KUALA LUMPUR: Sapura Energy Bhd will be able to ride over the challenging third quarter financial results ended September due to its strong fundamentals, solid order book of RM18.2 billion, rebounding crude oil prices as well as full support of its majority shareholder, Permodalan Nasional Bhd.
Analysts and industry sources said these are challenging times due to the cyclical nature of crude oil, but Sapura Energy is well poised to brush aside headwinds and emerge stronger than before.
The oil and gas giant is expected to announce its third quarter results on Bursa Malaysia tomorrow.
Industry observers say oil and gas industry will be facing a poor financial results in the third quarter of this year mainly due to weak crude oil prices.
But Sapura Energy is the exception as it has strict risk controls and the skills of its management led by its president and chief executive officer Tan Sri Shahril Shamsuddin.
"Shahril has more than 20 years experience in the oil and gas sector and he is experienced enough to turn around the firm. Any financial setbacks in the third quarter results will be temporary," said an analyst at Public Investment Bank Bhd.
MIDF Research oil and gas analyst Noor Athila Razali is forecasting crude oil prices to gradually recover and trade at more than US$70 per barrel next month.
"Demand is expected to be firmer next year and we do not expect the current low oil price environment to persist into 2019," she told NST Business.
Alliance DBS Research analyst Inani Rozidin meanwhile said despite all the gloom and doom, long-term outlook for Sapura remains strong as it has a sturdy order book of RM18 billion.
"The situation will normalise by the third quarter of 2019 and its order book will help the company to turnaround by 2020.
The company's high tenderbook points to a potential recovery and we are optimistic on the company further clinching further sizeable contract wins," Inani told investors in a research note recently, giving the stock a Buy recommendation.
Inani said Sapura's losses will narrow towards the second half of 2019 due to the realisation of new contract wins and higher Brent crude oil prices to support the energy segment and improvements in the utilisation in the drilling segment.
She added Sapura's RM18.2 billion orderbook is also its highest over the last four years and it is currently tendering book is worth RM30.6 billion.
"We are positive on signals that capital expenditure has bottomed out and contract flows are improving flowing into Sapura Energy's order book.
Meanwhile, in its research note recently, Public Invest said Sapura Energy is well shielded against any impediments due to its vigour to lighten its debt burden from RM16.4 billion to RM9.8 billion and lower its gearing level to 0.6 times from 1.7 times currently.
"The management expects this to translate into lower interest cost by RM320 million and Public Invest has raised Sapura Energy's net profit for 2020 to over 10-fold to RM2.46 billion due to interest savings from repayment of debt and gain from a RM2.7 billion disposal.
Most stockbroking houses such as JF Apex Securities, DBS Alliance and Public Invest have also the Sapura stock a Buy call with target prices ranging between RM0.80 sen to RM0.90 sen in the next one year from current levels of RM0.60 sen.
Shareholders can be assured over Sapura Energy's outlook as its prospects are rosy and bright as challenging third quarter results is not expected to sway the company one bit but in turn elevate its resolve to become stronger again.