SERI KEMBANGAN: Fresh from selling a stake in its exploration and production (E&P) arm, Sapura Energy Bhd is in talks with several parties to sell a stake in its drilling division.
“But the price must be right and it would need to open up to new markets and increase our competitiveness,” said president and group chief executive officer Tan Sri Shahril Shamsuddin.
Sapura Energy’s drilling arm is one of the group’s core businesses, along with E&P and engineering and construction (E&C).
Speaking to reporters after the group’s EGM yesterday, Shahril said the potential partnership could be similar to the deal it had signed with Austria-based OMV Aktiengesellschaft.
Earlier this month, Sapura Energy inked a share subscription agreement and shareholders’ agreement with OMV AG to sell a 50% stake in its E&P unit – Sapura Upstream Sdn Bhd – for US$975mil (RM4.1bil).
The amount is inclusive of US$350mil in debt from Sapura Upstream.
The proposed transaction is expected to be completed by the first quarter of 2019.
Amid the downturn in the oil and gas (O&G) industry in the last three years, Sapura Energy has been facing low utilisation rates of its drilling asset and has incurred massive impairments.
For the fourth quarter ended Jan 31, Sapura Energy made a whopping impairment loss of RM2.1bil.
Sapura Energy owns 16 drilling assets comprising eight semi-tender rigs and eight tender assist rigs.
“They are relatively young assets with a lifespan of between 15 and 20 years,” Shahril said, adding that the current utilisation rate was 35%.
“We are seeing the utilisation rate improving moving forward,” he added.
At the EGM, the shareholders agreed to the firm’s rights issue to raise RM4bil cash.
“The EGM went very smoothly,” Shahril said, pointing out that this was because of the solid backing from the institutional funds for the corporate exercises.
Upon completion of the two corporate exercises of selling a 50% stake in its E&P arm and the rights issue, Shahril said Sapura Energy would lower its gearing ratio significantly from 1.74 times to 0.62 times.
Subsequently, the group is expected to benefit from savings in the finance cost of RM320mil.
“The stronger balance sheet will provide greater financial flexibility for the group to deliver its business plans,” he said.
Shahril pointed out that in the past three years, the firm has been busy building its capabilities to prepare itself for the upturn in the O&G industry.
“The investments are part of our strategy to be ready for the industry upturn and we are progressively seeing the returns on our investments,” he said.
The group was looking to expand its services in the Middle East, Africa, Latin America, the Caspian and Mediterranean, as well as South-East Asia and Australia.
Sapura Energy’s order book stands at RM18.2bil.
On whether Sapura Energy’s E&C segment would welcome new partnerships or divestments, Shahril said: “That is our core business, so there is no plan.”
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