Positive on Sapura Energy’s first UAE contract

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Sapura Energy, via its partnership with Petrofrac Emirates LLC, has secured a contract from ADNOC for the Dalma Gas Development Project.

KUCHING: Sapura Energy Bhd’s (Sapura Energy) first engineering, procurement, and construction (EPC) contract in the United Arabs Emirates (UAE) region has been viewed positively by analysts as it could kick-start its reputation in the region for further job wins in the future.

In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) said, Sapura Energy, via its partnership with Petrofrac Emirates LLC, has secured a contract from the Abu Dhabi National Oil Company (ADNOC), for the Dalma Gas Development Project.

The scope of works includes: engineering, procurement, fabrication, transportation, construction, installation, testing and commissioning of all offshore facilities, several wellhead platforms, 189km of subsea pipelines, cables and umbilical forming the Dalma Gas Development Project.

“Overall, we are positive on the new win, with this being Sapura Energy’s first job in the UAE. According to Upstream, the package for the contract is reported to be worth US$591 million. Assuming a 50:50 partnership, Sapura Energy’s stake would thus be worth US$296 million – or approximately RM1.2 billion.

“Considering the competition, having successfully fought off McDermott International and Saipem who were thought to be contending bidders, we believe margins for the project could be around the low-teens percentage. This also represents Sapura Energy’s first (known) contract win in FY21, bringing its order-book to a guesstimated value of around RM16 billion,” it commented.

“On a bigger picture, the win could also help build Sapura Energy’s track record in the region, enabling further job wins in the future,” it highlighted.

This award, and together with another onshore package awarded wholly to Petrofac, are understood to be the first major upstream EPC contracts dished out by ADNOC this year, with more than US$10 billion worth of projects understood to be in the tendering stage but yet to be awarded, Kenanga Research noted.

Meanwhile, it also pointed out that Sapura Energy is also one the players under Saudi Aramco’s long-term agreement (LTA), thus qualifying it for direct tenders for jobs from Aramco.

“The Middle East is the single largest region for Sapura Energy’s tender book, making up about 32 per cent of circa US$8 billion tender-book, and as such, we believe strengthening its position in the region would be target for the company,” it said.

Kenanga Research retained its ‘outperform’ call on the stock, adding, “We believe earnings turnaround is a long-term eventuality, with all the fundamental building blocks gradually put in place, such as strong order-book backed by job wins, finance and depreciation expenses now much palatable post-rights and impairments, gradual increase in drilling rigs utilisation, and first gas from SK408 to boost E&P segment.”