This article first appeared in The Edge Malaysia Weekly on July 5, 2021 - July 11, 2021

More than 90% of Sapura Energy Bhd’s RM10.4 billion debts are long term. But the question remains whether the company, which is substantially owned by Permodalan Nasional Bhd (PNB) and managed by a new team, can sweat its assets fast enough to repay the debts within the next seven years.

Sapura is asset-rich and among the biggest integrated oil and gas engineering companies in the region. It has assets and the track record to win major contracts that are up for grabs in the international market. It also owns producing-gas fields in Malaysia.

But the company is saddled with too many assets at a time when oil and gas majors are tending to reduce spending on hydrocarbon assets. Apart from volatile oil prices, there is a big push by the oil and gas majors to shift towards renewable energy, which means lower allocation of financial resources for the traditional energy sector.

Armed with an order book of RM11 billion and managed by a team that was from Petronas, Sapura intends to pare down its debts by improving its operations. At the helm is a seasoned oil and gas veteran, Datuk Mohd Anuar Taib, who comes with an impressive track record of holding senior positions in Shell Malaysia and Petronas.

Sapura also plans to dispose of its assets to reduce debts. According to a research report, however, the assets have aged and have been cold-stacked for years, which means the company may not realise the full value.

Sapura did not get off to a great start this year, registering a loss in the first quarter, owing mainly to foreign-exchange losses and a one-off fee of RM48 million incurred to restructure the loans from short term to long term.

Considering the huge task ahead, the company cannot afford to continue to be on a losing streak for long.

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