not vested
Dec 30, 2017
Sapura Energy Bhd
Just as the global oil and gas (O&G) industry is gradually recovering, Sapura Energy Bhd’s dismal earnings this year has indeed surprised many in the market.
In the first nine months of its financial year 2018 (FY18), the integrated O&G services company continued to be in the red for the second consecutive quarter, with a net loss of RM1.4mil.
According to CIMB Research, Sapura Energy’s core net loss was almost four times higher than its previous loss forecast.
Precipitated by the uninspiring results, the share price has fallen to a three-year low currently. In fact, the stock has tumbled by nearly 66% from its year-to-date high of RM2.08 in April 11.
In its heyday prior to the oil price plunge, Sapura Energy, formerly known as SapuraKencana Petroleum Bhd, was Asia’s largest provider of O&G services by market capitalisation.
The company was worth RM30bil then but is now reduced to a market capitalisation of RM4.25bil.
What has gone wrong for the country’s largest O&G service provider?
The group’s two core operations – engineering and construction as well as drilling – have been suffering significant losses, while even the exploration and production division, which should have fared better in a higher crude oil price environment, registered a sharp drop in earnings.
UOB Kay Hian in a report points out that Sapura Energy’s low utilisation of rigs is a concern.
“Although the company is actively pursuing contracts, the likelihood of near-term contract win is unclear and unlikely in the immediate term, even though there is demand for 14 tender rigs up to 2020,” it says.
Moving forward, as Sapura Energy tries to return into profitability, cashflow is an important condition for the company in these trying times.
As no immediate lumpy loan repayments are needed and capital expenditure plans are already budgeted for, the group should be able to navigate through the currently-challenging environment.
Sapura Energy believes profits will recover in time and that its current performance is rather temporary.
For this to happen, the group needs to see a recovery in contract wins and a higher-than-expected drilling rig utilisation.
Source: The Star
https://www.thestar.com.my/business/bus ... s6RAIJ3.99