KUALA LUMPUR: KKB Engineering is expected to benefit from Petroliam Nasional Bhd's (Petronas) latest gas reservoir discovery via the Cengkih-1 exploration well in Block SK320, in the Central Luconia Province, about 220km off the coast of Bintulu in Sarawak.
RHB Research noted that this should present opportunities for KKB's steel fabrication unit, which covers oil and gas (O&G) facilities, as there could be a need for wellhead platforms for drilling activities in this area.
Block SK320 is operated by Mubadala Petroleum, which has a 55 per cent participating interest in the production-sharing contract.
Petronas Carigali and Sarawak Shell hold the remaining 45 per cent.
The block commenced its first gas production via the Pegaga gas field earlier in March.
"We think that KKB, via its subsidiary OceanMight, will be a potential beneficiary of this latest oil discovery.
"This is because Sapura Fabrication awarded OceanMight a job in May 2018 for the provision of the procurement and construction of wellhead deck, piles and conductors for the Pegaga Development Project under Mubadala Petroleum, which was completed.
"Hence, OceanMight is no stranger to Block SK320 and also Mubadala Petroleum," said its analyst Adam Mohamed Rahim in a note.
The bank-backed research firm added that even if decommissioned wellhead platforms were to be deployed, OceanMight could still benefit – albeit with a lower contract value – via requalification works.
The research firm reiterated that higher capital expenditure by Petronas may boost OceanMight's steel fabrication business for O&G platforms, with it being the only other Petronas-licensed fabricator in Sarawak besides Brooke Dockyard and Engineering Works Corp.
RHB Research maintained 'Buy' on the stock with a target price of RM1.85.