| SINGAPORE/KUALA LUMPUR, July 22
SINGAPORE/KUALA LUMPUR, July 22 From hauling
rigs to delivering toilet paper, firms from Southeast Asia are
cornering lucrative niches of the oilfield services market to
deliver growth that far outstrips that of much larger global
SapuraKencana Petroleum and Ezion Holdings
lead a group of top 20 Malaysia- and Singapore-listed
companies that grew assets by 30 percent to $8.4 billion last
year, according to Reuters analysis of company data.
Their expertise ranges from laying steel pipes at the bottom
of the ocean and moving huge rigs from the South China Sea to
the Gulf of Mexico, to delivering provisions for the rig crews.
The breakneck expansion has driven the shares of
SapuraKencana up by 30 percent and Ezion by 36 percent this
year, outpacing gains in their local markets and for larger
global rivals like Schlumberger and Technip.
But it also poses the largest risk for the sector as they
run into bottlenecks ranging from talent to equipment.
"In many cases, they are squeezed with high costs and the
need to provide competitive prices," Mark Mobius, executive
chairman of Templeton Emerging Markets Group, told Reuters by
"Nevertheless, well-qualified companies with special
technical capabilities and unique know-how can do very well and
provide excellent profitability," said Mobius, who oversees more
than $50 billion in emerging markets equities at Franklin
Many firms are heading to debt and equity markets to fund
their asset buys. Conglomerate UMW Holdings Bhd plans
to spin off its oil and gas services unit and raise $740 million
in what could be Malaysia's largest IPO this year.
Singapore's Swiber Holdings, which owns the world's largest
fleet of offshore construction vessels for shallow water and
wants to venture into deepwater, is looking at Islamic bonds, or
sukuk, after raising $754 million from corporate bond markets.
"You'll see more companies like ourselves looking at sukuk,"
Francis Wong, group chief executive officer at Swiber, told
Reuters. "Because we have heavy capex spending, it fits very
nicely into one of the models under sukuk which is asset based."
RIGS AND SHIPS
SapuraKencana, at 24.3 billion ringgit ($7.61 billion) the
biggest offshore oilfield services firm in Singapore and
Malaysia by market value, has moved to acquire assets in a bid
to win bigger jobs. In April it bought over the entire tender
rig business of Norway's Seadrill Ltd for $2.9
With that one purchase, the firm now owns more than half of
the world's 43 tender and semi-tender rigs - platforms
supporting offshore oil production in both deep and shallow
water - and a client list that includes Chevron Corp,
Shell and BP Plc.
"The fields are getting smaller and deeper, requiring
capital intensive drilling rigs," SapuraKencana CEO Shahril
Shamsuddin told Reuters.
Ezion Holdings' market value more than quadrupled since 2011
to S$2.2 billion as it dominates the Asian market for lift-boats
- a type of maintenance support vessel.
It has a 26-strong fleet of lift-boats and service rigs, up
from two in 2010, and is expected to increase this to 31 in
2015, said CLSA analyst Saurabh Chugh in a report, citing Ezion
and CLSA data.
These Southeast Asian firms have been able to grow from
Singapore, a energy trading hub home and world's two largest
offshore rig builders - Keppel Corp and Sembcorp
Marine, and oil-exporting Malaysia.
Malaysia's state oil firm Petronas awards risk
sharing contracts (RSCs) to extract more from marginal and
depleted fields under a 300 billion ringgit ($93.93
billion)capex programme from 2011 to 2015.
Petronas has so far awarded three out of the 25 RSCs, which
have a rate of return of up to 20 percent, a senior state oil
firm executive said. Industry analysts have said those in the
running for RSC are among Malaysia's top ten services firms.
With offshore oil and gas spending in Asia and Australia
seen growing 11 percent this year to $104 billion - second to
Latin America in scale, competition for equipment and people
have grown along with margin pressures.
Despite bagging consecutive jobs, Singapore's Ezra Holdings
Ltd reported a 68 percent plunge in third-quarter
profit, as its subsea division suffered losses with project
delays and cost overruns.
SapuraKencana said it faces similar risks even though it
makes average margins of 10-12 percent globally.
"Each project we get is like $200 million to $300 million.
So if you have a 10 percent swing to your cost...that is a lot
of money," SapuraKencana's Shamsuddin said.