PETALING JAYA: Oil and gas services company Coastal Contracts Bhd
’s earnings outlook remains positive, supported by major capital expenditure (capex) plans, inventory build-up, full capacity operations at it gas processing plants, and potential asset-conversion opportunities, analysts say.
TA Research said Coastal is actively expanding its operations with two medium-sized production infrastructure projects, such as floating production storage and offloading (FPSO) vessels and mobile offshore production units, in South-East Asia.
It is also undertaking three renewable-energy (RE) projects through partnerships where industry players will hold majority stakes to mitigate risks.
“The latest update highlights progress on the Sibuga Solar Farm, a 15MW alternating current large solar photovoltaic plant in Sabah, which is scheduled for commercial operation on June 30, 2027, under a 25-year contract worth an estimated RM180mil. Capex for the project is estimated at RM50mil,” the research house said in a report yesterday.
The group also has plans to invest up to RM100mil in a new resort in Sabah and RM200mil in a vessel-building programme.
Last year, Coastal ventured into the tourism industry by acquiring an 82% stake in a company undertaking an overwater resort in Sabah for RM18.98mil.
The plans call for a luxury resort development located in Semporna, Sabah, one of the fastest-growing tourist markets in Southeast Asia.
At the time, Coastal said the acquisition was part of a strategy to deliver its long-term growth and value creation to its shareholders as well as to diversify its income streams
TA Research said it assumes Coastal may allocate about RM100mil for RE projects and RM200mil for infrastructure ventures.
“Management projects RM600mil in vessel sales from the second half of 2025 (2H25) to 1H27, reinforcing its strategy for long-term earnings growth and operational expansion while leveraging its strengthened financial position,” the research house said.
The company has been making efforts to advance its gas-processing operations in cooperation with Petroleos Mexicanos (Pemex), as the Mexican state-owned petroleum company’s plans to expand capacity of the Papan plant and modify the Perdiz plant to incorporate capability for liquefied petroleum gas recovery.
Both plants are located in Mexico.
“The latest expansion for Papan aims to increase capacity by at least 150 million standard cubic foot per day (mmscfd), requiring an estimated eight to 12 months as Pemex hopes to see commercial operations by the end of this year,” the research house said.
Both plants are currently operating at full capacity.
The Papan Plant is running at 345 mmscfd, while the Perdiz Plant has reached 185 mmscfd.
The upcoming expansion is expected to further strengthen Coastal’s processing capabilities and support Pemex’s broader gas infrastructure strategy.
Meanwhile, Coastal’s jack-up gas compression service unit (JUGCSU) off Mexico remains suspended while discussions on a contract extension are ongoing.
TA Research said one of the options for the JUGCSU is to convert it into a mobile offshore production unit with a production capacity of about 40,000 barrels per day, operating at the current field for five years.
Another option is for it to continue operating as a JUGCSU at a different field for five to 10 years, which would require modifications due to the water at the other field being 6m deeper.
“We understand that Pemex aims to finalise discussions with the JUGCSU’s charterer soon, though no time indication has been given after a delay, and Pemex appears to favour the first option.
“We view these developments positively, as they indicate a strong likelihood of a contract extension,” the research house said.
TA Research maintained a “buy” call on Coastal with a target price of RM2.04 per share.
