Financially beleaguered Sapura Energy is battling hard to retain its status as a top flight Malaysian contractor to the oil and gas sector but the company admits to facing challenges in rebuilding its order book.
Sapura said that is facing a “drawback” in efforts to rebuild its order book, given the limited access to bank guarantees and working capital facilities during its restructuring phase, which is particularly impacting on the engineering and construction, and operation and maintenance business segments.
“As part of its efforts to improve overall cash flow, Sapura Energy is committed to continuing its review of underperforming contracts as well as renegotiating commercial settlements with customers,” the company said.
While its E&C and O&M business segments might be struggling, Sapura’s drilling arm recorded strong growth in the third quarter with 10 of its 11 rigs fully operational as of 30 September.
Sapura’s group order book currently stands at approximately 6.8 billion ringgit ($1.43 billion).
Sapura posted a 10 million ringgit after-tax profit for the third quarter of 2022 on revenues of 1.28 billion ringgit, while earnings before interest, taxes, depreciation and amortisation for the three months ended 30 September was 246 million ringgit.
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There is now some light at the end of the tunnel for the cash-strapped contractor which had made respective losses after tax and minority interests of 3 million ringgit and 669 million ringgit in the second quarter of 2022 and the third quarter of 2021.
Third quarter 2022 revenues improved 8.7% over the previous three months, mainly due to the progress of ongoing projects, which contributed 198 million ringgit, plus a termination settlement of 65 million ringgit.
“While there is still much more to do, we are pleased to record another quarter of improved results as we continue the momentum and press ahead with the implementation of our ‘Reset Plan’,” said Sapura chief executive Anuar Taib.
Sapura in late September submitted a draft proposed restructuring scheme (PRS) to Malaysia’s Corporate Debt Restructuring Committee (CDRC), which had agreed to assist in mediating its debt restructuring with lenders.
Since then, Sapura has been participating in CDRC-mediated meetings with financial institutions to seek feedback on and to refine the terms of the PRS.
The draft proposal will form part of Sapura’s overall restructuring and regularisation plan that, once finalised. will be submitted to Bursa Malaysia (the Malaysia Stock Exchange).
Pivotal importance of addressing unsustainable debt
“Our priorities are clear. We are focused on improving the group’s cashflow and Ebitda, as well as strengthening our risk management and operations for long-term sustainability,” added Anuar.
“At the same time, we are fully cognisant of the pivotal importance of addressing our unsustainable debt, which we will continue to make every effort to resolve with all relevant stakeholders.”
In line with portfolio rationalisation as part of its corporate restructuring, Sapura recently disposed of three drilling rigs to NKD Maritime.
Sapura’s cumulative revenues for the first nine months of this year were 3.3 billion ringgit while its cumulative profit after tax and minority interests for the period stood at 100 million ringgit.
Both the company’s O&M and drilling business segments registered positive Ebitda margins – 23% and 42% respectively for this period.
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