Petra Energy Bhd
(April 11, RM1.23)
Maintain neutral with an unchanged target price of 92 sen: According to a newspaper report, Petra Energy Bhd’s Kota Kinabalu subsidiary Petra Resources Sdn Bhd has been awarded a maintenance services contract by Sabah Shell Petroleum Co Ltd. 

The contract is to provide topside maintenance services for the Gumusut-Kakap and Malikai deep-water platforms. The award is for two years, with a one-year optional extension. 

The signing took place yesterday at the Sabah Oil and Gas Conference and Exhibition 2017. We are positive on this announcement, as the group’s performance will continue to be strengthened by more activities, and [it] is also established as a global energy company to undertake works for Malaysia’s deep-water assets with Shell, a global oil major. 

Pending further details from management, we retain our “neutral” recommendation on price-earnings (PE), with an unchanged TP of 92 sen pegged with financial year 2017 earnings per share of 11.5 sen and eight times PE multiples. 

Petra Resources will provide contract management, site execution and offshore maintenance crew services for the maintenance activities for the platforms. It will further ensure local participation via its partnership with 

Sabah-based company Evolusi Bersatu Sdn Bhd. 

To recap, the Gumusut-Kakap field is an entirely Malaysian-built project. Shell’s first deep-water project in Malaysia allowed the oil major to share its deep-water expertise domestically to aid the government in creating an offshore industry hub in the country while concurrently providing opportunities for its local companies. 

Malikai — Shell’s second deep-water project in Malaysia is the country’s first tension leg platform, a floating oil production facility moored to the seabed at 500m underwater. 

Going forward, we do anticipate a better 2017 performance, with Petronas to have recalibrated its budgets to continue and restart its capital expenditure programme but at a slower pace. 

To date for 2017, the group has managed to secure more new work orders for its Pan-Malaysia contract compared to 2016, which we see improving the group’s performance going forward. 

We are also comforted that the group is balance sheet-ready to undertake new jobs or to step up on existing ones where necessary. — PublicInvest Research, April 11