Sapura Energy in dire straits, PNB must now answer to investors

KUALA LUMPUR March 21 - For the past two weeks, the oil and gas sector in the country never had it so good.

From Petronas to Barakah Offshore Berhad and Saudi Arabia's Aramco, the sector is reaping the fruits of their labour and patience raking billions of dollars in petrodollars.

This is no thanks to Russia's invasion of Ukraine which saw oil prices surged to as high as US$120 per barrel, it's highest from US$20 per barrel in 2014.

However, amid the euphoria, one oil and gas giant is bucking the trend  to record a gargantuan loss.

Sapura Energy Berhad net loss for the financial year ended January 2022  widened to RM8.9 billion from RM160.87 million a year ago.

Revenue declined to RM4.13 billion rom RM5.35 billion previously.

Sapura Energy told Bursa Malaysia last week, the losses is due to the lower percentage of completion recognised in the current year, resulting from recognition of foreseeable losses and higher project costs in the engineering and construction (E&C) business segment.

Sapura also announced last week that three more of its subsidiaries have been served with winding-up petitions on March 7 and 9, due to non-payment of outstanding sums.

RELATED : Should PNB give Sapura more loans

How did it come to this?

How can one of the country's top oil and gas companies which aspires to be among the world's top five giants succumb to such sheer financial pressure?

In 2018, Sapura took a massive RM2 billion loan from Permodalan Nasiomal Bhd (PNB) via a fundraising exercise to help the company navigate through the extremely challenging oil and gas landscape at the time.

In 2018, oil prices were stable trading at between US$60-US$70 per barrel.

Sapura however never really recovered from the weak oil prices circa 2014 when black gold dived as low as US$20 per barrel.

The company is still grappling with cash flow problems and had problems managing its expansive operations.

The oil prices continued to be challenging between 2014 and 2021 and did not breach US$ 100 only until recently.

This is why Sapura is suffering immense losses right now and at the same time, it has to service it's loan to PNB.

Oil prices only surged to US$130 two weeks ago when Russia invaded Ukraine thus Sapura effectively missed the boat.

However, Sapura had made impairments as much as RM5 billion to cover for it's RM6 billion loss.

The question now is what would PNB, which owns 40 percent of Sapura do about this whole situation.

PNB assured investors last week that the situation at Sapura is not alarming as it affects less than 1 percent of PNB's asset under management of some RM370 billion.

PNB betted wrongly on Sapura and it must now answer to investors.

As for Sapura, the situation is still unfolding as the company continues to grapple with cashflow problems.

More and more development is unfolding at the company as it continues to divest its assets.

Sapura president Datuk Mohd Anuar Taib who took over the company in March from Tan Sri Shahril Shamsuddin said it aptly : it is not about winning bids but mitigating risks and making profit.

Maybe Sapura just won too many bids in the past and is now unable to handle it.  - DagangNews.com