KUCHING: Over the weekend, Petroliam Nasional Bhd (Petronas) faced a group-wide restructuring programme as other heavyweights encountered various developments in their respective course of work in the oil & gas (O&G) sector.
DIMINISHING RESERVES: ECM Libra’s analyst believes that Petronas’s key objective for the moment is to maintain its daily output rather than to grow. This was attributed to Malaysia’s slowly depleting oil reserves, hence the need to make new discoveries to maintain its daily output.
Petronas’ chief executive officer (CEO) Datuk Shamsul Azhar Abbas announced the appointment of four executive vice-presidents to head the national oil corporation’s key business areas, commented an analyst from ECM Libra Capital Sdn Bhd (ECM Libra).
According to the representative, this structural change included strengthening the board by bringing in industry experts including former Petronas staff as well as ensuring that it was separated from the management.
The CEO also noted that the group would focus on growing their reserves going forward as the lack of major oil finds in various areas abroad were costing the group.
“We believe that Petronas’ key objective for the moment is to maintain its daily output rather than to expand,” noted ECM Libra’s analyst. “This was attributed to Malaysia’s slowly depleting oil reserves, hence the need to make new discoveries to maintain its daily output.”
Azhar also recommended more investments at home, which the research house representative viewed as great news for the local industry, as the group looked towards new deepwater fields off East Malaysia such as Malikai and Kebabangan.
Apart from that, its non-core assets would likely be divested in due course, highlighted the research analyst.
“This includes its holdings in its properties, its university and perhaps even its Sepang track,” added the representative, “But with no decision made yet as to what, when or which non-core asset would be divested.”
Other corporate developments during the week included Scomi Group’s major shareholders selling down their stakes to 7.76 per cent, highlighted ECM Libra. Following this change, the group then announced its plan to buy a Nigerian tubular business for RM69 million.
SapuraCrest Petroleum Bhd (SapuraCrest) formed a joint venture in Qatar with Al Rayan Investment LLC and was likely to bid for some jobs in the region, while Coastal Contracts Bhd (Coastal Contracts) proclaimed that they were ready to go into O&G fabrication after a RM10 million expansion of their yard space.
Another Malaysian O&G player, Tanjung Offshore Bhd (Tanjung Offshore) was bent on bolstering its order book and had some 50 bids out in the market for various jobs involving drilling and production platform services as well as maintenance, engineering equipment and offshore support vessel services.
To date, Tanjung Offshore had an order book valued at RM1 billion that would sustain the group into 2014, noted ECM Libra.
On a negative note, Alam Maritim Resources Bhd (Alam Maritim) was facing a legal wrangle on the ownership of one of its vessels, MV Setia Ulung, which was also claimed by MLC Barging Pte Ltd.
Crude oil futures dropped 3.3 per cent towards the end of the week but did not yet convincingly break the US$70 per barrel level as prices fell when weak US job data was announced.
ECM Libra believed that prices would continue to trade in a tight range from here onwards unless the US dollar took a plunge further south that would see money flowing back into commodities.
On the local front, share prices were mixed as KNM Group Bhd (KNM) continued to see negative price action with a four per cent decline while SapuraCrest gained some 2.5 per cent, likely on bargain hunting activities.
The research house maintained fair values at RM10.30 per share for Petronas, RM2.50 per share for Dayang Enterprise Holdings Bhd, RM3.40 per share for Wah Seong Corporation Bhd, RM1.20 per share for Petra Perdana Bhd, RM0.55 per share for KNM and RM2.48 per share for SapuraCrest.