AmWatch - SapuraKencana Petroleum : Bidding for Petronas’ PSCs in Vietnam BUY, 8 Jul 2014

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SapuraKencana Petroleum : Bidding for Petronas’ PSCs in Vietnam          BUY

We maintain BUY on SapuraKencana Petroleum, with an unchanged fair value of RM5.70/share, based on an FY15 PE of 25x. The Star reported SapuraKencana’s CEO Tan Sri Saharil Shamsuddin as saying that the group is looking to bid for Petronas’ production blocks in Vietnam, although the company is not interested in Murphy Oil Corp’s Malaysian assets. Petronas, one of the more established producers in Vietnam, was earlier reported to be hoping to dispose its 5 production blocks in Vietnam for US$300mil (RM956mil).

Petronas is the operator of Vietnam-based PSCs for blocks 1 and 2, and blocks 102 and 106 which is developing the Ham Rong oil project in the Song Hong basin. Blocks 102 and 106 contain the Thai Binh gas discovery. Additionally, Petronas has equity stakes in the Lam Son joint operating company (JOC), the Con Son JOC, the Truong Son JOC, Block 46-Cai Nuoc and in Blocks 103 and 107. The Lam Son and Con Son ventures are currently in development mode.

We are uncertain of which PSCs in Vietnam that Petronas is currently planning to dispose, or the blocks being eyed by SapuraKencana. But we view SapuraKencana’s bid chances as fair given Petronas’ agenda to develop domestic operators into regional players. Pending further details of the potential size of the fields’ reserves and the pricing, we maintain FY15F-FY17F earnings.

Upstream reported that SapuraKencana is negotiating to provide 2 additional flexible pipe-laying support vessels to Petrobras, which will raise the Brazil-based fleet of its 50%-owned JV with Seadrill to eight. Upstream also reported that SapuraKencana’s wholly-owned TL Offshore is leading in the bid to secure a T&I contract, potentially valued at US$500mil (RM1.6bil) for the Nam Con Son 2 export pipeline network in Vietnam.

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