Sapura Energy’s main net losses in the first quarter masked by foreign exchange gains

Sapura Energy is currently classified as a PN17 company and a regularization plan, based on the group reset plan initiated in December 2021, is being drawn up.

KUCHING (Jun 28): Sapura Energy Bhd (Sapura Energy) reported a net profit of RM91.93 million in the first quarter (1Q) ended April 30, 2022 (FY23) compared to a net loss of RM97.07 million. RM during the same period last year, mainly due to the foreign exchange gain resulting from the appreciation of the US dollar against the ringgit.

In a filing with Bursa Malaysia, the integrated oil and gas services company said its revenue, however, fell 39.7% to RM886.08 million from RM1.47 billion a year ago. .

“The decline in revenue is primarily due to lower project activity in the engineering and construction segment during the current quarter,” the company said.

Sapura Energy said that as part of its holistic restructuring plan – its reset plan – the group has entered into a series of negotiations with customers to find out-of-court solutions to ensure delivery of the project, it said. the company separately in a statement.

Its profit after tax and minority interest (PATAMI) in 1QFY23 was primarily driven by these continued efforts, which resulted in approved trade settlements and favorable foreign exchange gains following the strengthening of the US dollar.

Sapura Energy Group chief executive Datuk Mohd Anuar Taib said the group is seeing the first green shoots of recovery, following the implementation of its reset plan.

“We still have significant hurdles to overcome before we can maintain this encouraging momentum,” he said.

Sapura Energy is currently classified as a PN17 company and a regularization plan, based on the group reset plan initiated in December 2021, is being drawn up.

“Delivering our reset plan becomes more important than ever as it is our pathway to a stable platform for the group, allowing us to exit from PN17 status and grow in the near future,” explained Mohd Anuar. .

Kenanga Investment Bank Bhd (Kenanga Research) noted that Sapura Energy was suffering from unprecedented challenges.

“The stock was recently filed as PN17, with their auditors pointing to significant uncertainty related to its going concern status,” it pointed out in its analysis yesterday.

“The group still carries unsustainable debt of around RM10.7bn – all of which is classified as short-term borrowings on its balance sheet, with the group recently writing off 99% of its book value in FY22. .

“The group continues to find access to credit facilities incredibly difficult given its dire financial situation. As such, it continues its restructuring efforts to stay afloat, which includes renegotiating its old contracts and with lenders on its debts, as well as the implementation of a divestment plan.

On a more positive note, Kenanga Research found that the group had recently successfully drawn down a RM300 million working capital loan, securitized from the proceeds of the sale of its Sapura 3000 asset, which is expected to be completed in July.

This should help alleviate its liquidity issues at least for the next two months.

Meanwhile, RHB Investment Bank Bhd (RHB Research) believed restructuring was the only way forward for Sapura Energy.

“Following the recent contract win of RM2.7 billion, Sapura Energy’s backlog improved by 26% quarter-on-quarter (qoq) to RM8.3 billion. The drilling segment is expected to gradually improve from the eight rigs currently in operation to 10 by the end of FY23.

“Management has indicated that offshore contractors expect better contract terms in upcoming new tenders with better risk proposals than older contracts previously awarded.

“However, it remains cautious in the face of operational challenges such as increasing cost pressure. Overall E&C margins could improve next year with legacy contracts likely to decline significantly.

Given its tight cash flow, Sapura Energy is targeting contracts with relatively lower working capital requirements. For the energy arm, net lift fell 10% year-on-year to 2.7 mboe due to an unscheduled shutdown of the Malaysian liquefied natural gas complex in Bintulu, Sarawak, which is expected to resume operations by August 2022 . »

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