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Oil stocks rally on joint venture discovery off Sabah

Business Times (Malaysia): Oil stocks rally on joint venture discovery off Sabah

“SELECTED oil-related counters closed higher yesterday on heavy volume following news of a major oil discovery off Sabah by a Shell-Petronas Carigali- Conoco Phillips joint venture, dealers said.”

Sep 24, 2004

SELECTED oil-related counters closed higher yesterday on heavy volume following news of a major oil discovery off Sabah by a Shell-Petronas Carigali- Conoco Phillips joint venture, dealers said.

They said the new discovery is expected to benefit not only the oil companies but also the providers of ancillary services to the industry, such as Scomi Group Bhd and SapuraCrest Petroleum Bhd.

Sentiment on SapuraCrest shares was also lifted by its sterling financial performance for the second quarter ended July. Its net profit grew 94 per cent quarter-on-quarter to RM20.2 million, while turnover surged 97 per cent to RM275.4 million.

SapuraCrest closed 3 sen higher to RM1.05 with 2.7 million shares transacted, while Scomi also ended 3 sen up to RM1.33 with 7.1 million shares traded, making it the fifth most active counter on Bursa Malaysia Bhd yesterday.

Shell Refining Co (M) Bhd closed 15 sen higher to RM7.40 with 137,700 shares done. Despite its relatively thin volume, the stock was among the leading movers of the Kuala Lumpur Composite Index (KLCI) yesterday.

However, Petronas Gas closed unchanged at RM6.95 with 49,800 shares traded while Petra Perdana Bhd fell 2 sen to RM3.36 with 919,900 shares done.

On Wednesday, Shell Malaysia announced that a Shell-Petronas Carigali-Conoco Phillips joint venture had made another important oil discovery offshore Sabah, at the Malikai-1 exploration well in deepwater Block G.

Earlier this month, the Shell group-Petronas joint venture discovered gas in Bunga Zetung-1 in Block PM301.

Mayban Securities analyst Tursina Yaacob said the series of discoveries was good news for the sector as it would spur demand for the provision of oil and gas services, especially for upstream services such as marine vessels and tug boats, mud engineering services and tubular handling.

Upon production, more jobs would be created in the downstream segment where there would be a need for drilling waste management, fabrication, transportation, pipelines and storage, among others, she added.

“We remain optimistic on the oil and gas sector given its importance to the Malaysian economy and its potential growth arising from continuous exploration and development activities,” Tursina said.

Development of marginal fields will further boost economic growth and serve Malaysia’s long-term strategic needs, she added.

In its daily note to clients yesterday, Mayban Securities said it is maintaining its “overweight” rating on the oil and gas sector, as well as its “trading buy” call on SapuraCrest.

The brokerage has valued SapuraCrest at RM1.35 per share on a sum-of-parts basis. It said the stock is trading at a price-earnings ratio of 16.2 times, which is relatively cheap compared to the industry average of 23 times.

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