Yesterday, Kencana announced that its 100%-subsidiary, Kencana HL SB, has secured a contract from Petronas Carigali SB for the provision of hook-up and commissioning for the Kanowit CPP Platform located offshore Sabah. The contract, valued at RM33.9m, is expected to be completed by November.
Still something but nothing to ‘shout about’. Lately, Petronas Carigali and its PSC contractors appear to have sporadically awarded O&G contracts of insignificant value. We believe they are saving the big ones for later in 2H10, especially in conjunction with the potential listing of MMHE, which would then give the local O&G industry a big boost. In the meantime, we would not be surprised to see more local O&G supporting companies announcing small contract awards now and then, especially with the change in Petronas’ from a flat to a taller organization structure. We think the new structure would bring about faster awards of the smaller O&G contracts whereby decisions can be made at the lower level. Hit rate close to 25%. Although the value of each contract award is small, the cumulative value of all of Kencana’s contracts secured in 2010 makes up about 25% of the total contracts awarded to other listed O&G companies in Malaysia, which we gather should amount to about RM1.6bn.