TP - S$1.25
We believe a formal announcement is due when the contract is finalised as EOCL is reported by Upstream to have received a letter of intent. Maintain Outperform and target price, at 10.5x CY13 P/E. No change to our EPS for now.
What Happened
According to Upstream, Hess has awarded a letter of intent to Ezra’s associate, EOCL, for the supply of a FPSO on a 3-year charter, plus options for extensions. The vessel, which will store up to 350,000 barrels of liquid, will be deployed in the North Malay Basin off Terengganu, Malaysia. It will be installed alongside a wellhead platform under fabrication at Lumut-based Kencana HL at the Kamelia field. EOCL is reported to have outbid Malaysian operators, Bumi Armada and Ramunia Holdings.
What We Think
Charter rates have not been disclosed but we reckon they could be in the range of US$150k-180k/day or about US$200m for the 3-year period, given storage capacity. Lewek Arunothai was last chartered to PTTEP for US$400m (>US$200k/day) for three years and deployed at the Arthit North gas field during the previous peak. Arthit North was developed in 2006 to meet the high demand of gas with a budget of more than US$1.4bn. It was shut down in Nov 11 following gas depletion.
Lewek Arunothai will be modified either in China or Singapore before its start-up in 2013.
What You Should Do
Stay invested. We believe contract wins and stronger-than-expected quarterly earnings could be stock catalysts.
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