OMV AG intends to acquire a 50% stake in Sapura Upstream, based on an enterprise value of RM6.6b

by RAHIMI YUNUS / Photo by courtesy of SAPURA ENERGY

SAPURA Energy Bhd will likely opt for a stake sale option of its upstream business, instead of a listing exercise to raise cash, after inking a heads of agreement with Austria’s OMV Aktiengesellschaft (OMV AG) that paves the way for a strategic partnership.

A statement by Sapura yesterday stated that OMV AG intends to acquire a 50% stake in its wholly owned subsidiary Sapura Upstream Sdn Bhd, which is based on an enterprise value of US$1.6 billion (RM6.64 billion).

Sapura Energy and OMV AG also agreed to continue ongoing negotiations on an exclusive basis.

JF Apex Securities Bhd analyst Lee Cherng Wee told The Malaysian Reserve that the initial public offering (IPO) route is now off the table as the deal is set to proceed.

“The proposed disposal is already involving a 50% equity. Plus, OMV AG is already a listed company. The intention was to raise cash and it turns out not through an IPO,” Lee said.

Bloomberg previously reported that Sapura Energy was considering to list its exploration and production (E&P) business on the Australian stock exchange in a float that could be worth as much as A$2.7 billion (RM8.1 billion), as cited by sources to The Australian.

Sapura Energy was said to have engaged Bank of America Merrill Lynch for the potential listing.

The company said it has been evaluating various options as part of the group’s broader strategic plan to strengthen its core businesses, boost its financial position and create better value for its shareholders.

“We have explored all options including the potential listing of our upstream business.

“The invitation to enter into this strategic partnership with a leading oil and gas player serves our goals and aspirations better, while providing certainty in timing and valuation,” president and CEO Tan Sri Shahril Shamsuddin said.

Lee said Sapura Energy is fixed on the equity sale route potentially because the firm wants to keep a hold on the E&P business as it is the “crown jewel” of the company, compared to its drilling and engineering and construction (E&C) segments that are lacklustre in performance.

“They don’t need to carve out the E&P unit. I suppose the equity sale addresses this concern instead of going for an IPO,” he said.

For the first quarter ended April 30, 2018, Sapura Energy recorded a net loss of RM136 million, mainly attributable to the lower revenue from the drilling and E&C divisions.

Revenue from E&C dropped 44.6% year-on-year (YoY) to RM666 million, while drilling saw its contribution reduced by 52.4% YoY to RM183 million.

E&P garnered 8% more in revenue YoY to RM210 million, making up the total topline of RM1.05 billion for the quarter.

The company said the partnership with the Austrian firm will strategically position the two companies to create sustainable long-term growth, expand portfolios and future business activities, as well as realise synergies in the value chain.

Sapura Energy said the partnership will sharpen its competitive advantage by leveraging on the strength of its portfolio of commercially viable gas fields offshore Sarawak and its acreage in new markets in New Zealand, Gulf of Mexico and most recently, Australia, while OMV AG is set to benefit from Sapura Energy’s in-house capabilities.

Sapura Energy’s share price closed 5.97% higher, up two sen to 35.5 sen apiece yesterday, after the counter was temporarily halted from trading for one hour until 10am in the morning session.