PNB’s increasing exposure in O&G sector is positive
Sapura Energy

Supporting Sapura Energy’s RM4b cash call will see PNB’s stake in the O&G  firm rising to 40%

By NG MIN SHEN

Permodalan Nasional Bhd’s (PNB) decision to support Sapura Energy Bhd’s RM4 billion cash call is seen as a positive move for the fund despite Petroliam Nasional Bhd’s (Petronas) assessment that volatility remains a risk.

Oil prices spiked to a four-year high above the US$80 (RM331.20) a barrel yesterday, but Petronas head Tan Sri Wan Zulkiflee Wan Ariffin on Tuesday said players should tread carefully and respond cautiously to the unpredictable industry landscape.

However, analysts are positive on the state-owned fund’s move to expand its stake in the the oil and gas (O&G) sector as crude prices continue to rise.

On Tuesday, Sapura Energy said it had secured the support of its major shareholders, PNB and Sapura Technology Sdn Bhd for its RM4 billion cash call.

The cash call entails a rights issue that will raise up to RM3 billion via ordinary shares with free warrants, and up to RM1 billion through the rights issue of Islamic redeemable convertible preference shares.

Sapura Energy said PNB and its associated funds will subscribe to their full entitlement rights shares with warrants and excess shares with warrants not taken up, as well as taking up  the Islamic redeemable convertible preference shares.

The undertaking will see PNB’s shareholding in the O&G company rising to 40% and it may emerge as the single-largest shareholder.

PNB currently holds a 12.16% stake in the upstream player, while Retirement Fund Inc holds a 7.7% share.

Despite the increase in shareholding to about 40%, PNB has requested to be exempted from making a mandatory general offer for the shares it does not own.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said PNB’s decision to subscribe to the rights issue and warrants was expected based on the current O&G climate.

“It would be quite natural to be looking at O&G when the prospects are looking up for the sector. We’ve passed the worst as far as earnings are concerned, and oil prices have increased,” he told The Malaysian Reserve (TMR).

Pong said the improved oil prices would likely result in more exploration activities, with O&G companies expected to inject more capital into exploration.

Support services and asset owners who charter out rigs for exploration purposes stand to benefit from this, he added.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said contract awards to O&G players are rising following the spike in oil prices.

“The number of oil rigs in operation has been rising although the average day rate is still fairly low. So, it makes sense to relook at the sector as value may have emerged after the industry was severely affected by the fall in crude oil prices since 2014,” he told TMR.

OPEC, which met last weekend, appears to be in no hurry to raise crude oil output, which Mohd Afzanizam said should help sustain current oil prices.

As at 7.15pm yesterday, Brent crude oil was priced at US$81.61 per barrel, after reaching its highest level in nearly four years on Tuesday.

Sapura Energy is not the only O&G firm under PNB’s belt. The country’s largest asset management company is also the largest shareholder in Velesto Energy Bhd — formerly known as UMW Oil & Gas Corp Bhd — which has made two cash calls of up to RM2.9 billion combined since May last year.

It also has about a 6% interest in upstream player Dialog Group Bhd, divided over several of its unit trust funds, according to a research report by CIMB Investment Bank Bhd last year.