This article first appeared in The Edge Financial Daily, on July 27, 2016.

KUALA LUMPUR: SapuraKencana Petroleum Bhd, which achieved a total cost savings of RM500 million in the last two years through its internal transformation, is targeting to save another RM250 million this year to help it stay “positive”, said president and group chief executive officer Tan Sri Shahril Shamsuddin.

“Over the past two years, we've been focusing on taking the cost out and creating synergies. To date, we have already saved some RM500 million in operational costs and we’re targeting to squeeze another RM250 million per year,” he told a news conference after the company's annual general meeting yesterday.

Shahril said the business environment remains “a bit challenging”, but the company will try “very hard to post positive results” for the financial year ending Jan 31, 2017 (FY17) .

“Beyond FY16, we will remain aggressive in rebasing our cost, relentless in our pursuit of higher productivity and leaner operations without compromise on safety and quality. The challenging environment is an impetus for us to transform into a more cost-competitive global market leader,” he added.

SapuraKencana said it is now on a stronger footing, with net gearing reduced to 1.27 times as of April 30 from 1.34 times as of Jan 31, while its cash balance has grown 20% to RM2.34 billion during the same period.

MIDF Research said the company’s fundamentals remain intact.

“With a current cash hoard of around RM2.3 billion and declining debts, SapuraKencana’s balance sheet has shown positive improvements. Moreover, the company has achieved a total cost savings of approximately RM500 million to date (30% cost reduction) by optimising procurement channels, increasing operating efficiencies and right sizing its overhead expenses,” it said in a report yesterday.

For its first financial quarter ended April 30, 2016 (1QFY17), SapuraKencana saw its net profit decline 57.7% to RM110.3 million from RM260.7 million in 1QFY16, primarily due to lower profit from the engineering and construction as well as the energy business segments. Revenue also fell 14% to RM1.94 billion in 1QFY17 from RM2.26 billion in 1QFY16, mainly attributable to lower revenue from the drilling and energy business segments.

SapuraKencana’s current order book stands at about RM20 billion, while its tender book amounts to US$7 billion (RM28.42 billion).

Shahril noted that bids for contracts are “very competitive” in the current environment, adding that securing smaller and short-term contracts is one of the ways the company has been working on.

One of the positive developments that can be seen is the company’s latest contract win worth RM461 million in Mexico. Works in relation to the contract are scheduled to commence this month and run until March 2017.

Shahril also said its Brazil operations continue to report robust performance, with five of its vessels having a utilisation rate of about 98% to 99% and Sapura Rubi — the sixth and final vessel under SapuraKencana’s Brazilian joint venture company, Sapura Navegacao Maritima — was delivered from the Royal IHC Shipyard in Rotterdam, with a contractual start in offshore Brazil in August 2016 for Petroleo Brasileiro SA.