by AZREEN HANI/ pic by TMR GRAPHIC

Sapura Energy Berhad posted RM8.9billion loss after taxation and minority interests (LATAMI) for the financial year ended 31 January 2022 (FY2022).

The Group announced on Friday that it also recorded an operating loss of RM2.2 billion on the back of RM4.1 billion revenue.

The Group recognised a RM3.3 billion provision for impairment on goodwill on consolidation and a RM2.3 billion provision for impairment on property, plant and equipment in FY 2022.

Its FY 2022 revenue of RM4.1 billion was 22.8 percent lower than the RM5.3 billion recorded in financial year 2021 (‘FY 2021”) primarily due to lower contributions from the Engineering & Construction
(E&C) segment.

Sapura Energy Group Chief Executive Datuk Anuar Taib described FY 2022 as one of the most challenging years in the Group’s history, as it faced an unprecedented liquidity crunch.

“Our current financial constraint is a culmination of many factors, including contracts accepted on onerous terms and operational issues exacerbated by COVID-19 pandemic. These have resulted in
significant losses in many projects, impacting our financial position. Almost all of the project losses were from legacy contracts,” Anuar said in a statement today.

“The Group’s liquidity challenges were also due to an unsustainable debt level and high overdue payables to our vendors, and these challenges became more acute with our working capital facilities
suspended since October 2021,” he added.

The Group has embarked on a series of negotiations with clients on legacy contracts for amicable solutions to recover or limit losses.

“We have had long discussions with clients on ways to moderate our losses, while ensuring project delivery. When a workable compromise is not possible, we may have to make difficult decisions,” he explained further.

To address its unsustainable debt and settle outstanding claims to vendors, Sapura Energy successfully applied for and was granted two Orders by the High Court of Malaya, which allows it to begin a court-
sanctioned debt restructuring exercise with creditors. The Orders, which include a Restraining Order, will help create a stable platform for the Group to negotiate with creditors while its operations can
continue.

Sapura Energy is already in talks with lenders to restructure its long-term debt and will begin scheme of arrangement briefings with its vendors, soon.

“We acknowledge that our current difficult situation has impacted our vendors. The proposed scheme of arrangement, which require vendors’ support, when approved, will enable the Group to carry out a
court-sanctioned framework for firm and committed payment to our vendors,” Anuar said.

“The framework also ensures we can continue our operations and pay vendors in an orderly manner that is sustainable to our business. The Group will endeavour to find a fair and equitable solution to all
stakeholders.”

The Group is also seeking sources of new funds to finance its business plan as it restructures its business and streamlines its operations.The implementation of its strategic divestment plan, aligned to Sapura Energy’s future business direction, is currently underway. “Businesses and assets that are not core to our future business direction will be divested to reduce our debt,” Anuar explained.

As part of its Reset plans, Sapura Energy has reviewed its business direction and enhanced its risk management framework for the bidding of future contracts.

In FY 2022 Sapura Energy was executing close to 60 projects, of which 63 percent of the revenue were from legacy contracts.

In FY 2023 revenue from secured projects attributable to legacy contracts will be reduced to about 25 percent. With an average of nine rigs expected to be in operation in FY 2023 compared to an average of seven in
FY 2022, its Drilling segment will continue to generate stable cash flow under better market conditions.

Meanwhile, its Exploration and Production segment, operated through its associate company SapuraOMV, is expected to improve performance on better gas prices in the current financial year.

SapuraOMV will continue providing stable gas supply to Malaysia LNG, from Blocks SK408 and SK310, while its Jerun development project on SK408 is progressing safely, on time and on budget. The strategic
partnership is self-funding in FY 2023.