KUALA LUMPUR: Sapura Energy Bhd will divest of some of its assets as early as next month to help resolve some of its immediate liquidity needs.

       This confirms a StarBiz report in September that the group was in talks with several oil and gas (O&G) service providers for the sale of its assets.

       “We are divesting some assets. The divestment process is progressing well, we are very focused on bringing in the right amount of value for the assets that we put out there,” group chief executive officer Datuk Mohd Anuar Taib said at a briefing yesterday.

       “We are quite confident that we would be able to make some announcement about the assets that would have gone through this process in the next month or so and this would actually help us bring some liquidity into the group,” Anuar added.

       He said the assets that the group planned to divest would be the redundant ones as it is changing its business focus.

       “We are going to look at focus areas that we would like to move on with. The assets that do not fit those (criteria) will be put to divestment. And these divestment (talks) have been progressing well. When the time comes, we will announce it,” Anuar said.

       Sapura Energy said in a statement earlier this month that it is facing short-term cashflow and liquidity issues.

       “We would like to reiterate that Sapura Energy is still a going concern. The group has taken and will continue to take decisive actions to resolve the current liquidity issue, including expediting claims and commercial settlements with clients; discussing with vendors, and negotiating with lenders for support through existing working capital facilities,” it said earlier.

       Bernama recently quoted a global energy news portal as saying that cash-strapped Sapura Energy appeared to have been dealt with a blow by failing to qualify for Petroliam Nasional Bhd’s prized Kasawari phase two front-end engineering and design contract.

       Looking forward, Anuar said the group continued to be in negotiations with its clients on key projects – especially those that have been impacted significantly by the Covid-19 pandemic.

       “We are divesting some assets. The divestment process is progressing well, we are very focused on bringing in the right amount of value for the assets that we put out there,” group chief executive officer Datuk Mohd Anuar Taib said at a briefing yesterday.

       “We are drawing up a reset plan – where we will be restructuring our capital – the change of capital structure with a focus on how to deliver in the engineering and construction business.

       “We are also looking at how we can bring this company forward, looking at opportunities in the renewable energy space, engineering and construction as well as capitalising on our geographical focus,” he said.

       It will be working with its lenders and shareholders to draw this plan up, he added.

       Anuar also noted that both the group and industry continues to be in a challenging position despite the recent recovery in crude oil prices.

       “Apart from Covid-19, there is a shift in capital expenditure – especially from the international O&G majors – from oil and gas into renewables.

       “These adds to the future uncertainties of the business. We are working towards addressing these future uncertainties,” he said.

       On its recently released financial results for the third quarter ended Oct 31, he said the quarter had been challenged on various fronts.

       The third quarter saw the group’s net loss narrowing to RM669mil from RM1.52bil in the second quarter.

       Revenue in the third quarter had also doubled quarter-on-quarter (q-o-q) to RM1.46bil from RM747mil in the second quarter.

       In its note yesterday, AmInvestment Bank Research had downgraded Sapura Energy to a “sell” from “hold” with a lower fair value of three sen from 11 sen per share, which is pegged to a 50% discount to its revised financial year 2022 (FY22) forecast net tangible assets (NTA) of seven sen per share.

       “The FY22 forecast NTA discount reflects our sharply deteriorated loss forecasts, up by 79% to RM3.1bil for the forecast FY22 and 22 times to RM1.6bil for the forecast FY23, due to lower engineering and construction (E&C) progress and cost provisions for E&C and drilling divisions.

       “Together with liquidity issues arising from its vendors’ tighter credit policies, the operational landscape for Sapura Energy remains bleak on uncertain delivery and margin prospects over the next two quarters,” the research house added.

       AmInvestment Bank Research said while the group’s short-term debt of RM7bil will be reclassified to long-term debt after receiving banks’ waiver from a breach of covenant terms for RM10bil debt, this issue could persist over the next few quarters.

       It noted that Sapura Energy is expected to register negative earnings before interest, taxes, depreciation and amortisation (Ebitda) for the next two years.

       Sapura Energy chief financial officer Andy Chew said despite the improvement in revenue, the group’s performance continued to be impacted by Covid-19.

       He said the direct Covid-19 costing in the quarter is about RM131mil due to the disruptions brought about in project execution.

       “There are additional costs as well for us to execute the projects. As a result, this had impacted our Ebitda in the quarter, which resulted in us registering a -RM244mil of Ebitda for the quarter compared to -RM1.17bil in the second quarter.

       “As a result, our Ebitda margins are negative. Moving forward, we hope to better mitigate the risks brought about by the pandemic, hopefully by the time we finish off the legacy contracts when we start to execute our new contracts,” Chew added.