Archive for April, 2010

MMC to expand Tanjung Bin power plant

Friday, April 30th, 2010

 

KUALA LUMPUR: MMC Corp Bhd intends to expand the capacity of the Tanjung Bin power plant owned by its subsidiary Malakoff Corp Bhd to cater for the future growth in power demand.

The group's CEO Datuk Hasni Harun revealed that MMC was likely to propose to the government its plan to add 800 megawatt (MW) of generating capacity to the coal-fired 2,100MW power plant considering the power supply from Bakun would not be forthcoming.

Malakoff, the energy division of MMC, is likely to take the lead in the expansion of the power plant. Financing for the expansion through the bond markets is an option if the concession terms were favourable, he added.

“We have the spare capacity and available land at the site to expand the power plant. The government could also save up to US$100 million (RM321 million) by utilising the spare transmission grids available at Tanjung Bin, Hasni told reporters after MMC's AGM on Thursday, April 29.

Hasni said the expansion plan was necessary to ensure stable power supply in the country, in particular the Iskandar Malaysia development region in southern Johor.

MMC looks set to follow in the footstep of TENAGA NASIONAL BHD [ ], which recently announced a plan to expand its 2,100MW Janamanjung power plant in phases that could lead to an additional capacity by 2,000MW, at an estimated cost of at least RM6 billion.

Hasni believes the government would likely invite other independent power producers to submit their power plant expansion proposals because the power reserve margin in Peninsular Malaysia could fall below the 20% threshold by 2015 from around 40% currently, if no new capacity is planted.

According to Hasni, Tanjung Bin has capacity to generate another 1,400MW (700MWx2) of electricity, while conventionally; the cost to construct 1MW of c

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oal-fired power plant is US$1 million to US$1.2 million. This puts the estimated cost of expanding Tanjung Bin by 800MW at US$800 million to US$960 million.

On the group's engineering and CONSTRUCTION [ ] division, Hasni said MMC's water treatment unit ALIRAN IHSAN RESOURCES BHD [ ] was negotiating with four state governments to take over the management and maintenance of water assets, and the company hoped to sign agreements with at least two states soon.

Aliran Ihsan currently operates and manages water assets in Johor.

Hasni expects the group's port operations in Port of Tanjung Pelepas and Johor Port to turn around this year, after suffering a dip in business last year.

The lower revenue from port operations and losses in associate companies dragged down the company's net profit by 31.7% to RM626.3 million for the financial year ended Dec 31, 2009 from RM917 million previously. MMC's revenue was marginally lower at RM8.44 billion versus RM8.54 billion the year before.

Hasni expressed confidence that the better economic performance this year will see the group doing better than last year, given that MMC's businesses are closely tied to the country's economic conditions.

Contribution from MMC's international business is also expected to stream in this year, starting with Malakoff's 900MW and 880,000 cubic metres per day from the independent power and water plant in Saudi Arabia, which began operation in January this year.

MMC's unit, MMC International Holdings Ltd, also has a 20% stake in Red Sea Gateway Terminal, a container port

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terminal operator in Jeddah, Saudi Arabia. The terminal also started operation at the beginning of the year.

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Higher oil prices boost Exxon, Conoco profits

Friday, April 30th, 2010

LONDON, April 30 — Higher oil prices boosted quarterly profits for Exxon Mobil Corp and ConocoPhillips, but Exxon saw its earnings hurt by recently enacted US health reform legislation.

The healthcare costs, weak performance from its refineries and higher-than-expected exploration costs pulled Exxon’s earnings below Wall Street forecasts, a stark contrast with rivals BP Plc and Royal Dutch Shell Plc, which both topped market expectations when they released quarterly figures earlier this week.

Benchmark US oil prices averaged nearly US$79 a barrel in the first quarter, about US$3 above the previous quarter and sharply higher than the US$43 average of the first quarter of 2009.

That strength offset weak margins from Exxon and Conoco’s refinery operations, which have been hurt by weak demand for fuels such as gasoline and diesel because of the soft global economy. However, the steady rebound in many regions is expected to pull up fuel demand later this year.

“Our results reflect higher crude oil realisations and stronger chemical margins while the downstream industry margins remained weak,” Rex Tillerson, said Exxon’s chief executive officer.

Exxon’s shares slipped 0.5 per cent to US$68.83 on the lower-than-expected earnings, but the losses were limited by the nearly US$2 jump in crude oil prices yesterday.

Conoco’s shares rose by 1.4 per cent to reach US$59.84 per share.

