Sapura Energy Bhd’s move to sell a 50% stake in its oil and gas (O&G) exploration and production (E&P) arm to an Austrian giant has been well-received by analysts.
RHB Research Institute, which has upgraded its view on Sapura Energy to a “buy”, described the deal as “a huge positive”.
"With the proposed divestment, the research house said US$350mil worth of loans sitting in Sapura Energy’s balance sheet would be paid off.
“This puts the company in a better financial position to capitalise on the long-term growth of upstream gas assets, coupled with the vast potential for further gas discovery on top of its current 2P reserves,” it said, adding that it had raised its target price on the stock to 49 sen.
On Nov 9, Sapura Energy inked an agreement to sell 50% in its wholly-owned subsidiary, Sapura Upstream Sdn Bhd, to Austria’s OMV Aktiengesellschaft (OMV AG) for a total value of 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.
Positive on the disposal, MIDF Research expects Sapura Energy’s forward earnings to improve further, in particular from savings in operating expenses.
“We are expecting Sapura Energy’s earnings to gradually improve, as the chunk of the group’s earnings will stem from the upbeat offshore activity levels of the engineering and construction (E&C) segment, and sustainably higher crude oil prices of the E&P segment,” it said in a note.
MIDF Research remains positive on Sapura Energy’s prospects, given the company’s increasing orderbook replenishments – aside from potential interest savings from paring down its borrowings and the potential pick-up in activity levels for both its E&C and drilling segments.
“We continue to believe that the share offers short-term trading opportunities for investors. As such, we are maintaining our ‘trading buy’ call on Sapura Energy with an unchanged target price of RM1.01 per share,” it added.
Meanwhile, Maybank Investment Bank (IB) Research said that getting OMV AG on board was a major plus for Sapura Upstream, from a strategic partnership perspective.
“OMV AG is one of the largest listed industrial companies on the Vienna Stock Exchange with a 15-billion-euro market capitalisation.
“Operationally, OMV AG has proven reserves of 1.15 billion barrels of oil equivalent and a daily production of 348,000 barrels per day,” it said.
The research house expects Sapura Energy to remain in the red in financial year 2019 (FY19). However, the company is projected to break-even in FY20 and turn profitable in FY21.