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The Star
23-07-2025
- Business
- The Star
Sapura Energy's final push
KUALA LUMPUR: Sapura Energy Bhd –soon to be renamed Vantris Energy Bhd – is calling on shareholders to support its high-stakes regularisation plan at its EGM on July 30, marking one of its final milestone in its multi-year effort to exit Practice Note 17 (PN17) status. Its chief executive officer (CEO) Muhammad Zamri Jusoh told StarBiz that the group has done 'the heavy lifting' with its lenders and even secured a white knight investor, leaving shareholder approval as the last piece of the puzzle. 'We've gone so far into this journey. The lenders now believe this company is worth restructuring. Having that much interest and confidence in us speaks volumes about the company,' said Zamri, who was appointed CEO in January this year. 'If shareholders support the plan, they'll be able to hold on to value. If they don't, the alternative is liquidation.' Zamri, previously helmed the now-divested SapuraOMV Upstream Sdn Bhd, said shareholders will vote on four resolutions at the EGM. This includes a special resolution to cancel RM11.85bil in share capital – a 99.99% reduction – followed by a 20-to-1 share consolidation. This move is to clear out accumulated losses, clean up the capital base and prepare for fresh equity issuance. The other resolution is on debt restructuring, which aims to slash Sapura's borrowings from RM10.8bil to RM5.6bill, saving an estimated RM521.2mil in annual interest – equivalent to more than 60% of total interest costs. According to chief financial officer Ganesh Gunaratnam, the group's annual interest cost is about RM800mil now, down from close to RM200mil in the first quarter alone. 'Even though the business is generating earnings before interest, tax, depreciation and amortisation (Ebitda), that interest load is not sustainable. 'Post-restructuring, once interest costs come down, the path to profitability becomes clearer,' Ganesh said. The debt restructuring plan involves multiple components with about RM784mil owed to unsecured creditors will be written off. Meanwhile, around RM2.25bil will be settled through the proceeds from the divestment of SapuraOMV. To settle the remaining dues, creditors will receive RM1.77bil worth of redeemable convertible unsecured Islamic debt securities (RCUIDS), and RM1.37bil in new shares, effectively swapping debt for equity. Another RM5.23bil will be retained as 'sustainable debt', with repayments stretched over time and tied to future project cash flows. On top of that, Malaysia Development Holding Sdn Bhd (MDH) – a vehicle under the Minister of Finance (Inc) – will inject up to RM1.1bil via redeemable convertible loan stocks (RCLS), with a coupon rate of between 2% and 4%. These funds are earmarked specifically for paying debts to Malaysian oil and gas service vendors. MDH will become a strategic investor with over 33% shareholding upon full conversion of the RCLS and will seek exemption from making a general offer, subject to shareholder approval. While Ganesh addressed the dilution of shareholding, he explained that 'it's about owning a smaller slice of a much larger, deleveraged cake. If the company performs well, the overall value to shareholders improves.' On the company's proposed name change to Vantris Energy Bhd, Zamri said this reflects the culmination of a broader transformation rather than a pivot. 'If you look at our journey, the reset really began in 2022. That's when the major shift happened and since then, we've been gradually implementing changes in how we operate and how we see the business evolving,' he said. 'The name change isn't the start – it's a reflection of everything we've done to get here.' ''Van' comes from 'vanguard', meaning to lead from the front. 'Tris' stands for the power of three – our three business segments, three guiding principles, and three core values. Together, these define the way we operate.' Sapura Energy, which has long operated in engineering and construction (E&C), operations and maintenance (O&M), and drilling, is recalibrating how it runs each division. For E&C, the focus has shifted to transportation and installation jobs, which are mostly reimbursable or day-rate contracts. 'These jobs are less risky and capital-intensive compared to engineering, procurement, construction, installation and commissioning (EPCIC) contracts, which require large upfront commitments,' Zamri said. Drilling remains a strong contributor, with nine of 11 rigs in operation. 'Drilling has always been a high-yield, cash-intensive business — it's all about utilisation. The recent contracts we've signed came with much-improved day rates.' The O&M segment, meanwhile, has also seen a turnaround, with Ebitda surging to RM144mil in FY25 from RM23mil in the previous year. 