SapuraKencana Secures $125M of Drilling, Engineering & Construction Deals

Malaysia's SapuraKencana Petroleum Berhad reported Tuesday that its wholly-owned subsidiaries have secured new contracts and contract extensions in the drilling as well as engineering and construction segments worth approximately $125 million (approximately MYR 513 million).

SapuraKencana Drilling Tioman Sdn. Bhd. clinched a contract from JX Nippon Oil & Gas Exploration (Malaysia) Ltd. to provide the SKD Berani semisubmersible tender assist rig for a development drilling campaign offshore Malaysia. SKD Berani is expected to drill three firm wells over a minimum period of 150 days beginning in July, with JX Nippon holding options for two wells.

Meanwhile, BP Trinidad & Tobago LLC. (BPTT) has extended a deal with SapuraKencana Drilling Jaya Ltd. for the provision of SKD Jaya semisubmersible tender assist rig for the former's development drilling campaign offshore Trinidad & Tobago. The contract extension is for an additional well, lasting approximately 45 days, while work on an existing well will take around 60 days.

Turning to SapuraKencana's engineering and construction business, SapuraKencana HL Sdn Bhd won a 9-month long contract from BASF Petronas Chemicals Sdn Bhd for the procurement, fabrication, construction, installation and pre-commissioning work for the Infrastructure and Utility Upgrading Projects. The workscope covers the provision of supervision, manpower, equipment and materials to carry out the construction, installation and pre-commissioning of three packages; boiler, condensate polishing unit and used firefighting water system, complete with common facilities.

SapuraKencana HL also secured a 19-month long front end engineering design (FEED) & engineering, procurement, construction, installation and commissioning (EPCIC) contract from Selex ES Malaysia Sdn Bhd for the Radio Shortwave Support System (RS3) Project for PETRONAS Offshore Facilities off the West Coast of Sabah.

The firm also clinched a contract from SapuraKencana Energy Sarawak Inc. for the procurement and construction for the topside package and jacket package for SK310 B15 development offshore Sarawak. Work on the contract is scheduled to be completed by the second quarter of 2017. 

Over in Australia, SapuraKencana Australia Pty Ltd. (SKA) has completed a light well intervention project for Woodside Petroleum Ltd. SKA provided an integrated services solution for the project using SapuraKencana’s assets, including the “SID” Light Well Intervention system and vessel “SapuraKencana  Constructor”. 

Woodside Energy Julimar Pty Ltd. also awarded a 6-month contract to SKA for phases of the Balnaves Decommissioning project for the Balnaves field offshore Northwest Australia covering project management, engineering and offshore execution for the removal of certain subsea infrastructure associated with the field.

Still in Australia, SKA bagged a five-year light well intervention contract on call-off basis by Shell Australia. SKA will supply an integrated service solution for Light Well Intervention services utilizing SapuraKencana’s Light Well Intervention System and vessel.

In a related development, SapuraKencana reported that profit after tax for first quarter 2016 (1Q 2016) that ended April 30 fell to $27.05 million (MYR 110 million), compared to $64.22 million (MYR 261.2 million) in the previous year. The company's revenue in the same period declined to $480 million (MYR 1.94 billion) from $560 million (MYR 2.26 billion).

Engineering and Construction (E&C) was the company's top revenue generator in 1Q 2016, accounting for $250 million (MYR 1.02 billion), while drilling and energy -- the upstream segement -- contributed $153.24 million (MYR 623.28 million) and $73.06 million (MYR 297.14 million), respectively. Revenue contribution from the E&C, drilling and energy segments in 1Q 2015 were at $270 million (MYR 1.10 billion), $189.36 million (MYR 770.18 million) and $102.19 million (MYR 415.63 million), respectively.

Sapurakencana attributed the revenue fall in 1Q 2016 to lower income from its drilling and energy businesses.

Going forward, the company noted that "the oil price outlook remains uncertain and capital spending in the oil and gas industry remains low in the short term. The Group continues to focus on growing and replenishing the orderbook in key markets, re-basing its costs and increasing operational efficiency. Due to declining capital spend, the Group expects to face stiff competition which may cause pressure on margins."

Chee Yew has covered the upstream and downstream sectors of the oil and gas industry in Asia for more than 15 years. Email Chee Yew at cheeyew.cheang@rigzone.com

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