SapuraKencana earnings results fourth quarter FY2016
Date: 26.03.2016.

Publication source: The Star Online

PETALING JAYA: Oil and gas company, SapuraKencana Petroleum Bhd (SapKen) recorded a net loss of RM1.28bil for the fourth quarter ended Jan 31 as compared to a net profit of RM129.1mil a year ago mainly due to provisions on impairment of its assets in the environment of the weak oil price.

The revenue for the quarter under review stood at RM2.23bil as compared with RM2.39bil in the corresponding quarter last year.

The group recognised provision for impairment on property, plant and equipment and oil and gas properties amounting to RM1.14bil for the quarter.

Additionally, SapKen has also written off deposit on proposed acquisition of oil and gas assets of RM172.5mil, according to its filing to Bursa Malaysia yesterday.

SapKen assets especially some of the older ones have to be marked to current market prices, which were much lower now due to weak oil market condition.

Impairment charges are non-cash items and reversible once the market improved.

Similar oil and gas companies around the world, such as Seadrill and Technip were also recognising high value of impairment provisions due the cheap oil price that currently hovered close to US$40 per barrel against its heydays over US$100 per barrel.

For the full year, SapKen registered RM791.5mil of net loss against RM1.4bil of net profit in 2015. This was on the back of RM10.18bil of revenue.

Besides the lacklustre performance, it is also important to note that SapKen pre-tax profit excluding the impairment provisions and other charges stood at RM1.4bil with margins of 14%.

SapKen too has better cash flow than previous year with cash and bank balances of RM1.9bil as of Jan 31 higher than RM1.2bil at the end of financial year 2015. Its net debt over equity stood at 1.31 times.

Its current orderbook is valued at RM21.3bil with visibility up until 2019. Year-to-date, SapKen new orders was at RM4.5bil.

President and group chief executive officer Tan Sri Shahril Shamsuddin said the group would continue to manage the current industry pressures through aggressive implementation of the group initiatives to reset costs to match the low oil price environment.

“We will continue to strengthen key capabilities and ensure our cost base is competitive in a US$30 oil price environment with the embedded agility to benefit as the industry recovers” he said in a statement yesterday.

Shahril said this involves strategic initiatives in the optimisation of the company’s supply chain and improvements to its operational and organisational efficiency.

“Our efforts have now been hardwired to ensure long-term competitiveness.

“The group has generated strong operational performance in financial year 2016 across all business segments through our commitment on precision in execution,” he says.

SapKen services divisions (drilling and engineering & construction) reported operating profits of RM1.16bil.

However, the energy division reported an operating loss of RM1.4bil mainly due to the weak oil price environment and the resulting provisions for impairment made.

Looking ahead, Shahril still anticipated pressures on the group’s margins in the near term but remain confident in their ability to deliver fit-for-purpose solutions for their customers.

“We will navigate this period with an enhanced focus on opportunities in key markets such as in South East Asia, India, the Middle East and Mexico,” he says.

SapKen closed 9 sen lower to RM1.91 with 18.55 million shares shares done.