Fundamental Thoughts
Egypt Petroleum Show pays off: Last week saw the commencement of the sixth edition of Egypt Petroleum Show (EGYPS 2023), with more than 32,000 participants, 2,000 delegates, and 41 international oil and gas companies in attendance. Egypt hopes to develop its petroleum sector, enhance cooperation with international entities, and spur FDIs in oil and gas. Below are our main takeaways:
(1) Cooperation with multiple sovereign nations to expand the scope of the petroleum sector:
· European Union has renewed its MoU with Egypt and Israel to secure its supply of natural gas.
· Iraq is calling on Egyptian companies to obtain exploration licenses in Iraq and support the petrochemicals sector given an abundant supply of feedstock.
· Yemen wishes to benefit from Egypt’s expertise in the natural gas sector, specifically compressed natural gas.
(2) Multiple international companies pledged to increase their investments in Egypt:
· Wintershall Dea (Germany) announced plans to invest USD1.5bn in 2023 for all of its international operations (Egypt represents 10% of its production).
· Dana Gas (UAE) will invest USD100mn in Egypt in 2023 and 2024; it is also interested in securing the new oil and gas exploration bids (Egypt represents 40% of its production with production capacity of 24,000 barrels of oil equivalent).
· LSE-listed Energean will invest USD350mn in its concession in Abu Qir in the Mediterranean.
· Bronco Oilfield Services will invest USD8mn for offshore drilling and exploration in the North Sinai region.
· Kuwait Energy to drill two wells with an investment of USD4mn.
· Eni (Italy) will drill two wells with an investment of USD7mn.
· Chevron (USA) will complete seismic research in its Red Sea concession and will help Egypt reduce its methane emissions.
· BP, Apache Corporation, and Mudabala Investment Co. (UAE) have all pledged to increase their investments in Egypt to increase production rates and research activities.
(3) Cooperation between Egypt and international entities:
· Schlumberger and Enppi will cooperate in deep-water extraction and engineering designs.
· Shell, Bechtel Egypt, Enppi, and Petrojet will cooperate to reduce carbon emissions.
· Apache Corporation and Helleniq Energy (Greec) will help export Qarun Petroleum Company’s crude oil stock.
(4) Technological developments to modernize the energy sector in Egypt:
· IBM will support digital transformation in the energy sector.
· Baker Hughes will cooperate with petroleum companies to develop, design, and implement advanced petroleum equipment.
· Emerson Global showcased its energy sector enhancement technology through automation, digital transformation, and asset optimization to accelerate energy efficiency and reduce carbon emissions.
· AMS-listed Fugro unveiled their new-patented QuickVision smart camera, assisting in subsea structure installation and drilling. The camera will provide direct and contactless monitoring and verification technology, to provide safer, more efficient, and cheaper solutions for marine operations.
How will this all play out for the EGX-listed names? EGYPS will allow the energy sector to reach new heights and hopefully turn Egypt into a Middle Eastern energy hub. Below we name a few local companies in the sector that could benefit from increased FDIs and more opportunities, which we group into:
(1) Offshore support services companies, such as Maridive & Oil Services [MOIL], will likely benefit in the short run from the increased offshore exploration and drilling activity that will occur.
(2) Infrastructure contractors, such as Egypt Gas [EGAS], will benefit in the short to long term, as it is Egypt’s main natural gas infrastructure contractor and will likely participate in some of the natural gas projects announced.
(3) Energy distributors, such as Qalaa Holdings’ [CCAP] TAQA Arabia and Egypt Kuwait Holding’s [EKHO] NAT Energy, will likely benefit in the long run as natural gas production levels increase, so will the need to distribute natural gas to more sectors and households in the country.
—Omar Taha | Equity Analyst
Today’s Top News & Analysis
Russian oil services company to operate in Egypt for the first time
Egypt and Italy to interconnect their electricity soon
Three international consortia compete for Abu Qir metro project
Two state-owned pharmaceutical companies to sell minority stakes
Oman’s sovereign fund interested in investing in Egypt
Palm Hills Developments concluded a bond securitization worth EGP638mn
Talaat Moustafa Group’s preliminary 2022: A 25% increase in bottom line profits
CIRA Education to increase its prices
Egyptians Housing & Development’s 2022: Post-merger revenues grew
MACRO
Russian oil services company to operate in Egypt for the first time
An agreement has been signed between Russia’s Tyumen Oil Tec, Egypt’s Access Middle East Oil Service, and F&M for the Russian company’s oil services. The Russian company will be able to offer its services in Egypt, bringing solutions that are technologically advanced and cheaper. (Al-Mal)
Egypt and Italy to interconnect their electricity soon
The Egyptian and Italian governments are reportedly in talks to sign an MoU for a 3GW interconnector project next June, with reports about a third country joining the project. The Italian offer includes funding options from European sources. (Enterprise)
Three international consortia compete for Abu Qir metro project
Three international consortiums are currently competing on the new 21.7km Abu Qir metro project, with a total expected cost of EUR1.6bn. The consortia are:
(1) Orascom Construction [ORAS] and the French Talis Group.
(2) Chinese CRBC and CRCC, Concrete Plus, and Adler EG.
(3) Arab Contractors, Hassan Allam Holding, Concord Construction, and Alstom. (Economy plus)
Two state-owned pharmaceutical companies to sell minority stakes
The Egyptian government is planning to offer 30-40% of Chemical Industries Development Co. (CID) and Misr Pharma to investors through the EGX within six months. It is noted that no strategic investors are currently interested. (Enterprise)
Oman’s sovereign fund interested in investing in Egypt
Oman Investment Authority (OIA) is reportedly looking for investment opportunities in Egypt’s energy, healthcare, technology, food & beverages, and logistics sectors. The deals should start by H1 2023 if the negations succeed. (Economy plus)
CORPORATE
Palm Hills Developments concluded a bond securitization worth EGP638mn
Palm Hills Developments [PHDC], in cooperation with EFG Hermes Holding [HRHO], concluded a bond securitization worth EGP638mn. The securitization structure is as follows:
Tranche A: Valued at EGP105.27mn with a tenor of 13 months and a credit rating of AA+.
Tranche B: Valued at EGP232.87mn with a tenor of 36 months and a credit rating of AA.
Tranche C: Valued at EGP299.86mn with a tenor of 84 months and a credit rating of A.
Talaat Moustafa Group’s preliminary 2022: A 25% increase in bottom line profits
Talaat Moustafa Group Holding’s [TMGH] consolidated preliminary net income came in at EGP2.23bn (+25% y/y) on revenues of EGP19.9bn (+29.5% y/y), while GPM decreased by 1pp y/y to 31.5%. (Company disclosure)
CIRA Education to increase its prices
The EGP devaluation has pushed CIRA Education's [CIRA] costs higher by c.25%; however, CIRA will increase its enrollment prices only by 10% this year and the next year. According to plans, CIRA should have four universities by 2025, one of which should be operational by September 2023 while the second should be operational by 2024-2025. (Zawya)
Egyptians Housing & Development’s 2022: Post-merger revenues grew
Egyptians Housing & Development’s [EHDR] 2022 results showed a net income of EGP16.6mn (-38.5% y/y) despite higher revenues of EGP59.4mn (+345% y/y) as the comparable year included gains from sale of investments amounting to EGP28.1mn. GPM came in at 48.1% (-7.3pp y/y). We note that the 2022 financials reflect the effect of the merger between EHDR and Emerald Real Estate Investment, Edge Development & Project Management, Odin Investment & Development, and Odin for Investment & Real Estate Marketing. (Company disclosure)
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