O&G sector to remain positive: MIDF Research

PETALING JAYA: MIDF Research maintains its positive stance on the oil and gas (O&G) sector, confident that the buoyant local O&G scene will be sustained given high global oil prices, which will spur exploration and production activities and growing global oil demand.
MIDF Research said this, coupled with the capital expenditure commitments by international oil companies including Petroliam Nasional Bhd, positive industry sentiment and the visible developments happening with Petronas' Refinery and Petrochemical Integrated Development (Rapid) project in Pengerang will lead to potential contract awards for O&G companies.
"As more deepwater discoveries are made, there will be more opportunities for these new discoveries to be developed. We believe that the two Bursa-listed companies which will stand in the forefront for these deepwater jobs are SapuraKencana Petroleum Bhd and Bumi Armada Bhd," it said in a note yesterday.
MIDF Research is bullish on SapuraKencana and recommends a "buy" call on the stock with a trading price of RM5.59 a share.
"We are bullish on SapuraKencana for its strong quality and well diversified orderbook, healthy earnings and consistent job wins," it said, adding that the company's orderbook remains healthy at about RM30 billion, stretching up to the year 2024 while tenderbook mimics the orderbook in terms of quantum.
It said more than 20% of the orderbook is expected to be recognised in FY15.
As for Bumi Armada, the research firm recommends a buy call premised on expanding topline, increasing quality orderbook value coupled with sizeable extension options, blended sustainable margins of more than 20% and undemanding valuation.
It said Bumi Armada is currently the fourth largest floating production, storage and offloading (FPSO) operator in the world with eight FPSO vessels currently, of which seven FPSOs either being converted or being commissioned.
In addition, MIDF Research said the company is embarking and venturing into the floating, storage & regasification unit business by enhancing its floating liquefied natural gas vessel capabilities.
It said the need for such technology is expected to increase in the near future, as more deepwater gas fields are being discovered and developed, making conventional pipeline construction to the shore uneconomically viable.