Smaller exploration companies Apache Corp and Occidental Petroleum Corp also saw profits boosted in the first quarter, benefiting from a near doubling in the price of crude oil from a year earlier.

Exxon’s profit in the quarter rose 38 per cent to US$6.3 billion (RM20.1 billion), or US$1.33 per share.

Jason Gammel, oil analyst at Macquarie Research, characterised Exxon’s first-quarter profit as a “pretty big miss,” and attributed the bulk of the shortfall to Exxon’s accrual f

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or the health care legislation.

That legislation sapped earnings by US$200 million, or about 4 cents per share. Wall Street analysts had expected Exxon to report a profit of US$1.41 per share, according to Thomson Reuters I/B/E/S.

The company’s oil equivalent production rose 4.5 per cent from a year ago, fuelled by the company’s liquefied natural gas (LNG) projects in Qatar, it said.

“The production numbers

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looked great, I was looking for 2.5 per cent growth,” Gammel said.

But Exxon’s downstream arm, which includes its refining and marketing operations, posted profits of US$37 million, well off the US$1.1 billion it earned a year ago.

Conoco, the third-largest US oil company by market share, saw its profits rise sharply to US$2.1 billion, but oil and gas output in the quarter fell to 1.83 million barrels of oil equivalent (BOE) per day from 1.93 million BOE per day a year ago.

Conoco, which is in the midst of a plan to shore up returns and reduce debt by selling US$10 billion in assets, said on its conference call that it expects oil and gas output to be lower for the next several quarters.

The Houston-based oil major is making progress, however. Chief executive officer Jim Mulva said the company may boost its 2010 spending plan from about US$11 billion to US$12 billion, with investments targeting assets like the Eagleford and Bakken Shales that bring higher returns.

Occidental Petroleum’s first-quarter profit tripled from a year earlier to US$1.1 billion, or US$1.32 per share, while Apache Corp swung to a profit of US$705 million, or US$2.08 per share, from a US$1.76 billion loss last year.

Apache, the largest US independent oil and gas producer by market capitalisation, reported a profit compared with a year-earlier loss and said its oil output in the quarter rose 68 per cent from a year-ago, lifted by two new projects in Australia. Still, its results lagged Wall Street expectations.

In London, gas producer BG Group (BG.L) reported a 5 per cent fall in first-quarter net profit to US$960 million as a glut in the global gas market hit gas prices, but underlying profits rose, beating expectations. — Reuters

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Sinopec close to issuing US$2.9b worth of bonds

Thursday, April 29th, 2010

 

SHANGHAI, April 29 — Top Asian oil refiner Sinopec Corp is close to issuing 20 billion yuan ($2.93 billion) worth of 5- and 10-year bonds on the Shanghai stock exchange, according to three sources with knowledge of the deal.

“It’s estimated that each bond type will be worth 10 billion yuan. We are waiting for approval,” one of the sources told Reuters today. “The sale will be d

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ependent on the timing of the approval. Once we receive approval, we will offer the bonds immediately.”

The main underwriters of the deal are China International Capital Corp, Goldman Sachs Gaohua Securities, and UBS Securities.

Sinopec spokesman Huang Wensheng told Reuters that the company had proposed at its last shareholder meeting last year a bond issue of

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up to 20 billion yuan and had asked for approval from the authorities.

Sinopec posted a 40 per cent rise in first-quarter net profit yesterday as booming demand for chemicals and oil in China offset weak refining margins. — Reuters

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Marathon International Petroleum Indonesia Limited

Wednesday, April 21st, 2010

 

Indonesia

Marathon holds approximately 1.8 million net acres (3.3 million acres gross) across the Pasangkayu, Bone Bay and Kumawa blocks in Indonesia.

Pasangkayu

The Company holds a 70 percent working interest in the 870,000 acre Pasangkayu Block, located on and offshore the island of Sulawesi in the Makassar Strait, directly east of the prolific Kutei Basin oil and gas production region.

Approximately 23 percent of the block is located on Sulawesi, with the remaining 77 percent in water depths up to 7,200 feet. Water depths for the prospects range from 1,500 feet to 6,000 feet. Marathon signed a Production Sharing Contract with the Indonesian government in 2006.

The Company completed 3-D seismic acquisition in 2008. Marathon leads a consortium of
six companies, which secured a two-year rig contract for Indonesia, and will commence drilling in 2010. Two wildcat wells are planned for Pasangkayu in 2010. The consortium has the option to extend this rig cont

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ract. The block contains more than 1 bboe gross unrisked resource potential.

