This article first appeared in The Edge Malaysia Weekly on July 20, 2020 - July 26, 2020

SAPURA Energy Bhd is understood to be close to securing a pipe laying contract valued between €100 million (RM487.3 million) and €150 million from French oil major ­Total, for work on the Al Khalji subsea project, off the coast of Qatar, sources familiar with the matter tell The Edge.

It is understood that if all the glitches are ironed out, Sapura may make an announcement on the award very soon.

“It’s more or less a done deal. It should go to Sapura unless there are some last-minute changes,” a source familiar with the matter says.

International oil and gas publications had suggested last week that Sapura was the front runner for the job, but stopped short of naming it as the winner.

Sapura president and CEO Tan Sri Shahril Shamsuddin could not be contacted on the matter. Similarly, its corporate communications executives could not be reached.

If secured, this would be Sapura’s second contract in Qatar. Earlier this year, the company completed an engineering, procurement, construction and installation (EPCI) job valued at about US$70 million (RM298.5 million) for North Oil Company, commonly known as NOC. NOC is a joint venture (JV) between Total and Qatar Petroleum and is developing the Al Shaheen field, which is one of the world’s largest oil fields, located offshore northern Qatar.

About 10 years ago, when Sapura was still known as SapuraCrest Petroleum Bhd, it formed a JV — SapuraCrest Qatar LLC — to operate in the oil and gas sector in Qatar. However, a check in Sapura’s annual report for FY2015 shows the company was liquidated.

Importantly, the latest award will nudge Sapura’s contracts secured year to date to above RM1 billion, and help quell the fears of it not being able to replenish its order book. The company’s current order book stands at RM14 billion.

Considering its annual revenue is in the region of RM6 billion, there was some concern over the speed at which Sapura was replenishing its order book. While the company’s bid book is high at RM74 billion, and its hit rate is between 10% and 20%, the Covid-19 outbreak has slowed things down in the industry.

An industry source says that pipe-lay contracts could give Sapura good margins considering the company has its own fleet of pipe lay barges.

For its first financial quarter ended April this year, Sapura chalked up net profits of RM14.2 million from RM1.36 billion in revenue. The company’s earnings received a shot in the arm from foreign exchange gains of RM33.91 million. For the corresponding quarter a year ago, Sapura suffered a net loss of RM109.10 million from RM1.63 billion in revenue.

After 10 quarters in the red, Sapura has accumulated losses of RM4.46 billion, and amassed long-term borrowings of RM7.29 billion, while current liabilities are pegged at RM3.46 billion. In contrast, it had cash and cash equivalents of RM710.97 million as at end-April this year.

Sapura’s finance costs for the three months ended April amounted to RM134.89 million. Nevertheless, the company is in negotiations with banks to refinance its debt by the end of the year, which may give it some breathing space.

After a three-month silence during the Covid-19 pandemic, Sapura seems to be winning jobs again. Last week, the company announced that its associate company, SapuraOMV Upstream Sdn Bhd, with JV partners Mitsui Exploration and Production Australia Pty Ltd and OMV New Zealand Ltd, had made a discovery with a positive result in the Toutouwai-1 exploration well in the Taranaki Basin in New Zealand. The prospect is located 50km off the Taranaki coast in a depth of 130m of water.

“Preliminary results are encouraging. The positive discovery of Toutouwai opens up an exciting opportunity for us,” Sapura said in its release.

In early June, the company announced the award of RM766 million worth of jobs in Malaysia, Brunei, Singapore and Thailand.

The scope of work in Brunei involves a pipeline replacement for Brunei Shell Petroleum Co Sdn Bhd, while in Singapore, Sapura with its partner Dredging International Asia Pacific have been awarded an EPCI contract by Shell Eastern Petroleum (Pte) Ltd. In addition, Chevron Thailand Exploration and Production Ltd awarded Sapura an asset retirement offshore removal contract, or decommissioning works.

In Malaysia, Sapura received an award from Hess Exploration and Production BV under the Umbrella Contract for Pan Malaysia Transportation & Installation of Offshore Facilities.

Other than the above, Sapura also received an award for the provision of EPCI services for the Additional Andalas Pipeline Project at the Malaysia-Thailand Joint Development Area from Carigali-PTTEPI Operating Company Sdn Bhd.

While Sapura has been consistently winning jobs, it has been adversely impacted by the slump in oil prices and was in the red for the 10 quarters prior to the current one.

It closed last Friday at 9.5 sen, giving it a market capitalisation of RM1.52 billion.

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