Petra Energy well-positioned to benefit from oil price recovery
KOTA KINABALU: Petra Energy Bhd (Petra Energy) is expected to be one of the best proxies to ride the oil price recovery due to the group’s 30 per cent stake in Kapal, Banam, Meranti (KBM) risk-sharing contract (RSC).
With current Brent crude oil prices sitting on a steady above US$60 per barrel (bb) levels and still climbing, the research arm of Affin Hwang Investment Bank Bhd (AffinHwang Capital) believed the current high oilprice environment will provide a boost to the KBMRSC’s profitability while providing a good opportunity for Petra Energy to undertake production enhancements on the field.
“On our estimates, field production could be ramped 50 per cent higher from the current 4,500 bbl per day by December 2018.
“We also see the possibility of an extension or renewal of the RSC, which expires by mid-2020, due to the current high oil prices and its good production track record,” said the research arm in a securities report.
Besides leveraging off the current high oil prices, AffinHwang Capital also guided that maintenance players like Petra Energy will be experiencing growth opportunities as the demand for decommissioning and abandonment works are expected to be on the rise.
“According to our channel checks, approximately 40 per cent of Petronas’ platforms have and pipelines are more than 30 years old.
“The aging platform, facilities and pipelines are expected to drive the demand for decommission and abandonment works,” said the research arm.
For now, Petra Energy is currently bidding a five-year extension for its for Pan Malaysia Hook-up contract which will expire later this year.
The group’s current outstanding orderbook stands at RM1.6 billion and comprises of RM1.0 billion from Petronas MCM and RM600 from the Pan Malaysia Hook-up.
All things considered, PublicInvest research is confident that Petra Energy’s prospects are turning around due to high oil prices and increased work orders.
As such, the research arm maintains its ‘buy’ call on the stock with a target price of RM0.83 per share.