Bone Bay

Marathon also holds a 49 percent interest and operatorship in the Bone Bay Block offshore South Sulawesi. Following government approval of a transaction already filed, Marathon's participating interest will rise to 55 percent. The block was awarded in November 2008 and covers an area of approximately 1.23 million acres. It is a high-potential, underexplored area with water depths ranging between 165 and 6,500 feet.

The Bone Bay Block is about 200 miles southeast of Marathon's Pasangkayu Block. Marathon began acquiring 2-D seismic data in late 2009. Drilling is planned for 2011.

Kumawa

In May 2009, Marathon entered into a PSC with the Indonesian Government for a 49 percent interest in the Kumawa Block. Following government approval of a transaction already filed, Marathon's participating interest will rise to 55 percent.

The Kumawa Block encompasses approximately 1.24 million acres and is offshore West Papua, Eastern Indonesia, in the Semai region, approximately 180 miles south of the producing Tangguh LNG facility. The Kumawa Block is a highpotential, underexplored area with water depths ranging from 2,400 to more than 4,000 feet. Current exploration plans for the Kumawa Block call for the acquisition of 2-D seismic in early 2010, followed by drilling operations in 2011/2012.
Marathon International Petroleum Indonesia Limited
Beltway Office

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Park
Building A, 4th Floor
Jalan T.B. Simatupang No. 41
Jakarta 12550 – Indonesia
Phone: +62 21-789-1622
Fax: +62 21-7884-3214

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Marathon to start drilling Indonesia Pasang Kayu block

Wednesday, April 21st, 2010

 

SINGAPORE, April 21 — Marathon Oil Corp will start drilling works on the Pasang Kayu oil and gas block in Indonesia in the second quarter of this year and its oil rig will depart from Singapore in early May, an official said today.

The Pasang Kayu block holds potential reserves of more than 1 billion barrels of oil equivalent (BOE), said John Bates, general manager of Marathon International Petroleum Indonesia, a unit of US-based Marathon Oil.

He was speaking at an

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industry conference organised by Global Pacific and Partners in Singapore.

Pasang

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Kayu block covers 1.2 million acres ranging from onshore Sulawesi to water depths of up to 7,200 feet. The block is largely offshore.

Marathon holds a 70 per cent interest in Pasang Kayu and operates the block.

The company last year also signed an oil exploration contract for the Kuwawa block off West Papua.

Indonesia has called on oil contractors working in the country to intensify exploration and boost production, as it faces declining output in ageing fields and has struggled to tap new fields. — Reuters

 

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Sime Darby completes Ramunia deal at RM515m

Tuesday, April 20th, 2010

 

KUALA LUMPUR: Sime Darby Bhd yesterday completed its acquisition of the Teluk Ramunia fabrication yard from Ramunia Holdings Bhd and its wholly owned Ramunia Optima Sdn Bhd for RM515 millio

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n.

Sime Darby said in an announcement to Bursa Malaysia yesterday that the final purchase price was agreed upon subsequent to the completion of the asset-tagging exercise.

The previously agreed price

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as at Aug 3, 2009 between the parties was RM560 million, before a downward revision to RM530 million on Aug 24, 2009.

The acquisition entailed the acquisition of a 170-acre fabrication yard comprising a building, structure, machinery, movable and immovable assets.

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Vastalux: Talks on stake in Shapadu ongoing

Tuesday, April 20th, 2010

 

KUALA LUMPUR: Vastalux Energy Bhd is said to be in talks on a possible acquisition of a 51% equity interest in Shapadu Energy and Engineering Sdn Bhd (SEEN).

“However, the negotiations are still ongoing and are at the preliminary stages,” it told Bursa Malaysia yesterd

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ay, confirming The Edge weekly

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report over the weekend.

The company said at the moment, neither SEEN nor any other entity within the Shapadu group is taking over Vastalux, adding that no decision had been made to inject SEEN’s assets into the company to be satisfied via issuance of new shares.

Vastalux made headlines in January when it announced the suspension of its Petroliam Nasional Bhd (Petronas) licence.

However, the management said all existing projects awarded by Petronas were not affected and were on schedule. The company had also appealed for the reinstatement of the licence.

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Oil and gas stocks back in favour

Tuesday, April 13th, 2010

 

KUALA LUMPUR: After being overlooked for months, the oil and gas (O&G) sector is now back in favour and over the past week, the majority of the sector’s stocks garnered rising interest, with a couple hitting 52-week closing highs.

Most analysts have been expecting a revival of O&G-related counters on the back of news from oil majors about an increase in capital expenditure.

