KUCHING: Despite Sapura Energy Bhd’s (Sapura Energy) softer financial year 2018 (FY18) performance, some analysts expect the group to return to the black for financial year 2019 forecast (FY19F) while others expect this to happen in FY20.
As per Sapura Energy’s filing on Bursa Malaysia, the group had recorded a loss after taxation of RM2.5 billion for the 12 months ended January 31, 2018.
Despite the reported losses, mainly from the drilling rigs segment, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) did not expect further impairments of such scale in the foreseeable future.
“For FY19F, we are expecting the group to return to the black,” MIDF Research said.
“The chunk of the group earnings will stem from the upbeat offshore activity levels of the engineering and construction (E&C) segment and sustainably higher crude oil prices of the exploration and production (E&P) segment.”
Meanwhile, AmInvestment Bank Bhd (AmInvestment Bank) cut FY19F loss for Sapura Energy by 70 per cent and reversed its FY18F loss to a net profit of RM118 million.
This resulted from a 12 per cent to 13 per cent reduction in the research firm’s depreciation assumptions due to the substantive asset impairments and US$5 per barrel increase in crude oil prices for FY19F-FY20F and five per cent increase in production for FY19F and flat for FY20F with the commencement of SK310 B15 field late last year.
AmInvestment Bank also introduced FY21F earnings surge of 2.9-fold, driven by higher asset utilisation rate assumptions for both E&C and drilling while the production levels of the E&P division will more than double from the commencement of the Larak and Bakong fields in SK408.
Similarly, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) narrowed FY19E losses for the group by 47 per cent to RM204.4 million.
This was assuming higher order-book replenishment of RM5.5 billion from RM4.5 billion previously in view of better contract flows and lower depreciation post asset impairment.
“Meanwhile, we expect Sapura Energy to return to the black in FY20 with RM51.6 million profit assuming RM6 billion order-book replenishment and 50 per cent utilisation for the drilling segment,” Kenanga Research said.
According to MIDF Research, year to date (YTD), Sapura Energy’s share price has declined by approximately 25 per cent.
“This is despite stable crude oil prices in the tight range of US$60 to US$70 per barrel,” the research arm said.
MIDF Research was of the opinion that the current broad-market sell off presents trading opportunities for investors seeking exposure in oil and gas service providers with direct upstream exposure.
Although MIDF Research acknowledged that Sapura Energy’s profitability might still be weak due to the group’s other underperforming segment, the research arm believed that the share offers short term trading opportunities for investors.