By Lawrence Yong
Shares of Dayang Enterprise and Petra Energy have soared in anticipation that both companies may secure up to half of the RM8-10 billion contracts up for grabs under the Pan-Malaysia Hook Up and Commissioning (HUCC).
In the latest upturn since May 2, shares of Dayang and Petra Energy have rallied by 30 percent to RM4.35 and by 25 percent to RM1.87 respectively in active trade on Bursa Malaysia. For Dayang, this further adds to 50 percent share gains in March and April.
Both Sarawak-based companies are favoured to win up to RM4 billion of contracts in awards to be finalised over the next few weeks by Petronas Carigali and Shell.
Early this week, Murphy Sarawak Oil gave the first HUCC award for a 5-year job worth RM313.6 million starting 2013 to Dayang. The contract carries a one-year extension and covers oilfields in Bintulu and Kikeh, analysts said. The award increased Dayang’s orderbook by 25 percent to RM1.5 billion.
“We believe that winning a chunk of the 5-year HUCC mega project will be a game changer for the company – it will accelerate growth over the next five years,” HwangDBSVickers research noted. The broker research said they estimated that every RM500 million increase in HUCC order win may raise Dayang’s FY14 earnings by 11 percent.
Another analyst from Kenanga Research said that Dayang and Petra were frontrunners due to their solid track record of executing HUCC jobs.
Industry sources had said that Dayang may get another RM 2-3 billion worth of contracts under the HUCC project while Petra Energy was also bidding for RM1-2 billion jobs. One analyst noted that margins for these contracts could range from 17-25 percent, assuming no major cost overruns.
For Petra Energy, which has an orderbook of about RM300 million to RM400 million, this HUCC award would be a major boost to its financials.
“We met with Petra Energy’s Management recently and understand that it is set to recover from patchy earnings over the last two years. While prospects are expected to remain benign in FY13, investors can look forward to a better FY14,” RHB Research said in a recent note.
RHB however warned that Petra’s capacity to take on big jobs may be limited for now.
The “hook up” part of HUCC refers to making the connections from the well to the oil and gas separator and from the separator to either the storage tanks or a flow line. It also includes connecting the utilities needed for the controls to function. The “commissioning” refers to activating the system once it is hooked up.
Sabah and Sarawak’s offshore oilfield production is being boosted by new deepwater exploration and enhanced oil recovery, therefore requiring new HUCC.
Tengku Dato Yusof Bin Tengku
The 9 PSCs involved in the megaproject are Shell, Petronas Carigali, ExxonMobil, Murphy Oil, Talisman, Nippon Oil, Petronas Carigali Hess, Petrofac and Newfield, analysts noted.
Other winners for HUCC contracts may include Sarku Resources Sdn Bhd, a wholly owned unit of oil and gas giants SapuraKencana Petroleum, and Shapadu Corp Sdn Bhd, where wholly owned Shapadu Energy & Engineering Sdn Bhd handles HUCC jobs, industry sources said last month.
Dayang’s largest shareholders are Sarawak based Naim Holdings Bhd with 33.64 percent, the Ling family with about 22 percent, managing director Tengku Yusof Tengku Ahmad Shahruddin with 10.07 percent and pilgrim fund Lembaga Tabung Haji with 5.01 percent.
Petra Energy shareholders include East Malaysian businessman Bustari Yusoff controlling 27.5 percent equity interest, IGB Corp Bhd controlled Wah Seong Corp Bhd with 26.9 percent, and Mohamed Nizam Abdul Razak brother of current premier Najib Abdul Razak, owning a 9.09 percent stake.
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