Low oil price a bless­ing in dis­guise for Enra

The Star Malaysia - StarBiz - - Companies & Strategies - By GANESHWARAN KANA ganeshwaran@thes­tar.com.my

WHILE the up­stream oil and gas (O&G) seg­ment may seem less ex­cit­ing for the time be­ing due to the low oil price en­vi­ron­ment, Enra Group Bhd has found the sit­u­a­tion as a bless­ing in dis­guise.

The O&G ser­vices provider is now ac­tively bid­ding for up­stream con­tracts worth up to RM1­bil in to­tal. The con­tracts are pri­mar­ily fo­cused on ser­vices re­lated to mar­ginal oil field de­vel­op­ment in the re­gion.

Enra president and group chief ex­ec­u­tive of­fi­cer Datuk Ma­zlin Ju­nid says the group is san­guine in se­cur­ing more mar­ginal oil field con­tracts, un­der­pinned by its abil­ity to pro­vide niche and low-cost O&G so­lu­tions to its part­ners.

“Ex­trac­tions from mar­ginal oil fields can be very lu­cra­tive if the process is done right. This is where we come in, as we of­fer to lower costs re­lated to mar­ginal oil field de­vel­op­ment.

“Our so­lu­tions can ul­ti­mately re­duce mar­ginal oil field de­vel­op­ment costs by 50% to 70% com­pared to what our con­ven­tional com­peti­tors can of­fer. This is what the O&G com­pa­nies need, par­tic­u­larly dur­ing the cur­rent low oil price en­vi­ron­ment,” he says, adding that Enra is keen on re­gional mar­kets namely Malaysia, Aus­tralia, Myan­mar and Thai­land.

Mar­ginal oil fields re­fer to those with re­cov­er­able oil re­serves of less than 30 mil­lion bar­rels. It was re­ported ear­lier that Malaysia alone has some 106 mar­ginal fields, with ap­prox­i­mately 580 mil­lion bar­rels of oil cu­mu­la­tively.

Cur­rently, Enra’s or­der book for its up­stream busi­ness stands at over RM200mil, which can sus­tain the group for the next four years. As for its down­stream seg­ment, the or­der book value is val­ued at RM40mil to RM50mil per an­num.

In July this year, Enra bagged a US$48mil (RM206.3mil) con­tract in Myan­mar from PC Myan­mar (Hong Kong) Ltd, a sub­sidiary of Petronas, for the leas­ing of a sin­gle-point moor­ing sys­tem and stor­age tanker fa­cil­i­ties.

The four-year con­tract, is an­tic­i­pated to con­trib­ute pos­i­tively to the com­pany’s earn­ings in its fi­nan­cial year of 2019 (FY19) and on­wards.

The group’s joint-ven­ture com­pany, Enra Icon Sdn Bhd, was also re­cently awarded a novel li­cence for its small field de­vel­op­ment and min­i­mal fa­cil­i­ties well­head plat­form de­signs un­der the stan­dard­ized work and equip­ment cat­ego- ries (SWEC) code.

This ba­si­cally means that Enra can now lever­age on the li­cense to of­fer con­cep­tual en­gi­neer­ing de­sign, front-end en­gi­neer­ing and de­sign, de­tailed de­sign and off­shore fa­cil­i­ties en­gi­neer­ing ser­vices di­rectly to Petronas.

“Via the novel li­cence, we will be bid­ding for two well-head plat­form con­tracts un­der Petronas next year. Apart from that, we are also likely to bid for about four con­tracts not di­rectly re­lated to Petronas in Malaysia,” Ma­zlin points out.

The Main Mar­ket-listed Enra is cur­rently at the tail-end of its tran­si­tion from a prop­erty de­vel­oper into an oil and gas (O&G) ser­vices out­fit. The com­pany, formerly known as Per­duren (M) Bhd, saw Ma­zlin and Tan Sri Ka­malud­din Ab­dul­lah emerg­ing as ma­jor share­hold­ers in 2015.

At present, both Ma­zlin and Ka­malud­din col­lec­tively own an eq­uity in­ter­est of 52% in Enra. Note that Ka­malud­din is the son of for­mer prime min­is­ter Tun Ab­dul­lah Ah­mad Badawi and a co-founder of Scomi Group Bhd.

The group fea­tures a few big names from the cor­po­rate world on its board of di­rec­tors in­clud­ing Petronas ex-president and CEO Tan Sri Sham­sul Azhar Ab­bas, for­mer chair­man of the Se­cu­ri­ties Com­mis­sion Datuk Ali Ab­dul Kadir and for­mer ex­ec­u­tive vice-presi- dent of Petronas’ gas and power busi­ness Datuk Anuar Ah­mad.

With a cur­rent mar­ket cap­i­tal­i­sa­tion of about RM377.8mil, Enra has seen its share price ris­ing by nearly 37% to RM2.80 year-to-date. Its price-to-earn­ings ra­tio cur­rently stands at about 28.63 times.

The oil and ser­vices provider, which fell into the red in its pre­vi­ous FY17, aims to turn prof­itable in its cur­rent fi­nan­cial year, driven by as­set dis­pos­als and the con­tracts se­cured via its joint ven­tures.

A stronger fi­nan­cial per­for­mance is ex­pected from FY19 and on­wards, says Ma­zlin, fol­low­ing the full im­pact from its cur­rent ini­tia­tives.

Enra recorded a net loss of RM72.08mil in FY17, in con­trast to a pre­vi­ous net profit of RM8.91mil. This was mainly the re­sult from dis­con­tin­ued op­er­a­tions in re­la­tion to its in­vest­ment prop­er­ties busi­ness, the Hol­i­day Plaza and Shamelin Busi­ness Cen­tre that had been clas­si­fied as non-cur­rent as­sets held for sale.

How­ever, the group reg­is­tered an op­er­at­ing profit of RM28.12mil in the fi­nan­cial year. Its full-year rev­enue surged by ap­prox­i­mately 46.63% to RM179.34mil from RM122.31mil in FY16.

Enra’s prop­er­ties in Hol­i­day Plaza is ex­pected to be dis­posed by the end of this year for RM85.15mil. The ex­er­cise is an­tic­i­pated to lower the com­pany’s gear­ing ra­tio to 0.2 times, from 0.4 times cur­rently.

More deals: Ma­zlin says the group is san­guine in se­cur­ing more mar­ginal oil field con­tracts.

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