Analysts: Sapura Energy’s financial performance likely to improve next year
PETALING JAYA: Oil and gas services firm Sapura Energy Bhd’s financial performance could likely be on the mend after falling into the red in the financial year ended Jan 31, 2018 (FY18), according to analysts.
MIDF Research said in a report that the company’s earnings could improve, as the research house did not expect any major impairment to take place in FY19.
The company’s net loss in the final quarter of FY18 ballooned to RM2.29bil due to high impairments, pushing its full-year results into the red.
“Despite the massive reported losses, mainly from the drilling rig segment, we do not expect further impairments of such scale in the future. For FY19, we are expecting the group to return to the black.
“The chunk of the group earnings will stem from the upbeat offshore activity levels of the engineering and construction (E&C) segment and sustainably higher crude oil prices of the exploration and production (E&P) segment,” said MIDF Research, reiterating its “trading buy” call with an unchanged target price of RM1.01 per share.
The research house added that Sapura Energy’s normalised loss after tax and minority interest in FY18 stood at RM243mil, well within its and consensus expectations on full-year FY18 losses.
Meanwhile, Kenanga Research projects Sapura Energy’s E&C services to lead the company’s recovery, going forward.
The research house also said the company’s tenders have doubled up to US$13bil since FY17.
“Its latest order-book position has marked the first year of improvement to RM16.6bil after three years of decline from FY15. Meanwhile, the SK408 project development (Gorek, Bakong and Larak) is on track for first gas in FY20 to FY21.
“Sapura Energy will internally fund the SK408 development, which amounts to a capital expenditure of US$200mil for the next three years. Proceeds from the monetisation of the E&P reserves will be used to repay its borrowings,” it said.
Kenanga Research has maintained an “outperform” call on Sapura Energy, with a lower target price of 77 sen.
Separately, in a filing with Bursa Malaysia, Sapura Energy announced that its wholly owned subsidiary, Sapura Exploration & Production Sdn Bhd, and its two joint venture (JV) partners had been awarded Block 30 in Sureste Basin, a proven and prolific hydrocarbon province in the Gulf of Mexico.
It pointed out that Block 30 was the most contested block in Mexico.
Sapura Exploration & Production and its partners, DEA Deutsche Erdoel Mexico and Premier Oil, have equity interests of 30%, 40% and 30%, respectively, in the consortium. Sapura Energy was up by 0.5 sen or 1% as trade closed yesterday, with 137.64 million shares changing hands.