2019, the company earlier said.
Nord Stream will directly connect the world’s largest gas reserves in Russia and the gas transmission system of the European Union.
Wah Seong said in an announcement that the Nord Stream 2 would largely follow the route and design of the successful Nord Stream pipeline.
“With Europe’s domestic gas production projected to halve in the next 20 years, Nord Stream 2’s twin pipeline will help to meet Europe’s gas import needs, with capacity to transport 55 billion cubic metres of gas per year, enough to supply 26 million European households,” the company said.
The Nord Stream 2 pipeline involves two parallel 48 inch lines, roughly 1,200km, each starting from south-west of St Petersburg (a Russian port city on the Baltic Sea coast) and ending at German coast, Greifswald.
Analysts will account for this contract into their forecasts now that the value has been announced.
In an earlier report in July, PublicInvest Research said earnings contribution would be “bell-shaped” as the bulk of the works will be done in 2017 and 2018.
KAF-Seagrott, which also rates the counter, earlier raised its rating on the stock to “buy” when the project was first announced without the contract price estimates.
The research house expected this contract to more than triple its outstanding order book from RM715mil to over RM3bil, eclipsing its previous record of RM1.7bil.
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