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Wednesday, August 17, 2011

Dialog - Balai marginal field development (CIMB)

Dialog and its partners Roc Oil and Petronas Carigali have clinched a 15-year Petronas contract worth up to US$950m to develop the Balai cluster fields. We are not surprised that Dialog has landed its first-ever upstream venture but are positively surprised by Petronas Carigali’s involvement in this 2-phase project. Our forecasts are unchanged as we have imputed construction contributions during the predevelopment phase. Commercial production will start 24 months after commencement, i.e. beyond our forecast period. Our SOP-based target price rises from RM3.21 to RM3.48 as we apply a 40% premium to the businesses that we previously valued at 20% premium over our 14.5x target market P/E. This puts their valuations on par with those of larger oil & gas companies. Dialog remains an OUTPERFORM, with the potential share price triggers being this contract and the US$20bn Rapid project.

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