Kuala Lumpur, 30 March 2023
Summary of FY2023 Preliminary Financial Results:
- Revenue of RM4.6 billion
- Operating profit of RM705 million
- EBITDA of RM667 million, of which
- E&C – RM155 million
- O&M – RM143 million
- Drilling – RM476 million
- Provision for impairment of RM2.6 billion
- LATAMI of RM3.2 billion
- Current orderbook of Group subsidiaries valued at RM5.6 billion
Sapura Energy Berhad (“Sapura Energy”) and its subsidiaries (“the Group”) today announced unaudited preliminary full year results for the financial year ended 31 January 2023 (“FY2023”), showing noteworthy progress in efforts to regain operational stability.
The Group posted an operating profit of RM705 million, a quadruple increase compared to the operating loss of RM2.2 billion recorded in financial year 2022 (“FY2022”). Revenue in FY2023 improved by 12 percent to RM4.6 billion against the RM4.1 posted in FY2022.
Encouraging turnaround in operational performance
All business segments operated under the Group (excluding Corporate) posted positive earnings before interest, taxes, depreciation and amortization (“EBITDA”) during the period under review. Sapura Energy booked an EBITDA of RM667 million - contributed mainly by Drilling, which outperformed its industry peers to achieve an EBITDA of RM476 million. Operations and Maintenance (“O&M”) returned to a positive EBITDA of RM143 million while Engineering and Construction (“E&C”) recorded an EBITDA of RM155 million.
“Our teams delivered significant operational improvements in the face of considerable challenges last year.” Datuk Anuar commented. “Relying on trusted partnerships and resourceful capabilities, we found ways to self-sustain and maintain safe, steady performance thus setting a firm base for our future growth.”
Major hurdles include the lack of working capital and the unavailability of bank guarantees, following the suspension of Sapura Energy’s working capital facilities in October 2021. The curtailment resulted in missed tender opportunities for the Group, with an estimated value of USD2.5 billion.
“It’s crucial that we revive Sapura Energy’s access to credit lines to remain competitive in the current and emerging markets. Reducing our unsustainable debt will go a long way in improving that financial ability,” he added.
The operations of Sapura Energy’s subsidiaries were also impacted by macroeconomic factors, including foreign exchange volatility and international conflicts, which resulted in rising base costs and supply chain disruptions.
Despite these challenges Sapura Energy retained its competitiveness as a global player. More than 70 percent of its FY2023 revenue came from international contracts, as it completed 45 projects for various clients during the year. The Group continued to win new work, which amounted to about RM3.7 billion in value, bringing its current orderbook to RM5.6 billion. In addition, the non-consolidated gross orderbook of the Group's joint-venture entities stands at RM5.2 billion. All eleven of its rigs are currently under contract in Malaysia, Thailand, Brunei and West Africa.
Meanwhile, its Exploration and Production arm, operated by joint venture company SapuraOMV Upstream, recorded a loss before taxation of RM356 million as a result of higher impairment, largely due to higher discount rates and unsuccessful exploration results during the year.
Profitability impacted by impairments and forex losses in Quarter 4, FY2023
The Group narrowed its loss after tax and minority interests (“LATAMI”) to RM3.2 billion in FY2023, compared to a LATAMI of RM8.9 billion in FY2022.
The LATAMI in FY2023 included RM2.6 billion impairment charges, of which nearly RM1.5 billion is related to goodwill on consolidation. The impairments are associated with higher weighted average cost of capitals arising predominantly from a global interest rate hike. Another driver for the impairment charges relate to a revised business outlook, mainly due to limited working capital and bank guarantee facilities and a projected market down-cycle in the medium to long term.
The Group’s profitability was also impacted by higher foreign exchange losses in the fourth quarter of FY2023, as the ringgit strengthened against the US Dollar.
Reassuring progress in debt restructuring plan
In the last twelve months, Sapura Energy took large strides to progress its debt restructuring plan.
In early March, the High Court granted Sapura Energy and 22 wholly owned subsidiaries (collectively, “the Scheme Companies”) new convening and restraining orders, following the expiry of the same orders obtained last year. Sapura Energy also informed the Court that it had obtained a letter of support from a White Knight, whose investment will help the Group implement its Reset plan.
