Sapura Energy actively traded on speculation of RM800 mil India pipeline job


(May 18): Sapura Energy Bhd was the third most actively-traded counter on the local bourse this morning, after an analyst at AmInvestment Bank Bhd said the oil and gas firm could clinch an India’s Oil and Natural Gas Corp Ltd (ONGC) pipeline contract worth over RM800 million.

At 11am, Sapura Energy was trading unchanged at 76.5 sen, with 49.68 million shares done, equivalent to 0.83% of its share capital, for a market capitalisation of RM4.61 billion.

AmInvestment Bank said it is keeping the stock’s “Buy” call and 12-month target price of RM1, adding Sapura Energy is currently trading at an unjustified valuation, and targets the to reach RM1.

Quoting Upstream, a Norway-based oil and gas newspaper, AmInvestment Bank said Sapura Energy is poised to win a key offshore contract from ONGC for work on the fifth development phase of its subsea wells and pipeline replacement project (SSPRP-5) off west coast of India.

AmInvestment Bank said Sapura Energy’s likely win for SSPRP-5 was following a dramatic bid process in which a consortium involving United Arab Emirates-based Valentine Maritime and India’s Supreme Offshore had emerged as the lowest bidder at US$212 million versus Sapura Energy’s US$216 million, Larsen & Toubro’s US$227 million and Indonesia-based Timas Suplindo’ US$252 million.

“However, ONGC decided to disqualify the Valentine-led consortium on financial grounds and decided to award the contract to Sapura Energy, which was requested to match the lowest price,” AmInvestment Bank analyst Alex Goh said in a note to clients today.

Before the project value was scaled down by over 15%, AmInvestment Bank said the work scope initially involved the installation of more than 200km of subsea pipelines and modification of platforms.

This included engineering, procurement, construction and installation works for 125.6km of subsea pipelines across 29 segments, 11 umbilicals over 57 km and topsides modifications at 31 offshore platforms, AmInvestment Bank added.

If Sapura Energy manages to secure the ONGC contract, AmInvestment Bank said this would raise Sapura Energy’s fresh job awards by 30% to RM3.5 billion for ending Jan 31, 2019 (FY19), which translates to half of its assumption.

Currently, AmInvestment Bank said Sapura’s outstanding orderbook stands at RM16.6 billion.

With crude oil prices now trading above US$70 per barrel, AmInvestment Bank said “the limelight has returned to Sapura Energy’s exploration and production (E&P) operation, with its proposed listing becoming much more likely and reinvigorates the group’s overall re-rating process.”

Source: The Edge

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