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4 March 2010

Awards still rolling in from Gorgon

Company Report
Alex Goh alexgoh@ambankgroup.com 603 2036 2291
Rationale for report : Sector update

US services company General Electric (GE) announced that it has won new contracts to supply Chevron with power-generation and subsea equipment for the Gorgon gas development offshore Western Australia. This would push GEs total revenue for work on the project to US$1.1 bil. GE will supply wellheads and pipes that the Gorgon project will use to extract natural gas from wells drilled more than 1200 metres below the surface of the Indian Ocean, off Australia. The world's largest maker of electricity-producing equipment will also supply gas turbines to generate power. GE expects to start shipping equipment for the project in 2Q11. GE announced back in October last year that it had been awarded a US$400mil contract by Chevron to supply Gorgon's LNG refrigeration and C02 re-injection components. In this latest award, GE will supply five (5) 130 MW Frame-9 Gas Turbines in a modularised solution to meet power generation needs of Barrow Island's gas treatment and liquefaction facilities. In addition, GE Oil & Gas' drilling and production business will supply the Subsea Production System that will be installed between 60km and 140 km offshore Barrow Island, in 200 metres to 1,350 metres of water depth. This award is made under a five-year agreement to supply subsea equipment and support services for Gorgon - signed in May 2008. The GE Power Generation Frame-9 Gas Turbines will be manufactured in Belfort in France and Florence in Italy and fully pre-assembled for the first time in modules, with all controls and auxiliaries to be tested in Massa in Italy before being shipped to Australia between July 2012 and mid-2013. The Frame 7 Mechanical drive Gas Turbine will be manufactured in Greenville in the United States while the Main Refrigerant Compressors will be manufactured in Florence and Massa in Italy where complete trains will be string tested. The CO2 train will be fully built and tested in Florence. Chevron and its two partners, Shell and ExxonMobil, plans to develop the first phase of the Gorgon fields with a budget of A$43bil (US39mil). Located on Barrow Island, about 130km off the northwest coast of Western Australia, the Gorgon fields have about 40 trillion cubic feet of natural gas in reserve, equivalent to 6.7 billion barrels of oil reserve. Chevron will own a 50% stake in the liquified natural gas venture while ExxonMobil and Shell will both have 25% stakes. Recall that Wah Seong Corp (Wah Seong) secured the US$163mil pipecoating contract in late October last year. Thus far, we estimate total contracts awarded thus far amounts to around 20% of Gorgons budget for the first development phase. Hence, we believe that Malaysian companies -such as Kencana Petroleum (Kencana) and KNM Group (KNM) bidding for jobs from Gorgon field - still have a chance to secure some contracts. We continue to be positive on the oil & gas sector with an OVERWEIGHT call on the sector - top pick being SapuraCrest Petroleum. We also like Kencana, Coastal Contracts, Alam, Tanjung Offshore, Dialog Group and Wah Seong. Our HOLDs are Petronas Gas and Boustead Heavy Industries Corp. We have SELL calls on Scomi and KNM due to poor earnings performance.

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Oil & Gas

4 March 2010


Fair value RM 2.58 5.10 3.15 1.24 2.00 0.70 9.75 3.12 0.76 0.65 1.00 3.40 PE CY10F x 7.8 8.6 4.4 10.6 15.5 20.6 17.9 16.1 4.2 6.3 12.4 13.5 11.5 10.9 Div yield CY09 CY10F % % 0.3 1.2 1.8 3.3 0.3 0.8 5.1 2.1 5.9 1.3 3.8 2.4 2.4 2.1 0.5 1.3 2.1 4.0 0.3 0.9 5.1 2.3 5.9 1.3 3.8 2.6 2.5 2.3 P/BV x 2.6 3.7 2.1 3.7 5.1 1.7 2.4 2.9 1.0 0.4 0.8 2.7 2.4 2.4



CY09 x 9.2 13.4 5.1 13.6 15.8 18.3 19.8 19.9 5.5 7.1 65.6 14.8 17.3 17.1

Alam Maritim Resources Boustead Heavy Industries Coastal Contract Dialog Group Kencana Petroleum KNM Group Petronas Gas SapuraCrest Petroleum Sealink International Scomi Group Tanjung Offshore Wah Seong Corporation


Average Average - exclude Petronas Gas Source: AmResearch

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