However, it was the price of oil pushing above US$70-US$80 (RM223.30-255.20) per barrel that provided the spark. In the past week, crude oil traded as high as US$86.84 per barrel.

While the price dipped, it never fell below US$85 per barrel. The average trading price over the past 12 months was US$71.55.
“Enthusiasm for the sector is expected to continue, with sentiment underpinned by both the oil price and the announcement by Petronas of the two units that it intends to list,” said an analyst.

OSK Research certainly feels that the sector is due for a re-rating, according to its recent reports. It was announced last Thursday that Petronas would list its petrochemical business and Malaysia Marine and Heavy Engineering Sdn Bhd, a subsidiary of MISC Bhd.

“Although O&G investment is viewed as long term in nature and most projects, including deepwater ones, had become commercially viable at an oil price of US$60 per barrel, we believe there may now be a sense of urgency among the oil majors to award their contracts before the commodity surges to another peak, which may then result in higher material costs,” said OSK.

Going forward, most analysts expect the oil price to move upwards at a more gradual pace, unlike the substantial and sudden spike two years ago when
it reached a historical high of US$147 per barrel.

“This should augur well for the local oil and gas players, as it would be seen as a more su

stainable path,” said the analyst.

OSK’s top picks for the sector are Alam Maritim Resources Bhd, Kencana Petroleum Bhd and Wah Seong Corp Bhd. AmResearch also lists these companies as its picks together with Dialog Group and Tanjung Offshore Bhd. Both research houses have an overweight rating on the sector.

There was substantial interest in Kencana over the past week, with trading volume last Friday coming in at over 35 million shares. Its share price peaked on Tuesday, closing at RM1.67 before declining to RM1.61 on Friday.

Analysts are bullish on Kencana, with the majority calling

it a buy or an outperform, with target prices ranging from RM1.76 to RM2.18.

“Among the listed O&G companies, we believe Kencana stands a better chance of securing new contracts soon given the nature of its business coupled with international presence, delivery track record and availability of space,” said OSK in its latest report on the company.

Calls on Alam Maritim are also predominantly a buy, with fair values of between RM2.20 and RM2.99. The stock closed at RM1.90 last Friday. Wah Seong closed at a 12-month high of RM2.75 last Monday before declining on profit taking to end the week at RM2.63.

According to OSK, while Wah Seong’s share price had the lowest correlation with oil price based on two-year cumulative data, it was one of the most highly correlated companies in 2009.

“Of course, unlike its peers, the company is supported by a consistent jobs flow through constant orderbook replenishment of RM400 million to RM500 million per quarter while maintaining its orderbook at RM1.4 billion.

“Hence, we believe Wah Seong is one of the few O&G companies which had a very good year in 2009, although all other companies had to ride through the
global recession,” said OSK. Fair values for Wah Seong range from RM2.80 to RM3.40.

Dialog’s share price also managed to close at a high of RM1.17 last Tuesday, before declining to RM1.13 on Friday. Fair values for the stock range between RM1.20 and RM1.80, with five research houses calling it a buy.
This article appeared in The Edge Financial Daily, April 12, 2010.

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RM2.5bil investment boost for Johor , Malaysia

Tuesday, April 13th, 2010

 

NUSAJAYA: Johor has received two new investments totalling more than RM2.5bil for the upcoming oil and gas (O&G) hub in the Teluk Ramunia and Pengerang areas this year.

Johor State Investment Centre (JSIC) general manager Mohamed Basir Mohamed Sali said RM2bil would be for a shipyard project from an Asia-Pacific-based company.

The remaining RM500mil would be for a fabrication yard project covering over 200ha from a local company.

Mohamed Basir Mohamed Sali … ‘Upon completion, the hub will span over 5,000ha.’

Basir said that apart from the local investor, another foreign company had shown strong interest and commitment to invest in a fabrication yard project in the O&G hub.

“Many domestic and foreign players in the O&G sector and related activities have approached us and they are keen to set up their operations in

the hub,’’ he told StarBiz in an interview yesterday.

Apart from the new investments, two investors from Qatar and Iran planned to invest RM16bil and RM30bil to set up their facilities in the hub before 2013, said Basir.

He said JSIC was seriously promoting the hub to local and foreign investors and would be going to China, India, Japan, South Korea, Taiwan and the United States this year to attract investors.

The O&G hub in Johor’s southeast area will have related activities such as processing, refinery, storage, fabrication, bunkering, shipyard and marine-related industries.

Southeast Johor, located along one of

the world’s busiest shipping routes, is an ideal location due to its deepwater that allows large crude carriers to berth easily.

