Wednesday, 13 Sept 2017

Salient points:

> Focuses primarily on projects related to marginal oil field developments.

> Eyeing for contracts worth up to RM1bil.

> Set to return to the black in FY18.

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 categories (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-president 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.

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