Petra Perdana enters tripartite joint venture for North Sea oil and gas

Petra Perdana has entered into a tripartite joint venture with a British Virgin Island-based company and another based in Singapore. The integrated services provider said its venture with Geosea Holding (Seabird) and Continuity Solutions (CS) is to capture benefits from increasing worldwide demand for two and three dimensional seismic data acquisitions.
Seabird is a company involved in seismic operation, vessel ownership and marine management based in the British Virgin Island (BVI). CS is a seismic acquisition project management company.

A joint-venture company, Geoseas Technologies (Geo) has been formed in the BVI. It has been conditionally awarded a two-dimensional seismic data acquisition project of between 10,000 km and 15,000 km in the North Sea by Norwegian company, TGS Nopec Geophysical (TGS).
Geo has an authorised share capital of $ 50,000 and a paid-up capital of $ 5,000 ($ 1 = RM 3.80) divided into 5,000 ordinary share of $ 1 each. Petra holds a majority 51 % stake in Geo while Seabird holds a 30 % stake. The remaining 19 % interest is held by CS.

The Nopec contract is valued at about $ 3.75 mm. It is expected to start anytime now and will last until December 31 this year. Petra said the joint venture will combine the three companies’ expertise. It said the joint-venture company is anticipated to benefit from the prevalent market demand for two-dimensional seismic survey.
A RHB research note estimates the contract to add about RM 1.5 mm to Petra’s net profit this year, bringing total annual net profit to about RM 25.2 mm or an earnings per share (EPS) of 37.2 sen.
The forecast was made based on a conservative pre-tax profit margin of 20 %. The note says while Geo’s contribution for now may be low, Petra’s move tells more about the company’s future plans.

Petra is breaking away from Petroliam Nasional and low-margin maintenance business while widening its involvement in the upstream oil and gas sector, it says. Petra’s executive chairman Tengku Ibrahim Petra callsthe joint venture "a significant achievement for a Malaysian company to penetrate the oil and gas industry in the North Sea.
"Not only will the Nopec contract have a positive bearing on Petra’s earnings for the current financial period but the joint venture agreement and the company will pave the way for Petra to reinforce its presence in the upstream sector, particularly the exploration phase, of the oil and gas industry. We will do this while maintaining our business model for the group," he said.

He also said that Petra is confident of leveraging on new business opportunities in the upstream sector of the oil and gas industry in Malaysia.
Based on its valuation, RHB Research maintains an "outperform" rating on Petra’s stock with an indicative fair value of RM 6.71.
Valuations are even more attractive as the research house puts financial years 2004 and 2005’s EPS growth of 107.9 % and 12.5 % respectively against price earning ratios of 13.1 times and 11.6 times.