Oil prices to stay volatile, says Sapura Energy


Oil prices will remain volatile in the medium term, driven by fundamental supply and demand dynamics, says Sapura Energy Bhd.

“The rebalancing of these factors is expected to trigger return of investment appetite for offshore development projects, but we believe the activity levels will remain subdued in the short term and competition will remain intense,” the group said in a statement yesterday.

It was reported in May that the drop-off in prices over the last three years had forced global oil and gas majors to slash cost and capital spending especially for upstream projects, but Sapura has said it has seen some interest building in the sector.

Despite current challenges, the group reported a profit after tax of RM206 million in the financial year ended Jan 31, 2017 (FY17).

The group attributed its coordinated effort to market expansion, and cost reduction had resulted in RM7.7 billion in revenue and a profit before tax margins before impairment of 8.7%.

For FY17, Sapura Energy further said it has secured new projects worth RM6.3 billion.

The contracts include Trans Anatolian Gas Pipeline in Turkey; engineering, procurement, construction, installation and commissioning of B-127 project in India; KMZ sour gas pipeline in Mexico; long-term Plug and Abandonment contract in Brunei; and decommissioning work in Malaysia, Brunei and Australia.

“In exploration and production, we have made significant progress in commercialising our gas fields. The B15 SK310 development is on track for first gas by the third-quarter of this year.”

“The additional gas discoveries for SK408 offshore Sarawak enhances our position as an Asian-based independent and we continue to leverage our in-house expertise to identify new opportunities to add further to the group’s portfolio of resources and reserves,” it added.

Moving forward, Sapura Energy is positive that they are well positioned to address a wider scope of the energy value chain globally.

“We will continue to pursue our strategies on global market expansion and cost optimisation, and setting the scene right as the industry finds its way back to recovery,” the group said.

After starting strong in FY18, analysts expect the group’s engineering and construction segment to progress, backed by its RM16.7 billion orderbook, while RHB Research Institute Sdn Bhd recently retained a ‘Buy’ call for Sapura Energy with a higher sum-of-parts based target price of RM2.50 from RM2.30, a 39% upside.