June 7, 2010

ALAM - Reconnecting Sabah Oil & Gas Terminal

Stock Name: ALAM
Company Name: ALAM MARITIM RESOURCES BHD
Research House: MAYBANK

Oil and gas (O&G) sector
Maintain overweight
: The impending award from the recently reinstated Sabah Oil & Gas Terminal (SOGT) project by end-2010 will lead to greater project rollouts. Intensifying the development of domestic O&G fields, notably deep-water prospects, would benefit domestic service providers and kick-start contract flows and earnings momentum disrupted in 2008.

We are overweight on the O&G sector in anticipation of more positive news flow.

The invitation to bid for SOGT's engineering, procurement, construction and commissioning (EPCC) project has officially been in the market since mid-April after a three-year hiatus.

Petronas Carigali Sdn Bhd (PCSB) is the owner of this project. The first invitation to tender, made in 2007, was pulled back during the tender process due to 'technical reasons'.

The EPCC job is very similar to the earlier one, in terms of job scope. Prospective bidders will be requested to submit a base proposal as well as an alternative proposal considering that PCSB is seeking the lowest cost and shortest schedule options.

Tender submission for the project, initially scheduled to close by June 26, 2010, will most likely be extended should PCSB accede to participating companies' request for an extension.

The request for an extension will not be surprising considering the short lead time (2.5 months) to prepare the bid. Should PCSB consent to an extension not exceeding three months, we reckon it will likely meet the 4Q10 deadline for awarding the contract to the winning party. Based on the timeline, the SOGT should be operational by 2013 as the EPCC job will take about 24 months to complete.

Channel checks indicate that most of the bidders in the earlier tender are again vying at this round. Dialog, KNM, Kencana Petroleum, Muhibbah Engineering, Ranhill (all listed) and PFC Engineering Sdn Bhd (unlisted) are among the locals directly leading their respective tender.

Sinopec (China), JGC, Fumiko (Japan) and Technip (France) are the notable foreign operators, in joint ventures/consortiums with the local players.

Potential award(s) could drive interest and trigger a re-rating of the O&G stocks, probably in 2H10. We continue to put an overweight rating on the sector in the run-up to growing order flows on the back of a steady oil price environment. We have buy ratings for most of the O&G stocks under our coverage. ' Maybank IB Research, June 4







This article appeared in The Edge Financial Daily, June 7, 2010.


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