Strategic partnership between Sapura Energy and Austrian OMV lauded
KUALA LUMPUR: Analysts are optimistic on Sapura Energy Bhd (Sapura Energy) divesting its 50 per cent equity stake in Sapura Upstream to Austria-based OMV Aktiengesellschaft (OMV) for an enterprise value ofUS$1.6 billion or about RM6.69 billion.
The group last Friday said it completed the signing with OMV to divest 50 per cent of its upstream assets, for total proceeds of US$890 million, with an additional US$85 million subject to consideration to be satisfied.
Out of the US$890 million, Sapura Energy will utilise US$720 million to repay its existing debt. The upstream assets will be injected into a new JV company which will be equally owned by Sapura Energy and its new partner, OMV.
The deal is expected to be completed by the first quarter of financial year 2019 (1QCY19) 1QCY19, and will see a one-off disposal gain of US$649 million.
Affin Hwang Investment Bank Bhd (AffinHwang Capital) lauded the O&G player for leveraging on Austrian OMV’s regional experience and capabilities.
To note, OMV is one of Austria’s largest listed industrial companies with market capitalisation of 16 billion euros. Its O&G assets exposure are mostly in Romania and Black Sea, Austria, North Sea,
OMV’s assets portfolio currently produced 348,000 bpd in 2017 – which is more than 50 per cent of Petronas production – with proven reserves of 1.15 billion barrels. AffinHwang Capital
Australasia, Russia, Middle East and Africa.
“OMV’s assets portfolio currently produced 348,000 bpd in 2017 – which is more than 50 per cent of Petronas production – with proven reserves of 1.15 billion barrels,” it said in a research note yesterday.
“We raise our FY20-21E earnings forecast by 36 per cent and 42 per cent to reflect the interest cost savings from the expected US$720 million debt repayment post divestment,” it said.
Looking at the new venture’s job division, the team at Am Investment Bank Bhd (AmInvestment) saw that both the special purpose vehicle Sapura-OMV as well as OMV itself will focus on their core geographical regions as they operate in largely exclusive territories, with the exception of Australia and New Zealand.
Sapura Energy and OMV will individually have three board members on Sapura OMV with Sapura holding the chairman and chief executive officer roles, while OMV occupies the deputy chairman and chief financial officer positions.
“Together with the group’s RM4 billion rights issue, we estimate that Sapura’s net profit will surge 2.2 times for FY20F and 46 per cent for FY21F from the substantive cuts in interest costs, partly offset by the upstream earnings deconsolidation,” AMInvestment Bank added.
“Additionally, this will cut the group’s FY20F net gearing from 1.7 times to a comfortable 0.5 times, lower than our earlier estimate of 0.7 times due to the book value boost from the exceptional disposal gain.
Besides an improved balance sheet, AmInvestment Bank remained positive on this mutually beneficial strategic partnership which expands Sapura’s portfolio and facilitate synergies in the upstream value chain through the sharing of technology, development of Sapura’s local talent and risk mitigation in E&P activities while opening up new market opportunities for its engineering & construction services in OMV’s offshore activities globally.
ON this point, MIDF Amanah Investment Bank Bhd (MIDF) was also positive on this disposal as it expect the company’s forward earnings to improve further – in particular from savings in operating expenses.
The company will also benefit from the reduced constrain on its cash attributable to the upstream business.
“Furthermore, we are expecting Sapura Energy’s earnings to gradually improve as the chunk of the group earnings will stem from the upbeat offshore activity levels of the engineering and construction segment and sustainably higher crude oil prices of the exploration and production segment.
“Group orderbook currently stands at RM16.9 billion, marking an inflection from FY18 low for the past four years. Out of these, approximately RM4.3 billion and RM4.6 billion are expected to be recognised in FY19 and FY20 respectively.
“The current contract winsto-date constitutes of about 50 per cent of the past three-year cumulative contracts wins for Sapura Energy. The company’s bidbook is at US$7.4 billion with bid prospects at US$10.8 billion.”