KUALA LUMPUR (Dec 13): Sapura Energy Bhd narrowed its net loss by 56% to RM669.34 million for the third quarter ended Oct 31, 2021 (3QFY22), from RM1.52 billion in the previous quarter of 2QFY22, as 2QFY22 saw higher project costs recognised for certain projects and a provision for foreseeable losses.

Its revenue jumped about 94% to RM1.46 billion from RM747.1 million quarter-on-quarter, on higher completion of its projects recognised in the reporting quarter, it said in a bourse filing.

But compared to its year-ago corresponding quarter of 3QFY21, the group, which has been loss-making since 4QFY21, sank into a net loss compared to a net profit of RM17.21 million previously, despite an almost 10% revenue improvement from RM1.33 billion, as three of four of its business segments reported losses, while its only profitable segment saw earnings halved.

"The group recorded a loss before taxation of RM649.2 million in the current quarter, compared to a profit before taxation of RM59.0 million in 3QFY21. The decrease is mainly contributed by higher project costs incurred for certain projects and an impairment charged arising from asset held for sale during the current quarter," the group said.  

Notably, its engineering and construction (E&C) segment posted a loss before tax of RM526.79 million compared to a profit before tax of RM36.98 million, while its operations and maintenance (O&C) segment posted a loss of RM1.05 million, from a profit of RM118.91 million previously.

Its drilling segment remained loss-making, albeit at a smaller scale of RM18.94 million compared to RM72.84 million previously, while its exploration and production segment's PBT dropped to RM14.81 million from RM32.76 million.

The group did not declare any dividend for the latest quarter.

For the nine months ended Oct 31, the group sank into a net loss of RM2.28 billion, compared with a net profit of RM55.16 million in the corresponding nine months a year earlier, primarily due to provision for foreseeable losses, higher project costs recognised for certain projects, lower share of profit from associates and joint ventures, and an impairment charge arising from asset held for sale.

Cumulative group revenue fell 6% to RM3.67 billion from RM3.9 billion, primarily due to the lower revenue from its O&M business.

In a statement, the group said pandemic-related costs continue to bear heavily upon the group’s earnings, with Covid-19 direct costs rising to RM131 million in the latest reporting quarter, accounting for more than half of RM242 million spent on the pandemic in the 9MFY22 period.

In contrast, the group incurred RM286 million in Covid-19 direct costs for FY21. The group has spent a total of RM528 million on Covid-19 direct costs since the start of the pandemic.

Such Covid-19 direct costs include vessel standby expenses, as well as testing and quarantine costs for its crew and employees.

Apart from direct costs, the group said the pandemic also resulted in it having to absorb additional expenses due to procurement delays and changes to project schedules.

These consequential costs, which can be between two to four times higher than direct costs, severely eroded the profitability of some projects, it said.

As the pandemic’s retreat still looks uncertain, Sapura Energy expects its current hurdles to continue in the remaining part of the year.

“These additional costs, which remain uncompensated, have adversely impacted the group’s cash flow and liquidity. We continue to engage with clients to expedite our claims and commercial settlements,” said group chief executive Officer Datuk Anuar Taib.

The group is also in negotiations with lenders for support through existing facilities; and has held discussions with vendors regarding its outstanding payments.

Meanwhile, it also updated that despite the difficult operating conditions, Sapura Energy’s services business segments have completed 26 global projects year-to-date, and are currently executing 59 projects, 18 of which commenced in the second half of the year.

Among its ongoing projects include the Integrated Rig, Drilling, and Completion Services Contract for Petroliam Nasional Bhd (Petronas), the Hess North Malay Basin Phase 4A project in Peninsular Malaysia, and the Santos Dorado project, offshore Western Australia.

The order book held by the group’s subsidiaries currently stands at RM7.58 billion, including new wins worth RM1.76 billion, it said, adding that the group is bidding for RM22 billion more worth of projects.

“Our focus is to turnaround and regain strength. We are working to effectively position Sapura Energy for the expected rebound in the Oil & Gas Services and Equipment (OGSE) sector next year,” said Anuar.Sapura Energy closed unchanged at five sen on Monday (Dec 13), valuing the group at RM1.28 billion. Year-to-date, the counter has fallen 61.54%.