SapuraKencana's rig making facility
KUALA LUMPUR: SapuraKencana Petroleum Bhd (SapKen), which recorded a 7.9% increase in net profit for the second quarter, could see earnings being impacted over the next few quarters dragged down by its engineering and construction (E&C) works and drilling operations.
Maybank IB Research said on Thursday that it expect weaker quarters ahead, mainly on slower E&C works and decelerating prospects at its drilling operations.
“We expect the former to see a 25% year-on-year (y-o-y) fall in workflows with fourth quarter (Q4) expected to be the softest. The latter should see further drop in utilisation. We expect its overall rigs utilisation to fall by 25-ppt y-o-y with eight rigs off-hire by Q4.
“In all, we expect SapKen to fall into the red in the second half. Its net gearing level of 1.7 times as at July 2017 is relatively high vis-à-vis peers but manageable. The company targets to pare down its borrowings by RM1bil in financial year 2017 (FY17),’’ it noted.
The catalyst to SapKen according to the research house is the monetisation of its gas assets. Signing several new, bigger, gas sale agreements (i.e SK408 & SK310 B14 fields) beyond SK310 B15 field over the next 12 months, which would unlock the value of its gas assets, is a re-rating catalyst.
These fields are sizeable, potentially four times of SK310 B15 in reserves, life span and net present value (NPV), the brokerage added, noting that it has yet to impute this into its forecast.
SapKen recorded a 7.9% increase in its net profit to RM112.3mil for the second quarter ended July 31, 2016. This was despite the oil and gas services company’s revenue sliding 40.2% to RM1.7bil from RM2.8bil a year ago.
The higher earnings was due to the higher profit before tax from its energy business segment, whereby it had made provisions for impairment on oil and gas properties of RM539.9mil during the same quarter a year ago.
Its engineering and construction division recorded 51.4% lower revenue of RM796.7mil, in line with lower activities, while profit before tax fell 63.7% to RM120.1mil.
Its drilling segment saw revenue fall by 31.4% to RM537.7mil, mainly due to the lower revenue from certain rigs which were off contract during the quarter, while profit before tax was at RM50.3mil, 77.4% lower than a year ago, due to the lower revenue.
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