Basir said JSIC had already submitted its application to the Federal Government for development fund to set up hard infrastructure facilities. He said utility providers such as for telecommunications, water and power had already finalised their infrastructure work with investments worth RM1bil.

“Work on phase one covering 1,200ha will start at the end of this year, and upon completion several years down the road, the hub will span over 5,000ha,’’ said Basir.

Basir said land acquisition was not an issue as the hub would be developed on state land and JSIC was in the midst of acquiring 2,000ha of disused mining land.

He said two new ports dedicated for the O&G sector and related activities would be set up in the areas to cater for companies operating there.

“The economic spin-offs from the hub is huge as it will bring benefits to local companies in the logistics, support and services sectors, and also SMES,’’ said Basir.

He said thousands of workers would be needed during its construction period and when the hub was fully operational, it would create over 10,000 job opportunities.

Basir said the best example was Pasir Gudang which has been transformed from a fishing village about 30 years ago into one of the leading industrial areas in Malaysia.

He said Pasir Gudang industrial area was already facing space constraints for further expansion and the opening of nearby Tanjung Langsat industrial area provided more area for investors.

JSIC is a one-stop centre set up in 2004 to handle investment-related matters and act as a mediator between investors and the state government and its relevant agencies.

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Petronas reveals units to be listed

Friday, April 9th, 2010

 
KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) named its petrochemical business and Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE) as the two companies it will list on Bursa Malaysia by year-end.

“Like our other listed subsidiaries, these two new listings will allow the investing public to participate directly in some of Petronas’ businesses – in this case, our petrochemical and heavy engineering businesses,” said president and CEO Datuk Shamsul Azhar Abbas in a statement yesterday.

“We hope that these listings will add further depth to Bursa Malaysia.”

Petronas said its petrochemical business registered revenue of RM13bil for the year ended March

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31, 2009. The business consists of a diverse product portfolio that ranges from olefins and polyolefins, fertilisers, industrial to speciality chemicals.

The business started with a capacity of 600,000 tonnes per year and had since grown to over 10 million tonnes of petrochemical products, with a significant regional market presence, said Petronas.

“Petronas’ petrochemical business takes pride in its operational excellence, having achieved world-class standards in manufacturing. The commencement of commercial operations of the mega methanol plant in Labuan in May 2009, with a world-scale capacity of 1.7 million tonnes per year, further strengthens its position as the biggest methanol producer in Asia-Pacific and fourth globally,’’ it said.

MISC Bhd subsidiary MMHE, which Petronas said is the country’s largest marine and heavy engineering entity, registered revenue of over RM4bil for the financial year ended March 31, 2009.

“MMHE’s performance is driven by three core businesses: engineering and construction services, marine conversion, and marine repair,’’ said Petronas.

“MMHE has grown to become an integrated engineering, procurement and construction contractor and liquefied natural gas tanker repair specialist with in-house capabilities and is committed to the pursuit of growth in strategic areas and enhancement of capability through investments in

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infrastructure, technology and human capital.”

Petronas said MMHE operated a yard in Pasir Gudang, Johor, which is one of the largest in the region and the only one capable of undertaking floating production storage and offloading and floating storage offloading conversions and fabrication of high tonnage offshore oil and gas structures in Malaysia.

The listing of two Petronas subsidiaires was announced by the Prime Minister at Invest Malaysia 2010.

Petronas’ other listed subsidiaries are Petronas Dagangan Bhd, Petronas Gas Bhd, KLCC Property Holdings Bhd and MISC.

The announcement yesterday drew little praise from analysts, but between the two companies, analysts said MMHE could be more appealing to investors given that the company would be contract driven and directly dependent on the oil and gas business cycle.

“There’s good growth in fabrication and the expectation is that revenue will grow strongly as the oil and gas exploration business is picking up,’’ said Maybank Investment Bank Bhd head of research Andrew Lee.

The downside, however, is that MMHE is already part of MISC and while the move will unlock value, it might not be assigned a higher market price to earnings ratio than its current parent.

Analysts said Petronas’ petrochemical business had a large revenue base but it might not be a favoured choice due to the nature of its business.

“Because of volatility and its cyclical nature, the price-earnings ratio will be low,’’ said OSK Research head Chris Eng.

UOB Kay Hian head of research Vincent Khoo said margins in the petrochemical business were low but that, however, depended on the business cycle.

He said the listings would be positive but it would not change the landscape of Bursa Malaysia.

Another issue analysts would be watching out for would be the free float of those two stocks on Bursa. The general complaint has been that the free float of some of the largest stocks on the stock exchange is low which tends to lead to thin trading volumes.

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