This article first appeared in The Edge Malaysia Weekly on October 14, 2024 - October 20, 2024

NATIONAL oil company Petroliam Nasional Bhd (Petronas) is close to awarding RM8 billion to RM10 billion worth of contracts as part of its maintenance, construction and modification (MCM) initiatives, sources familiar with the matter tell The Edge.

It is understood that a number of companies have been notified of their successful bids, with letters of award (LOAs) set to follow soon.

“There is some form of confirmation [on the companies securing jobs] already, but the LOAs are still pending for most [of the successful bidders],” one source says.

Another source explains that the contracts are on a five-year basis and broken up into 15 to 16 packages. They will commence early next year with an option for two extensions, the first for three years and the second for a two-year time period.

The average value of each package is about RM500 million. If the companies exercise the options for extension, the contract value could double, which augurs well for them.

While the value of the contracts is not known, the big winners thus far are said to be T7 Global Bhd (KL:T7GLOBAL) with three packages; Dayang Enterprise Holdings Bhd (KL:DAYANG), also securing three packages; Petra Energy Bhd (KL:PENERGY) and Deleum Bhd (KL:DELEUM) with two packages each; and Sapura Energy Bhd (KL:SAPNRG), Carimin Petroleum Bhd (KL:CARIMIN) and Terengganu government-controlled Eastern Pacific Industrial Corp Bhd (EPIC) being awarded one package each.

The remaining two to three packages are understood to have been awarded to some of the smaller players.

In terms of value, it is understood that T7 Global is the largest winner.

But the margins are relatively thin, though the jobs are a good source of recurring income, says an executive from one of the companies awaiting the LOA. “[The bidding] is competitive, which is why the margins are thin … but it is good for the industry,” he says.

It is understood that the companies will require Petronas’ consent before announcing their contract wins, which means any announcement of the awards may take time.

Deleum’s share price hit a record high of RM1.69 in intra-day trading on Oct 7. The stock finished last Thursday at RM1.60, translating into a market capitalisation of RM642.5 million. The counter has gained 48% since early August.

For its six months ended June 2024, Deleum chalked up a net profit of RM31.62 million, up 68% from the corresponding period a year ago, as revenue rose 24% to RM387.32 million.

Petra Energy’s shares, which ended trading last Thursday at RM1.35 apiece for a market value of RM433.3 million, are up 56% year to date. The stock hit RM1.61 in mid-June this year, its highest in almost a decade.

For its six months ended June this year, Petra Energy managed to register RM27.16 million in net profit from revenue of RM281.37 million. In the same period last year, the company recorded net profit of RM10.34 million on revenue of RM281.37 million.

T7 Global, meanwhile, closed at 46 sen last Thursday, for a market value of RM378.8 million. Since early May, the counter has fallen over 15%.

T7 Global posted a net profit of RM15.24 million in the six months ended June this year, up from RM10.67 million a year ago, as revenue climbed to RM282.57 million from RM198.08 million.

Dayang’s shares, which closed at RM2.39 last Thursday to give the company a market capitalisation of RM2.77 billion, have shed almost 22% since the stock hit its 52-week high of RM3.05 on June 13.

For its six months ended June, Dayang made a net profit of RM159.34 million, over three times the RM48.74 million it made in the previous corresponding period, as turnover jumped to RM702.96 million from RM418.15 million.

As for Carimin Petroleum, the company had a market capitalisation of RM194.1 million at its close of 83 sen last Thursday. The stock hit a 52-week high of RM1 on July 11, but has since shed about 17% of its value.

For its financial year ended June 2024, Carimin Petroleum registered a net profit of RM46.24 million, up 101.5% from a year ago, as revenue gained 21.55% to RM309.43 million.

Sapura Energy, which is in the cash-strapped Practice Note 17 category of Bursa Malaysia, ended trading last Thursday at three sen, which is its 52-week low, for a market capitalisation of RM551.3 million.

The company, which was once the second largest oil and gas service provider in the world, managed to register a net profit of RM76.9 million on revenue of RM2.38 billion for its six months ended July this year. For the first six months of FY2023, Sapura Energy reported a net profit of RM188.89 million on turnover of RM2.09 billion.

The fortunes of most of the oil and gas companies hinge on oil prices, which surged above US$80 per barrel on Oct 7, as tensions mounted in the Middle East and supply disruptions in the US Gulf of Mexico heightened from a major hurricane.

The benchmark Brent crude, which was testing the US$81 band early last week — its highest since August — tapered off to US$78 by Thursday. Nevertheless, Brent crude is up about 20% from early September.

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