Sapura Energy has grown from a domestic-focused player into a renowned global O&G company
By NUR HANANI AZMAN / Pic By MUHD AMIN NAHARUL
AFTER leading Sapura Energy Bhd for 25 years, substantial shareholder Tan Sri Shahril Shamsuddin will step down from his post as president and group CEO today upon reaching the retirement age of 60.
Shahril founded Sapura Energy in the mid-90s and built it from a diving contractor to the global integrated oil and gas (O&G) firm that it is today.
Known as a hard-driving businessman, Shahril leaves the group seeking to recover from the financial impact the group had to bear with after crude oil price slumped from the lofty US$100 (RM411) a barrel levels in 2014.
The resulting slump in upstream and downstream activities across the world exposed Sapura Energy to the negative impacts of its high capital and debt-backed business model, which required fresh capital amounting to RM4 billion being pumped in by new controlling shareholder, Permodalan Nasional Bhd (PNB).
The cash call is seen as an important part of the group’s efforts to pare down its whopping RM14 billion borrowings during that time.
As at December 2020, PNB is the single-largest shareholder in Sapura Energy and Velesto Energy Bhd, and its exposure to the O&G sector constituted about 5% of its total portfolio.
Shahril made the news a couple of years ago for his hefty remuneration package despite the company’s poor financial condition.
Sapura Energy was born out of a merger between SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd in 2011, and the combined company’s market capitalisation hit a high of about RM30 billion in April 2014.
The integrated O&G services and solutions provider’s share price dropped from a peak of RM4.90 in December 2013 to a historic low of
six sen in March 2020, before closing at 15.5 last Friday despite crude oil price having gone above the US$60 a barrel level this year.
“Under his leadership, Sapura Energy has grown from a domestic-focused player into a renowned global O&G company serving the entire upstream value chain. This includes becoming a regional independent oil company via SapuraOMV Upstream Sdn Bhd, with net resources in excess of 260MMboe (million barrels of oil equivalent), serving a significant part of Malaysia’s natural gas requirement.
“Shahril’s legacy will be the group’s highly skilled and technically capable multinational human capital, strategic world-class assets, sound processes and strong project management capabilities,” Sapura Energy chairman Tan Sri Shamsul Azhar Abbas said.
Federation of Public Listed Companies Bhd president Tan Sri Megat Najmuddin Megat Khas described Shahril as a shrewd entrepreneur in his younger days.
“It must be painful for him to leave the company that was named after his late mother and started by his father.
“O&G business can be very lucrative, but you can also lose lots of money if you are not careful,” he told The Malaysian Reserve.
Despite the challenges, Sapura Energy continued to secure a number of contracts.
The group announced on Feb 10 that its wholly-owned subsidiaries and joint-venture companies were recently awarded RM1.85 billion worth of contracts and contract extensions, comprising engineering and construction, and drilling works in countries like Saudi Ara- bia, Thailand, Brunei and Malaysia.
Sapura Energy’s board of directors has appointed Datuk Mohd Anuar Taib as COO and CEO designate effective Oct 1, 2020, as part of a six-month transition.
AmInvestment Bank Bhd analyst Alex Goh is positive on Mohd Anuar taking over as CEO as he comes with a commendable track record of helming Petronas Carigali Sdn Bhd as CEO, before heading Petroliam Nasional Bhd’s upstream division as executive VP.
“The group is expected to secure the engineering, procurement, construction and installation contract for the central processing platform (CPP) for Sapura- OMV Upstream’s Jerun field development in offshore Sarawak.
“We estimate the contract value for a CPP weighing 22,000 tonnes, plus 5,300 tonnes of piles, and an 8,500-tonne compression platform could easily be worth over RM1 billion,” he wrote in a research note on the company on March 18.
Goh believes the O&G industry is in the recovery cycle this year as several sectors within the industry are expected to chart a gradual recovery, especially the engineering, procurement, construction, installation and commissioning (EPCIC) business.
Goh noted that rising EPCIC jobs would be driven by several activities, including pipeline installations growing by 4.2 times to a base-case scenario of 266 days in 2023 from 64 days in 2021, as more development projects tie into existing platforms or processing facilities.
“We note that Sapura Energy’s integrated service platform is well-positioned to secure these jobs, given the group’s under-utilised heavy installation vessels currently.
“We like Sapura Energy, which will complete its RM10 billion debt restructuring package soon and subsequently, position the formidable EPCIC group to secure fresh global orders,” he added.
The investment bank has a ‘Buy’ recommendation on Sapura Energy with an unchanged forecast and fair value of 29 sen.