KUALA LUMPUR: Once all but written off, Sapura Energy Bhd seems to be doing something right.
A year ago, the thought of the oil and gas (O&G) service provider turning a profit was unimaginable.
If its first quarter (Q1) 2022 results are anything to go by, Sapura Energy seems to be turning a corner.
It returned to the black Q1 ended April 30, 2022 with a net profit of RM91.93 million from a net loss of RM97.07 million a year ago.
Improving Prospect
Bankers acknowledged that Sapura Energy's cash flow was improving thanks to clients who still trusted it despite its financial condition.
In the past six months, the company announced contract wins worth more than RM3 billion, including renewals from repeat clients.
They included contract extensions for pipe-laying vessels from Petrobras in Brazil, long-term contract for drilling services from PTTEP Thailand, an award for transportation and installation from Hess in Malaysia; and several other wins in Gulf of Mexico and West Africa.
It also undertook the sale of its Sapura 3000 vessel to improve cash position.
According to banking sources, Sapura Energy no longer had access to working capital from its banks.
Despite this, industry observers indicated that Sapura Energy's debt restructuring seemed to be making some progress, and the recent news that Corporate Debt Restructuring Committee had given its nod to mediate the company's debt revamp could only strengthen its turnaround efforts.
Setting Right Course
So, it appeared the current management team was doing everything it could to set the course right, an O&G expert said.
"If that is indeed the case, it then begs the question: why are there rumours swirling that the company is forced to sell almost all of its assets and businesses?" he asked.
According to banking sources, foreign advisors representing the banks that provided the multi-currency facility (MCF) to Sapura Energy were, to put it crudely, keen to sell the company for parts, killing the potential of a Malaysian entity that continued to do well globally.
The MCF currently stands at a combined value of about RM10.3 billion.
"What is the motivation for wanting Sapura Energy to be carved out, since it has made enormous progress to date as a group? Are there vested interests? Are there buyers already lined up?" the expert asked, again.
"Whatever the reason, it seems a shame to sink a viable ship," he said.
Delay in Restructuring?
Local senior bankers expressed worry that Sapura Energy was taking a little too long to progress its restructuring plan and the management had been reticent in the meantime.
Indeed, Sapura Energy has not been actively engaging with the media or stakeholders, even when there is public outcry over the call for its bailout.
There are also questions about the effectiveness of the company's restructuring advisors, some of whom, according to industry sources, had been replaced since the beginning of the year.
According to reports, Sapura Energy had already paid the banks over RM17 billion in principal repayments, interest and fees, over the last eight years.
Financial analysts indicated that Sapura Energy was paying the MCF banks close to half a billion per year in interest alone until 2027.
Sapura Energy also owes its more than 3,000 vendors around RM1.5 billion.
Given the number of SMEs that relied on Sapura Energy, it was crucial now more than ever that Sapura Energy continued to improve on its prospects so that these vendors did not suffer, industry observers said.
They added that Sapura Energy remained a major competitor in the global O&G services sector.
According to its annual reports, Sapura Energy owns the largest fleet of tender assist drilling rigs in the world and operates a large fleet of offshore vessels for transportation and installation.
It holds about one-third of the market share in Malaysia for offshore major maintenance including platforms and subsea facilities.