Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on July 19, 2019

KUALA LUMPUR: The stable crude oil prices are a boon to Sapura Energy Bhd which sees business activity in the next 12 months to be “encouraging”, as the oil and gas (O&G) support services provider has seen a lot of opportunities to drive profitability and asset utilisation.

Sapura Energy president and group chief executive officer Tan Sri Shahril Shamsuddin said its current order book of RM17.3 billion is at its highest in two years as Brent crude oil trades above US$60 (RM246.60) a barrel.

He said Sapura Energy expects Brent to be at between US$60 and US$65 a barrel in the next two years, which is positive for the company’s prospects.

“We are targeting to have at least another RM3 billion for the order book [for this year]. We will be comfortable to be at RM21 billion to RM22 billion, so we need to work a lot harder,” he said at a press conference after Sapura Energy’s annual general meeting yesterday.

Prior to this, its order book hit RM21.3 billion for the financial year ended Jan 31, 2016 (FY16), and it declined in FY17 (RM16.7 billion) and FY18 (RM14.9 billion) before  rebounding to RM17.2 billion in FY19.

“I believe oil prices will be around US$60 to US$65 per barrel in the next couple of years. But it is enough for the sustainability for oil companies to approve their development programmes. Actually, we are seeing that (increase in business activities) in the number of bids that we have been invited to go into,” Shahril said.

As such, he said there is a good chance for its engineering and construction, drilling, and exploration and production (E&P) businesses, to be profitable in the next 12 months.

Meanwhile, Shahril also said venturing into the wind farm business will also improve the utilisation of its assets as its vessels can also be used in renewable energy business other than the O&G segment.

“The potential [of the wind farm] will be significant. If we are successful, it will be [contributing] 10%-15% of our business [in terms of top line],” he said.

The company is also looking to expand its service for renewable energy business into the European market — after successfully clinching its first wind farm contract in Taiwan June this year — as the company is bidding one wind farm contract in Europe worth €120 million (about RM550 million).

In June, Sapura Energy announced its maiden award for the installation of an offshore wind farm. The wind farm contract was awarded to its unit Sapura Offshore Sdn Bhd by Yunneng Wind Power Co Ltd, and is for the provision of transportation and installation of substructures (foundations) for offshore wind turbines at the Yunlin Offshore Wind Farm in Taiwan.

Overall, the company is tendering for projects across its businesses worth US$6.8 billion (RM28 billion), and is expecting a success rate of between 15% and 20%.

For the full financial year ended Jan 31, 2019 (FY19), the gain on asset sale allowed the group to post a net profit of RM207.55 million against a net loss of RM2.5 billion in FY18.

The group’s yearly revenue decreased 9.55% year-on-year to RM4.57 billion, due to lower revenue from the engineering & construction and drilling business segments.

Asked if the company needs another cash call after raising funds from the rights issue and the sale of a 50% stake in its E&P business, Sharil said: “We are comfortable with our gearing level of 0.66 times, compared to peers and other players; we are in a very good position in terms of [debt-]to-equity ratio.”

In January, Sapura Energy announced it had successfully raised about RM4 billion from its rights issue exercise. On completion of this cash call, Sapura Energy said Permodalan Nasional Bhd (PNB) has emerged as its single largest shareholder with a 40% stake, while Sapura Technology Sdn Bhd — controlled by Shahril — is now its second-largest shareholder with a 16.3% stake. Sharil said there will be some changes in the boardroom, with two people from PNB to be introduced into the board. But he sees this is a positive move, citing PNB is one of the largest fund management companies in the region.

Prior to this, Sapura Energy had appointed Datin Paduka Kartini Abdul Manaf as non-independent and non-executive director on April 24.

Shares in Sapura Energy closed half a sen or 1.64% lower at 30 sen yesterday, with 35.26 million shares done, bringing it a market capitalisation of RM4.78 billion.

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