Follow up. We spoke with Kencana’s management yesterday. The tender-assist drilling rig owned by MKR1 (and currently being built by Kencana) will be delivered to Petronas Carigali by mid-Aug, and should commence operations in mid-Sep. The rig is in fact physically completed and only awaiting final testing. Kencana has already recruited the rig’s onshore manager and will go on to recruit the crew. Manpower and other operating costs are already covered under the 5-year US$235m service contract awarded by Petronas Carigali. The charter will still earn a pre-tax profit margin of 30-35% p.a. which is higher than our estimate yesterday of 20-30% EBIT margin based on SapuraCrest’s drilling division earnings.According to management, Kencana’s profit margin may be higher due to differences in engineering specifications, as well as the financing structure.
Kencana Petroleum Berhad : Follow Up - 23/6/2010
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