PETALING JAYA: SAPURA ENERGY BHD, which is saddled with net debt of slightly more than RM15bil, has stepped up plans to reduce its gearing with a proposed disposal of a 50% stake in its oil and gas exploration and production (E&P) arm to Austria’s OMV Aktiengesellschaft (OMV AG).
If everything goes according to plan, Sapura Energy could see its gearing drop to 0.7 times compared to 1.7 times at present.
Analysts generally have a wait-and-see view on the proposed 50% stake disposal of Sapura Upstream Sdn Bhd, pending finalisation and more details on the transaction.
According to an analyst, the completion of the previously-announced proposed rights issue would reduce Sapura Energy’s gearing ratio to about 0.9 times, while the 50% stake sale would shave the gearing ratio down to an estimated 0.7 times.“With a bid book of about US$7.4bil worth of projects, the group is expecting to win large projects going forward.
“This will require it to fork out funds for downpayment,” he said.
Based on Sapura Upstream’s enterprise value of US$1.6bil (RM6.64bil), Sapura Energy could receive an estimated US$0.8bil (RM3.32bil) worth of proceeds from the deal
As such, the group’s previous plan to list Sapura Upstream will be called off.
A source close to the matter pointed out that the proposed equity sale of Sapura Upstream was more advantageous for the group, as the listing process would take much longer, typically six months to a year.
The stake sale is targeted for completion by year-end, which if successful, would mean that the monetisation of the energy asset would only take a few months.
This will also spur Sapura Energy’s degearing exercise. Taking both the rights issue and stake sale into consideration, Sapura Energy will be equipped with substantial liquidity to meet its debt repayment schedule, as well as freeing up funds to be deployed as working capital.
The group had a two-year, interest-only payment holiday for some of its debts, which will expire in February next year.A Bursa Malaysia filing stated that the heads of agreement confirmed both Sapura Energy and OMV AG’s intention to establish a strategic partnership.
The source said that a firm deal was in the making and this was not merely a disposal of assets, as a joint venture would likely be formed.
“Seeing that it is a strategic partnership, the assets are still partly-owned by Sapura Energy – not a hive-off. This deal provides some certainty in timing and value of the assets.
“With the current subdued global equities market, the initial public offering would have met greater market risk,” he said, adding that Sapura Energy was ripe for the taking and in line with OMV AG’s plan to expand into South-East Asia.
In a Reuters report just last week, OMV AG had indicated its plans to expand its exploration business with an acquisition in South-East Asia by the end of 2018, in line with its strategy to grow in low-cost markets outside Europe.
OMV AG is one of Austria’s largest listed industrial companies, with a strong base in the upstream business, in Romania and Austria, as well as a balanced international portfolio comprising the North Sea, the Middle East and Africa and Russia as further core regions.
In a statement yesterday, Sapura Energy said that the partnership would sharpen its competitive advantage by leveraging on the strength of its portfolio of commercially viable gas fields offshore Sarawak and its acreage in new markets in New Zealand, the Gulf of Mexico and, most recently, Australia.
In addition, OMV AG will benefit from Sapura Energy’s in-house capabilities.
Sapura Energy president and CEO Tan Sri Shahril Shamsuddin commented that the partnership with OMV AG’s existing footprint offered new opportunities for the group’s upstream segment and increased market reach for Sapura Energy’s services segment where OMV operates.As of April 30, 2018, Sapura Energy had an orderbook of RM16.7bil, and its total contract wins amount to RM4.5bil to date.
Last month, Sapura Energy announced its proposal to raise RM3bil through the rights issue of ordinary shares and RM1bil through the rights issue of Islamic redeemable convertible preference shares.
The group, in a previous statement, had said that it was evaluating various options, which may involve the listing of its E&P business and a possible strategic partnership for its drilling business.
It said that the rights issue was part of a broader strategic plan to strengthen its core businesses, boost its financial position, and create better value for shareholders.
The rights issue is also targeted to be completed by year-end. Sapura Energy closed 6% higher at 35.5 sen, traded on a volume of 134.89 million shares.
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