PETALING JAYA: The latest contract win amounting to RM611mil by Sapura Energy Bhd
is positive news at a time when jobs are scarce in the oil and gas (O&G) sector.
However, the immediate challenge is the RM10bil debt which needs to be refinanced with 14 banks by next month, according to AmInvestment Bank.
This could mean “additional equity-raising exercise in the pipeline that will translate to massive dilution given the current low share price”, said the research firm in a report.
Shares of Sapura Energy closed at 12 sen yesterday, up 0.5 sen.
On Monday, Sapura Energy said it was awarded three contracts worth RM611mil, comprising two engineering and construction (E&C) jobs in Qatar, Malaysia and Thailand, and a drilling contract in Congo.
Collectively, the contracts marked the third contract award in financial year (FY) 2021, bringing year-to-date wins to about RM2.2bil with an order book estimated at RM13bil. Despite this, analysts are still cautious on the group because of its highly-geared balance sheet, and sustainability of its earnings given the current industry climate.
AmInvestment Bank, which has a “sell” call on the stock, said going by Sapura Energy’s quarterly depletion rate of RM1.2bil to RM1.3bil, it did not expect the new contracts to reverse the declining outstanding order book trajectory that had led to a 5% quarter-on-quarter contraction to RM13.3bil in 2QFY21.
“Although the group is bidding for RM29.4bil of new jobs with additional prospective projects of RM63bil, clients could defer the awards until next year amid the uncertain oil price outlook, ” it said.
Amid sluggish project rollouts, the research firm believed that the group could still experience potential losses and asset impairments in the upcoming quarters.
On a brighter note, Sapura Energy appears to be making inroads in the Middle East as the E&C contract award in Qatar marked its third major contract there, pointed out Kenanga Research.
Meanwhile, the E&C award from Carigali-PTTEPI Operating Company marked the group’s second contract win from the same project, after securing one earlier in the year. This potentially reflects the client’s satisfaction in Sapura Energy’s job delivery capabilities, it said.
That said, Kenanga expected the new contracts “to fetch operating margins within the low-teens”.
The research firm also has an “underperform” call on the stock. This followed the likelihood of more impairments, while the successful materialisation of the group’s bid book into order book remained uncertain.
As for its debt issue, Kenanga said the group was seeking a refinancing to lengthen its average debt maturity profile by year-end.