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Wednesday, January 12, 2011


Another good news for Kencana

KUALA LUMPUR: SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd are in the running to bag major oil & gas (O&G) contracts for the development of marginal oil fields, expected to be announced by Prime Minister Datuk Seri Najib Razak at the briefing on the progress of Economic Transformation Programme (ETP) today.

Interestingly, SapuraCrest completed the signing of its wholly owned subsidiary Aurabayu Sdn Bhd’s syndicated Islamic financing facilities of up to RM750 million comprising ringgit and US dollar-denominated tranches with Maybank Investment Bank Bhd yesterday.

Proceeds of the Islamic financing deal will likely be used to fund a major job for SapuraCrest in line with its strategic business expansion in the O&G industry.

Details of the O&G contracts, for the development of marginal oil fields, are scarce but these contracts could be worth about US$1 billion (RM3.07 billion), industry observers said.

SapuraCrest along with its partner Seadrill Ltd were thought to be strong contenders for some of the marginal oilfields development jobs. Seadrill has a 23.59% equity interest in SapuraCrest.

Analysts are positive on SapuraCrest’s prospects as it currently controls 70% of Malaysia’s installation of pipelines and facilities segment.

Another company which is also expected to be a beneficiary of these O&G contracts is Kencana Petroleum.

The Edge had earlier reported that Kencana and its technical partner London-based Petrofac Ltd have emerged as frontrunners to bag the exploration of the Berantai O&G field at PM309.

Kencana is also understood to be ahead of the race for the US$250 million engineering, procurement, construction and commissioning job at Block PM313, the Sepat oilfield. Reports have said that Petrofac has secured a US$280 million contract from Petronas Carigali covering work on the Sepat offshore early production system with the first oil expected before end-2011.

Industry players note that the O&G player has the requisite expertise in drilling after making several acquisitions last year.

Kencana recently proposed several fundraising exercises which were understood to fund its marginal oilfield development aspirations. The group plans to issue RM350 million worth of five-year Islamic securities with 350 million warrants, conduct a 10% new share placement exercise and raise up to RM200 million via Islamic medium-term notes.

O&G counters have been rallying since last September on expectations of announcements of new contracts from national oil company, Petroliam Nasional Bhd, this year.

Both Kencana and SapuraCrest hit a 52-week high in intra-trade yesterday. Kencana hit RM2.73 before easing to RM2.67 at its close while SapuraCrest touched RM3.32 before ending at RM3.27.

This article appeared in The Edge Financial Daily, January 11, 2011.

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