Maybank IB: RM1.34bil job win to improve SapKen’s earnings

SapuraKencana's rig making facility

PETALING JAYA: SapuraKencana Petroleum Bhd’s (SapKen) securement of total contracts worth about RM1.34bil (US$300mil) is a re-rating catalyst that could unlock value and improve its earnings going forward.

Maybank IB Research, which is maintaining its buy call on the stock with a target price of RM2.30, on Tuesday said it views the contract win as a reflection of improving sentiment in the oil and gas sector.

“Monetising its gas fields beyond the SK310 B15 field is a rerating catalyst, which would unlock value and improve earnings. We see SapKen as a direct proxy, beta play for a rising oil price environment . The company’s RM1.34bil job win equates to 17% of fianncial year 2018 revenue. It has successfully turned 4% of its US$7.5bil (as at Oct 2016) worth of bids and prospects into job wins. 

“Of these recent contract wins, we are particularly impressed with the rig charter contract – tenures are exceptionally long with decent daily charter rates (DCRs), which we reckon account for majority of the RM1.34bil total job value. We maintain our earnings forecasts,’’ it noted.

The research house said signing several new, bigger gas sale agreements (GSAs) (i.e. SK408 & SK310 B14 fields) beyond the SK310 B15 field over the next 12 months would unlock the value of
SapKen’s gas assets. These fields are sizeable, potentially four times of SK310 B15 in reserves, lifespan and net present value (NPV).

Progress-wise, the brokerage expect the company to sign to sign the GSAs for the: Phase 1 of SK408 field; with a 1.5tcf ((trillion cubic feet) of gas reserves by the first quarter of 2018, first gas by the fourth quarter of 2019 and Phase 2 (6tcf of gas reserves) two to three years down the road.