UAE project could lead to more job wins for Sapura Energy

  • Analyst Reports
  • Thursday, 20 Feb 2020

KUALA LUMPUR: Kenanga research is positive over news that SAPURA ENERGY BHD's joint venture with Petrofrac has secured a US$591mil EPC contract from the Abu Dhabi National Oil Company (Adnoc) for the Daima Gas development project.

The research house maintained its outperform call on the stock with a target price of 33 sen.

According to Kenanga, the contract represents the group's first in the United Arab Emirates and its first known win in FY21, which brings its order book to a guesstimated value of about RM16bil.

Assuming the value of the contract is split evenly with Petrofrac, Sapura's stake would be worth US$296mil.

Kenanga believes the margin for the project could be in the low-teens percentage owing to the competition for the project, which included Mcdermott International and saipem.

The research house believes that the contract could pave the way for Sapura to secure more job wins in the region. "This award, and together with another onshore package awarded wholly to Petrofac, are understood to be the first major upstream EPC contracts dished out by ADNOC this year, with more than USD10b worth of projects understood to be in the tendering stage but yet to be awarded," it said.

Sapura Energy is also one the players under Saudi Aramco’s long-term agreement, thus qualifying it for direct tenders for jobs from Aramco.

"The Middle East is the single largest region for Sapura Energy's tender book, making up about 32% of US$8bil tender-book, and as such, we believe strengthening its position in the region would be target for the company," said Kenanga.

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