Analysts expect smaller Sapura Energy net loss

KUALA LUMPUR: Integrated oil and gas player Sapura Energy Bhd, which has been registering losses for the past few years, is expected to have narrowed its net loss in the fourth quarter, supported by newly-secured contracts and recovering crude oil prices.

Sapura Energy is expected to announce its financial performance in the next few weeks.

The firm narrowed its net loss to RM31 million in the third quarter ended October 31, 2018 from RM274.4 million loss in the same quarter the previous year.

Analysts said Sapura Energy’s outlook was bright, backed by its RM16 billion order book and crude oil price that was expected to reach US$70 (RM286) a barrel in the next few months.

AllianceDBS Research analyst Inani Rozidin believes that Sapura’s core loss will narrow towards the second half of this year due to the realisation of new engineering and construction contract wins as well as higher Brent price.

Sapura Energy is also expected to make improvements in the drilling segment. This would help the company turn around next year, she said in a research note.

She said Sapura Energy’s longterm outlook remained strong and gave the stock a “buy” call.

AllianceDBS expects Sapura Energy to be profitable by next year.

Public Investment Bank Bhd analyst Nurzulaikha Azali said the research house was positive on Sapura Energy on back of its RM3 billion contract with India’s Oil and Natural Gas Corp Ltd.

“After imputing the debt repayment and factoring in the enlarged share base, our rating on Sapura Energy is raised to ‘outperform’ as we believe the group is in a positive transition towards improving its financial health.”

She said the investment bank had revised Sapura Energy’s 2020 and 2021 forecasts higher.

“We are expecting the group to record better profit next year and 2021, estimated at RM103 million and RM279.6 million, respectively.”