KUALA LUMPUR: Coastal Contracts Bhd
is still in negotiations with Mexico’s national oil company Petroleos Mexicanos (Pemex) on the Perdiz gas plant and jack-up gas compression service unit (JUGCSU) contract extension.
Citing an analyst briefing, TA Research noted the discussion with Pemex for a two-year contract extension was expected to be finalised in January.
“The indicative value of contract extension is around US$70mil to US$80mil,” it said. “Pemex is considering a five-year contract extension with liquefied petroleum gas (LPG) processing capability added to the plant, which we believe is a positive sign that Pemex will likely extend the Perdiz plant’s operation and maintenance contract with the group’s Mexican joint-venture,” it added.
Pemex had requested for the temporary suspension of Agosto JUGCSU from Nov 27, while the discussion for contract extension was ongoing. The contract was supposed to end in February 2024.
Coastal Contracts might consider requesting for compensation for the suspension of charter before the end of the contract, depending on whether the group was satisfied with the terms of contract extension.
TA Research maintained a “buy” call on Coastal Contracts, with a lower target price of RM1.90 from RM2.08 previously.
The lower target price was in tandem with the brokerage’s trimming its earnings forecasts for Coastal Contracts for the financial year ending Dec 31, 2023 (FY23) by 7.6%, as well as those for FY24 by 1.5% and FY25 by 0.9%.
This was based on assumptions of lower utilisation rates for both the Group’s Perdiz plant and Papan plant as the ramping up of processing volume was slower than expectations.TA Research said the Papan plant’s gas processing volume was gradually increasing in line with capacity expansion of Ixachi field.
“As Pemex drills new wells and increases the production capacity of Ixachi field, the utilisation rate of Papan plant is expected to ramp up by the first half of FY24.
“Perdiz plant’s processing volume will increase once Papan plant reaches maximum utilisation rate,” it added.
Limited by Ixachi field’s gas production capacity, the gas from the field continued to be diverted from Perdiz plant to Papan plant due to the latter’s ability to process additional products such as naphtha and LPG.