At the same time, the Proof of Debt exercise with trade creditors is almost complete, with the adjudication process currently ongoing. The Scheme Companies received approximately RM1.5 billion in claims submitted by approximately 2,300 vendors.
In September 2022, the Corporate Debt Restructuring Committee (the “CDRC”) approved Sapura Energy’s application for assistance to mediate debt restructuring negotiations with financiers of its Multi-Currency Financing (“MCF”) Facilities. Sapura Energy presented a draft Proposed Restructuring Scheme (“PRS”) to financiers on 20 October 2022 and has since made progress to refine the terms of the PRS through CDRC mediated meetings with the financial institutions. The CDRC Committee has extended the standstill period for Sapura Energy up to 9 September 2023. In line with the CDRC’s Participants’ Code of Conduct, the MCF Financiers will be expected to observe the standstill and withhold all legal proceedings or recovery actions under the CDRC regime.
“The new convening and restraining orders will allow us to complete discussions with our financiers,” Datuk Anuar was quoted in an earlier statement. “Through CDRC’s mediation, we aim to reach an understanding and in-principle approval with financiers on the complex debt restructuring exercise involving RM10.3 billion in MCF Facilities.”
Continue rebuilding Sapura Energy in Financial Year 2024
In its disclosure to Bursa Malaysia, Sapura Energy’s Board of Directors said the Group will continue to implement its Reset plan to address unsustainable debt and resolve overdue claims by trade creditors.
Critical to the successful delivery of sustainable value to all stakeholders, the Group is developing its Regularisation Plan to address its PN17 status, underpinned by the schemes of arrangement with lenders and creditors. The Board of Directors is committed to ensure the interest of all stakeholders will be considered in a fair and equitable manner, it stated.
To support this, the Group has appointed MIDF Amanah Investment Bank as principal advisers to help formulate a regularization plan.
Building on the positive momentum achieved in the last financial year, Sapura Energy is determined to extend the turnaround in its operations to Financial Year 2024 (“FY2024”).
“Our operational mantra is ‘Bid Right, Execute with Discipline’. We have strengthened our ability to ‘Bid Right’ by working within our risk appetite and working capital limitations, but we still have room to improve ‘Execute with Discipline,” Datuk Anuar explained. “We will bolster this capacity by rebuilding our core solutions and optimizing project delivery.”
The E&C segment will continue to rebalance its projects portfolio and asset deployment between the Eastern and Western Hemispheres, pivoting towards Transportation & Installation projects while keeping an eye on Decommissioning opportunities. The business is expected to grow its footprint in the Atlantic and West African regions.
The O&M business is projected to remain competitive in Malaysia, while cautiously exploring opportunities to emerge as a regional player in the South-East Asian market.
Meanwhile, the Group is confident that the utilisation of rigs in its Drilling segment will remain robust in FY2024 and beyond. Sapura Drilling has all of its eleven rigs currently utilised, including five rigs on long-term contracts in Thailand.
Consistent with its Reset Plan and as part of its PRS, the Group is looking to divest its interest in SapuraOMV Upstream to pare down debts.
“We have a part in developing the energy eco-system in countries where we operate; and we need financial strength to perform that role effectively,” said Datuk Anuar. “We must ensure our turnaround benefits the entire value chain; and regain the trust of our stakeholders - particularly clients, vendors, employees and shareholders.”
Cautionary note: “Sapura Energy”, “the group” and “the company” are used for convenience where references are made to Sapura Energy Berhad in general. Similarly, words like “we”, “us” and “our” are used to refer to Sapura Energy Berhad in general or to those who work for the company and its subsidiaries, where relevant. This press release may contain forward-looking statements. All statements other than statements of historical facts included in this press release, including, without limitation, those regarding our financial position, financial estimates, business strategies, prospects, plans and objectives for future operations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. Such forward-looking statements reflect our current view with respect to future events and are not a guarantee of future performance. Forward-looking statements can be identified by the use of forward-looking terminology such as the words “may”, “will”, “would”, “could”, “believe”, “expect”, “anticipate”, “intend”, “estimate”, “aim”, “plan”, “forecast” or similar expressions and include all statements that are not historical facts.