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Malaysia's Sapura Energy swings to third quarter net loss

Prolonged low capital spending amid challenging industry conditions hurt earnings

An oil and gas offshore facility constructed by Sapura Energy in Terengganu, Malaysia (Courtesy of Sapura Energy)

KUALA LUMPUR (Nikkei Markets) -- Malaysian oil-and-gas services firm Sapura Energy swung to a net loss in the fiscal third quarter amid slowing business activity that marked certain rigs going off contract.

The weak earnings amid fuzzy prospect of any swift upturn in the oil and gas services sector sent the company's shares to all-time low.

Net loss for the three months ended Oct. 31 totalled 274.41 million ringgit ($67.22 million) against a net profit of 158.06 million ringgit a year ago, the company said in an exchange filing. Quarterly revenue slid 42.4% on year to 1.28 billion ringgit from 2.22 billion ringgit.

"Industry condition continues to be challenging and the group's current performance is a reflection of the prolonged low levels of capital spending within the industry," Sapura Energy said. "The board anticipates the challenging environment to persist in the short and medium term."

Shares of Sapura Energy plunged more than 20% to a new record low since its listing in 2012 as analysts cautioned that the company could be in for tougher times ahead. The stock ended at 0.965 ringgit apiece, while the benchmark FTSE Bursa Malaysia KLCI closed relatively steady.

"We do not foresee any improvement in its earnings prospect in the near term," said AllianceDBS Research analyst Inani Rozidin. Outlook across the company's three operating segments -- engineering, drilling, and energy - remains lacklustre, she added.

Oil has shown signs of climbing out of its doldrums with prices gaining as much as 17% this year before the rally was tempered by latest data showing a surge in U.S. production. Brent, the benchmark for crude oil, rose 0.3% to $61.40 on Thursday.

A decision earlier this month by the Organization of Petroleum Exporting Countries and non-OPEC members including Russia to extend an existing output cut until the end of 2018 helped in supporting crude prices. Malaysia has also committed to reduce its oil production by 20,000 barrels per day.

Despite the recent recovery in oil prices, it could take more time for demand for drilling and other related services to recover, said Kenanga Investment Bank's analyst Sean Lim. That could spell weak earnings for the company for another two quarters due to slow order-book replenishment, he said.

Sapura Energy's engineering and construction segment recorded an operating loss amounting to 29.32 million ringgit, partly due to share of loss on disposal of vessel from SapuraAcergy amounting to 46.1 million ringgit. Drilling segment also slipped into an operating loss of 93.14 million ringgit.

The company said it will continue to focus on replenishing the order-book by strengthening its position in existing markets and expanding into new markets amid recent increase in tendering and bidding activities across key geographies.

Net loss for the nine-month ended October was 217.95 million ringgit compared to a net profit of 380.64 million ringgit over the same period last year, Sapura Energy said. Year-to-date revenue slumped 19% year-on-year to 4.71 billion ringgit from 5.84 billion ringgit.

--Gho Chee Yun and Chong Sin Hao

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