The deal will significantly expand its rig-drilling business

PETALING JAYA: Kencana Petroleum Bhd is expected to clinch a deal with Mermaid Drilling Singapore Ltd, which will allow the former to significantly expand its rig-drilling business.

StarBiz learnt that the contract to fabricate drilling rigs was valued at US$200mil to US$250mil (about RM670mil to RM840mil).

Should the deal materialise, Kencana would emerge as the first Malaysian oil and gas (O&G) company to become a fabricator, owner and operator of drilling rigs, according to a senior analyst who tracks the company.

Kencana could not be reached for comment. The company, however, is expected to sign an agreement next week.

The signing would signify “a major expansion for Kencana in collaboration with Mermaid.”

Last month, Kencana announced that its wholly owned subsidiary Kencana Petroleum Ventures Sdn Bhd (KPV) had formed a joint venture with Mermaid Drilling to carry out offshore drilling and related services in the O&G industry in Malaysia.

KPV has a 60% stake in the joint-venture company known as Kencana Mermaid Drilling Sdn Bhd.

Analysts expected the joint venture to own and operate the new drilling rigs, which it would charter to oil drillers.

Bangkok-based Mermaid Maritime Public Co Ltd, the holding company of Mermaid Drilling, is Thailand’s leading provider of subsea drilling, engineering and services for the O&G exploration industry with an established clientele, including BP, Chevron Texaco, Shell, ExxonMobil and Petronas.

Mermaid Maritime made its debut on the Singapore Exchange on Tuesday. Both Tan Sri Quek Leng Chan and Datuk Mokhzani Mahathir are said to have equity interests in the newly listed group.

Kencana seems to be aggressively expanding its business.

In August, another Kencana subsidiary, Kencana HL Sdn Bhd, acquired Torsco Sdn Bhd from IJM Corp Bhd for RM74.63mil.

The deal was to increase its seafront land to 23.35 acres so that it could undertake additional large-scale fabrication work in Lumut, Perak.

Torsco is mainly involved in engineering, fabrication and construction works.

The acquisition would also allow Kencana to diversify its activities in the O&G sector, which covers offshore and onshore steel fabrication works, by leveraging on Torsco’s capabilities in the heavy steel fabrication businesses and enhance the company’s position in the O&G fabrication industry in terms of size and capability.

Kencana is one of only seven licensees in Malaysia to undertake fabrication of offshore platforms for the local O&G industry.

Kencana shares have more than doubled since the beginning of the year. The stock closed at RM2.70 yesterday on volume 23.5 million shares.

The group posted a net profit of RM57.1mil on revenue of RM824.5mil for the financial year ended July 31. Its earnings per share was 6.88 sen.

 
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