Sapura Energy’s total order book stands at more than RM8bil.
PETALING JAYA: Sapura Energy Bhd
, which is in the spotlight following a proposed RM1.1bil cash injection from the government to repay unpaid vendors, could achieve sustainable profit from financial year 2027 (FY27).
In a report, BIMB Research said this is likely to come with cost savings from its debt restructuring plan and a sustained order book in the drilling, and operations and maintenance (O&M) segments.
“Management guided that its annual interest expense will be lowered by RM450mil afterwards. This is more than our initial loss estimate of RM306mil in FY27.
“Hence, we estimate the company to deliver core profit of RM134mil in FY27,” the research house said yesterday.
It maintains a “trading buy” on the stock with an unchanged target price of six sen.
As the debt restructuring plan is progressing well, BIMB Research thinks the company will be in better shape and subsequently regularise its Practice Note 17 or PN17 status. The troubled oil and gas (O&G) company was placed under the PN17 category in March 2022.
While many have reservations, BIMB Research said it is optimistic about Sapura Energy’s turnaround plan, having recently secured approval from its scheme of creditors for the proposed debt restructuring plan, apart from securing the RM1.1bil capital injection from the government to repay all outstanding amounts to over 2,000 vendors.
“The debt restructuring plan is now expected to be effective the earliest in August 2025.
“With this, we see light at the end of the tunnel, aided by the upcycle in the offshore capital expenditure spending,” the research house added.
With the liquidity issue it faced previously, the group’s average utilisation rate for its yard and construction vessels stood at 0% and 50% respectively in the third quarter of its financial year ending Jan 31, 2025 (3Q25).
Nonetheless, BIMB Research noted that sustained spending by O&G companies has boosted demand for drilling and O&M segments.
This helped to replenish its order book at circa RM6bil as at 3Q25.
Similarly, the outstanding order book held by its Brazilian joint-venture also remains encouraging at RM6bil, providing recurring income to the group.
According to the research house, the utilisation rate in the drilling segment has achieved a commendable level, averaging 80% since 3Q23.
Recently, the company had managed to secure multiple drilling contracts for five rigs amounting to RM3.2bil, boosting Sapura Energy’s total order book to more than RM8bil.
Meanwhile, the drilling order book has tripled to RM4.5bil.
“It’s noteworthy that the group has secured two long-term contracts spanning five plus three years for T-17 and T-18 rigs with PTTEP Energy Development Ltd.
“Our back-of-the-envelope calculation showed that the blended day rate for this contract win is at US$95,000 per day, which is around 10% higher than average day rate for the nine-month period of 2025.”
Previously, the company had total borrowings of over RM10bil with annual finance cost of RM800mil per year.
“Notably, the losses that it suffered in FY21 and FY23 to FY24 were contributed primarily by this reason.
“Hence, it is the intention of the management to reduce its borrowings so that it can reduce its finance cost and turn profitable,” BIMB Research said.
At the time of writing, shares of Sapura Energy were trading at 4.5 sen, up 12.5% in the last five days.
Catalysts for the stock include a successful exit from its PN17 status and new contract wins and higher utilisation rate for yard and construction vessels in the engineering and construction segment.
BIMB Research said the key downside risk to its target price and recommendation include the dilution impact from new shares issuance.
“At this juncture, the RM1.1bil of debt will be settled through new share issuance at four sen a share.
“In the future, there will be a further dilution impact from potential conversion of redeemable convertible unsecured Islamic debt securities instrument worth of RM1.8bil at six sen per share and another RM1.1bil convertible loan issued to the government’s special purpose vehicle.”
