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SapuraKencana to expect more drilling contracts for 2014

Posted on April 21, 2014, Monday

KUCHING: SapuraKencana Petroleum Bhd (SapuraKencana) is expected to see an inflow of drilling contracts throughout 2014 as it bids for more work in various regions worldwide.

Following a visit to SapuraKencana’s seven semi-submersible self-erecting tender assisted drilling rigs (STDR), the SKD Berani, Alliance Research Sdn Bhd (Alliance Research) opined that the company could expect more drilling contracts to emerge as the year progresses.

“Just last month, SapuraKencana announced RM1.5 billion of drilling contracts for four of their rigs. Based on our records, two more rigs, the SKD Jaya and SKD Menang STDRs will require extensions/renewals in the third quarter of the financial year 2015 (3QFY15),” it explained.

In addition, more work in the Africa region could mean higher charter rates for these two rigs, the research firm pointed out.

“The group highlights that they continue to bid in this region, but are also bidding for work in other regions like Brazil and Southeast Asia,” Alliance Research said.

In terms of other contracts on SapuraKencana’s radar which are part of the group’s RM25 billion tenderbook, the research firm said, based on Upstream Online, some jobs the group is after include a third Petrobras tender for smaller flexible pipelaying support vessels, central processing platform (CPP) fabrication for Baronia and Bardegg fields, Mumbai High pipeline installation, risk service contract for the Bubu field, five CPP fabrication for Bergading field, and also six fabrication jobs in the Malaysia-Thai JDA.

Overall, it remained optimistic on SapuraKencana’s prospects based on contracts the group is looking to clinch.

Meanwhile, on SapuraKencana’s seven semi-submersible STDR; the SKD Berani, the research firm explained that the rig is currently docked at Keppel’s yard in Singapore while it undergoes some upkeep and maintenance as well as addition of new equipment before it heads out to the waters off Congo for a one+one year term charter with Total in early May.

To note, SKD Berani was built in 2006 by Keppel and was previously known as the West Berani before the SapuraKencana-Seadrill rig deal.

Alliance Research explained that the contract in Congo with Total is worth US$108 million (RM350 million, awarded in March 2014) which works out to a day rate of US$244,000 per day or RM780,000 per day.

“SapuraKencana noted that this day rate is the highest the group has achieved so far, as it includes mobilisation costs and also some new equipment.

“The rig will be working at one of Congo’s oldest production wells and carrying out directional drilling work to enhance the field’s recovery,” the research firm said.

The rig, given its semi-submersible nature, is also able to work in water depth of up to 6,500 feet, making it a more suitable option for Congo than jack-up drilling rigs which can operate at a maximum depth of 500 feet, Alliance Research outlined.

“Also, because of its floating nature, it is more suitable to work at existing offshore developments, where there could be a lot of umbilicals and subsea equipment on the seabed, making it hard for rigs like jack-up to be set up,” it said.

All in all, Alliance Research maintained its ‘strong buy’ recommendation for the stock. It added that newsflow is expected to be active going forward as the group needs contract replenishments of RM4 billion to RM5 billion per annum to maintain its orderbook at RM24 billion to RM26 billion.

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