not vested
SapKen not affected by Brazil’s falling real
PETALING JAYA: SapuraKencana Petroleum Bhd (SapKen) is not affected by the politial developments in Brazil, that has caused the currency and capital markets in that country to take a beating, according to an analyst.
The analyst said that under the terms of the contract, SapKen was paid in US dollars for services it provided, something that insulated the company from the volatilty of the Brazilian real.
“SapKen is paid in US dollars. Also any cost incurred in local currency will become cheaper for the company. It is well insulated from the problems in Brazil,” said the analyst.
“The company’s operations in Brazil are based on long-term contracts that have already been locked in on US dollar terms. This means the recent decline of Brazil’s real against the US dollar has no implications on SapKen’s earnings.”
It was reported two days ago that SapKen, which has come under selling pressure amidst falling oil prices in recent weeks, saw its problems compounded by the political climate in Brazil.
Some 49% of its orderbook of RM26.8bil is related to work in Brazil, where the currency fell to a nine-year low against the US dollar following investors reacting negatively towards the re-election of President Dilma Roussef.
Yesterday, shares of SapKen have risen in tandem with the slight recovery of global oil prices.
The shares of oil and gas services provider gained four sen, or 1.18%, to close at RM3.43 yesterday.
Volume was moderate with 13.1 million shares changing hands.
Analysts said that the movement of SapKen’s shares indicated that the recent poor sentiment towards the counter was linked to volatility in global oil prices rather than the company’s exposure to Brazil.
Brent was traded at around US$86.50 a barrel yesterday, while US crude was traded at US$81.88 a barrel, both rising by 46 US cents.
Sentiment towards the oil and gas sector has turned negative in recent weeks on the back of high supply amid slowing global growth, which could affect demand for the commodity.
Most international agencies have already cut their forecasts for oil prices.
The latest was Goldman Sachs, which recently reduced its oil price forecast for Brent to US$85 a barrel and US crude to US$75 a barrel in the first quarter of 2015, both down US$15 from its earlier forecasts.
Source: The Star