SapuraKencana Deal Pushes KLCI to Record: Kuala Lumpur Mover

SapuraKencana Petroleum Bhd. advanced to a four-month high after agreeing to buy Newfield Exploration Co.’s (NFX) stakes in offshore Malaysian fields for $898 million, helping send the country’s benchmark index to a record.

Shares of Malaysia’s largest oil and gas services company by market value advanced 5.4 percent to close at 4.30 ringgit in Kuala Lumpur trading, its highest close since May 31. The stock provided the biggest boost to the benchmark FTSE Bursa Malaysia KLCI Index today, and has climbed 73 percent in the past year.

“The deal will give SapuraKencana an immediate foothold in the upstream segment and allow it to become a full-fledged producer,” Norziana Mohd Inon, an analyst at CIMB Group Holdings Bhd., wrote in a report issued today. “The Newfield purchase is a major re-rating catalyst.”

SapuraKencana was created last year following the merger of two companies. Before the tie-up, they won rights to jointly develop their first oilfield off Malaysia’s eastern coast with Petrofac Ltd. Newfield, based in Woodlands, Texas, is seeking to scale back international operations to focus on U.S. onshore growth as the company isn’t able to fund additional investments into both its businesses in North America and Asia.

The Malaysian group became the world’s largest operator of tender rigs earlier this year after buying part of Seadrill Ltd.’s business for $2.9 billion.

The KLCI rose 0.6 percent today and has climbed 9 percent this year, the third-best performer among Southeast Asia’s largest benchmark gauges after Vietnam and the Philippines, according to data compiled by Bloomberg.

Outperform Rating

CIMB maintained its outperform rating and price target of 5.60 ringgit on SapuraKencana. That means it’s expected to show positive returns of at least 10 percent over the next 12 months, the bank said.

Newfield Chairman and Chief Executive Officer Lee Boothby put the company’s international assets up for sale earlier this year, citing the “certainty” of results from expanded drilling in North American shale.

More than 40 companies took part in the bidding process for the Malaysian assets, the U.S. company said yesterday in a statement. The SapuraKencana transaction is expected to close early next year, Newfield said.

Proceeds from the sale will be used to pay off debt as well as general corporate purposes, Newfield said. Goldman Sachs Group Inc. is acting as financial adviser on the sale of Newfield’s international assets.

The transaction is subject to approval from Petroliam Nasional Bhd., the Malaysian state oil company known as Petronas, under production-sharing contracts.

Revenue from Malaysia accounted for 39 percent of Newfield’s $2.6 billion in annual sales last year, data compiled by Bloomberg show.

To contact the reporters on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net; Jim Polson in New York at jpolson@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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