Oil & Gas sector
Following the new tax incentives on Nov 10 to enhance the viability the development of marginal oilfields, Petroliam Nasional Bhd (Petronas) has awarded two unprecedented marginal field risk service contracts (RSC) in 2011 — Berantai (US$800 million [RM2.5 billion]) in January and Balai fields (US$900 million) in August.
The RSCs guarantee recoverable capital expenditure and are estimated to command an internal rate of return (IRR) of 11% to 20%. Potentially, a company with 30% stake in a nine-year US$800 million RSC could rake in more than RM150 million cash flow per year.
The incentive-driven RSC will drive development of new oil and gas (O&G) resources to sustain increasingly challenging production from mature basins.
With the remaining 22 identified marginal oilfields to be developed, the next RSC will probably be awarded by mid-2012 since potential bidders will have submitted their proposals by 1Q12.
Petronas does not restrict the development plan to marginal oilfields but qualified foreign players with technical know-how and sound financials must rope in local listed partners with at least 30% equity ownership.
O&G players with a proven track record are set to benefit given the expertise-sharing requirement. We believe this is the game-changing plan for local players to move up the value chain.
We rate Bumi Armada Bhd as a strong contender for upcoming RSCs given its healthy balance sheet, outstanding track record and synergistic oilfield services that just fit the criteria for an RSC.
Bumi Armada is probably the best candidate for foreign oil players to jointly bid for marginal oilfields given its impeccable floating production, storage and offloading expertise, strong fleet of 43 offshore service vessels and transport and installation services.
Large-cap players like Dialog Group Bhd, Kencana Petroleum Bhd and SapuraCrest Petroleum Bhd could participate in a second RSC given their solid balance sheets and good track records, though timely delivery for their first RSC remains the priority for now. — HwangDBS Vickers, Dec 13
Following the new tax incentives on Nov 10 to enhance the viability the development of marginal oilfields, Petroliam Nasional Bhd (Petronas) has awarded two unprecedented marginal field risk service contracts (RSC) in 2011 — Berantai (US$800 million [RM2.5 billion]) in January and Balai fields (US$900 million) in August.
The RSCs guarantee recoverable capital expenditure and are estimated to command an internal rate of return (IRR) of 11% to 20%. Potentially, a company with 30% stake in a nine-year US$800 million RSC could rake in more than RM150 million cash flow per year.
The incentive-driven RSC will drive development of new oil and gas (O&G) resources to sustain increasingly challenging production from mature basins.
With the remaining 22 identified marginal oilfields to be developed, the next RSC will probably be awarded by mid-2012 since potential bidders will have submitted their proposals by 1Q12.
Petronas does not restrict the development plan to marginal oilfields but qualified foreign players with technical know-how and sound financials must rope in local listed partners with at least 30% equity ownership.
O&G players with a proven track record are set to benefit given the expertise-sharing requirement. We believe this is the game-changing plan for local players to move up the value chain.
We rate Bumi Armada Bhd as a strong contender for upcoming RSCs given its healthy balance sheet, outstanding track record and synergistic oilfield services that just fit the criteria for an RSC.
Bumi Armada is probably the best candidate for foreign oil players to jointly bid for marginal oilfields given its impeccable floating production, storage and offloading expertise, strong fleet of 43 offshore service vessels and transport and installation services.
Large-cap players like Dialog Group Bhd, Kencana Petroleum Bhd and SapuraCrest Petroleum Bhd could participate in a second RSC given their solid balance sheets and good track records, though timely delivery for their first RSC remains the priority for now. — HwangDBS Vickers, Dec 13
