KUALA LUMPUR: Sapura Energy Bhd sees good chances for its engineering and construction (E&C), drilling, as well as exploration and production (E&P) businesses to be profitable in the next 12 months due to opportunities that will drive the utilisation of its assets.
President and group CEO Tan Sri Shahril Shamsuddin (pix) said it is confident that at least two of the three businesses, including E&P, will be profitable this year.
“We’re still under-utilised so we need to push utilisation in the rigs (drilling) and E&C. We should be able to show progress this year and even more next year,” he told a press conference after the group’s AGM here today.
According to its financial statement for the financial year ended Jan 31, 2019 (FY19), the E&P segment recorded a pre-tax profit of RM88.6 million, including a gain on disposal.
The E&C segment recorded a pre-tax loss of RM120.5 million after impairments and excluding provisions, while the drilling segment recorded a pre-tax loss of RM213.2 million, after impairments and excluding a provision.
In the first quarter of FY20, E&P recorded a pre-tax loss of RM7.5 million, while E&C’s pre-tax profit stood at RM48.0 million and drilling saw a pre-tax loss of RM51.0 million.
“We’ll do it (turn around at group pre-tax level) when our utilisation crosses 70% both for drilling and E&C businesses.”
For E&P, Shahril said it is on track to producing its first gas in SK408 (Gorek, Larak and Bakong fields in offshore Sarawak) before year-end.
Shahril said this is the company’s focus in the short term and as production ramps up, this is where the value driver is the biggest. It also has exploration assets in New Zealand, Mexico and Australia.
In drilling, Shahril said its rigs are at 50% utilisation and he sees it moving to 70% quickly.
“In the next 12 months, we see more rigs being deployed and this is encouraging for our rig business. E&C in the next 12 months will continue to book in more contracts and start to implement the projects that they started beginning of the year which will also ramp up utilisation.”
Sapura Energy’s order book stands at RM17.3 billion, comprising Asia (RM9.6 billion), the US (RM6.6 billion), Europe, the Middle East & Africa (RM800 million) and Australia (RM300 million). Its tender book is worth US$6.8 billion (RM28 billion) of which over 50% is in Africa and the Middle East.
Shahril said margin is going to be similar and in the same range compared with its peers in the business.
“We’ve gone through three years of conditioning from our clients that have been pressing down the margin and price and they’re not going to let it go easily until assets are being soaked up, only then we will see the movement in margins move up.”
Shahril expects crude oil price to sustain at the US$60-65 a barrel level for the next two years on the back of global growth and strong shale which will provide opportunities for contracts.
“I believe we’re at where oil price is going to be for a while. US$60-65 is the window that is going to hover around for the next couple of years, but it is enough with the stability of oil for oil companies to approve their development programmes. We’re seeing that in the number of bids that we’ve been invited to go to,” explained Shahril.
He added should the oil price fall below the US$60 a barrel level for a long time, there will be less opportunities for contracts.
Meanwhile, Shahril said it will continue to develop its services in the renewable energy ssector and continue to form partnerships to build wind farms after securing its first offshore wind farm contract in Taiwan recently. It has submitted a tender in Europe worth €120 million (RM554 million) for the installation of wind farms and will tender for another job there.
He said the contribution from RE will be significant in the future and if successful, will make up around 10-15% of its revenue in two to three years.
“We can use existing assets which will drive utilisation. We will see more and more wind farms be deployed so this is going to be encouraging for us,” said Shahril.
