KUALA LUMPUR (July 29): Shares of Dagang NeXchange Bhd (DNeX)(KL:DNEX) rose on Monday, after securing a small field asset cluster production sharing contract (SFA cluster PSC) from Petroliam Nasional Bhd (Petronas).
DNeX rose as much as 2.5 sen or 6.02% to 44 sen during the morning session. As of 10.15am, the counter was trading at 43.5 sen — still up two sen or 4.82% — giving it a market capitalisation of RM1.49 billion. Trading volume totalled 15.45 million shares.
The counter has one “buy” and one “hold” call, with a 12-month target price (TP) of 50 sen, according to Bloomberg.
Last Friday (July 26), DNeX announced that its subsidiary Ping Petroleum Sdn Bhd had accepted the letter of award for the SFA cluster PSC from Petronas, which consists of the Bubu, Bunga Tasbih and Enau fields. The tenure of the contract is for a period of 14 years from July 1.
The award is a part of Petronas’ PSCs for three clusters of discovered resource opportunities under the Malaysia Bid Round Plus Round I. The awarded PSCs cover 12 oil and gas fields in the Malay basin, offering synergistic development opportunities due to their location near existing infrastructure.
Apart from DNeX, Petronas also awarded a 65% participating interest and operatorship in the PSCs to Hibiscus Petroleum Bhd’s (KL:HIBISCUS) unit Hibiscus Oil & Gas Malaysia Ltd. Shares of Hibiscus, meanwhile, slipped three sen or 1.24% at RM2.39 as of 10.35am, giving it a market value of RM1.92 billion.
Hong Leong Investment Bank (HLIB) said it is neutral on the development, as it reckons that the PSC award has no material impact on DNeX and Hibiscus in the near- to mid-term, until there are further announcements on reaching FIDs (final investment decisions) to develop these oil fields.
“For DNeX, we understand that Ping Petroleum is currently occupied with the reactivation of the Abu cluster (first oil in 1H2025) and its subsequent focus on the Meranti cluster. Meanwhile, Hibiscus is financially occupied with the development of Teal West (UK) and SF Water Flood Phase 2 (Sabah), in addition to its ongoing acquisition of MLJ field in Brunei.
“Hence, we believe DNeX and Hibiscus will likely not reach FIDs to develop these oil fields in the near term. Factoring in the process of resource assessments and development works of these oil fields, we believe it will take at least three years before the first oil comes online,” said the research house.
HLIB maintained its “hold” call for DNeX with a TP of 43 sen, while Hibiscus at a “buy” call and a TP of RM3.36.
Overall, the research house kept “overweight” on the oil and gas sector, premised on elevated oil price, supported by continued production cuts from Opec+ (the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia), heightened geopolitical tensions, as well as slowing oil production growth.