'It's a steady business. Last year, it turned the corner — Ebitda grew more than six times. Today, they're actually growing.' Sapura Energy's target is to grow the O&M segment into a billion-ringgit revenue contributor, with gradual expansion across South-East Asia. Over the years, Zamri said the company has shifted its strategic focus towards the Eastern Hemisphere in a bid to de-risk its operations and build on regional familiarity. 'Our concentration now — both in the bid book and order book — is very heavily skewed towards the Eastern Hemisphere. This was a conscious decision we made in the past couple of years. We're essentially hunkering down and focusing on geographies we know well, and where we've been actively operating,' he said. As at April 30, Sapura Energy's order book stood at RM7.9bil, with 78% or RM6.2bil from the Eastern Hemisphere. Of the total orderbook, 49% is from the drilling segment, followed by E&C at 28%, and O&M at 23%. These figures exclude RM4.8bil in orderbook under its joint ventures (JVs) and associates, particularly the Seabras Sapura JV in Brazil with Paratus Energy Services Ltd, where Sapura Energy holds a 50% stake. Zamri said the order book would be progressively recognised with 40% slated for FY26, 22% in FY27, and the remainder in FY28 and beyond. 'That JV has always been healthy and continues to be a very significant contributor to the group. While we only recognise our share of profit, they remain an important part of our overall portfolio,' he added. On tenderbook, Zamri said the group's active bids currently total RM29.9bil, with 81% or RM24.1bil also concentrated in the Eastern Hemisphere. 'Despite the challenges we face — limited working capital, fundraising constraints — our order book has consistently stayed above RM6bil (excluding JVs) over the past five years. This remains a viable and sustainable business,' he said. For the first quarter ended April 30, 2025 (1Q26), Sapura Energy's topline dropped to RM801.37mil from RM1.18bil in 1Q25. Bottomline slipped into the red, recording a net loss of RM477.96mil from a net profit of RM82.13mil in the previous corresponding quarter. Zamri said Sapura Energy's first quarter was marked by a typically slow period, impacted by seasonal and structural factors. 'One of the challenges is that clients are only just starting their business plans for the year, so contract awards have been slow. We're also coming out of the monsoon season, which limits mobilisation and offshore activity,' he said. He added that a project in Angola had also weighed on performance due to a mismatch between cost and revenue. 'We're making progress. By progress, I mean we are spending money. Some variation orders have yet to be formalised, and we're in active discussions with the client to reflect those changes.' Sapura Energy has no plans to re-enter the exploration and production (E&P) space in the near term, despite Zamri's own E&P background. Instead, the company is eyeing two adjacencies – asset decommissioning — through its Kita Solutions JV — and renewable energy, particularly engineering services for carbon capture, utilisation and storage (CCUS). Addressing the oil price cycle, Zamri noted that Sapura is less sensitive to short-term swings. 'Our clients make decisions based on long-term oil price scenarios. Investment will continue because energy demand continues to grow.' Operationally, Zamri said the company now focuses on discipline and margin preservation over chasing revenue growth. 'We're no longer aiming to be a giant like before,' Zamri said. 'We're taking baby steps. It's now a margin game, not just top line.' 'Can we grow back to the giant we were before? The real question is: do we want to?' he added. Chief restructuring officer Andy Chew Seng Heng acknowledged the role of the corporate debt restructuring committee (CDRC) in securing a balanced deal. 'Through CDRC mediation, we had a bigger voice to sell our story. In the end, figures speak for themselves — in liquidation, lenders would've gotten less than 30%. With this plan, they're getting well over 60%, plus equity, 'Chew said. Ganesh added if that scenario [liquidation] happens, the shareholder basically gets nothing. Concluding the interview, Zamri underscored the importance of shareholder backing, noting that it would reinforce the company's ability to move forward with greater confidence. 'Please, stand up at the EGM and vote in favour of the plan. The stronger the support, the stronger we move forward.'
The Star
14-05-2025
- Business
- The Star
Sapura Energy set for regularisation plan
The company said that under its reset plan, there would be a focus on improving bidding and project delivery capabilities. PETALING JAYA: Sapura Energy Bhd (SEB) is finalising a regularisation plan to exit the Practice Note 17 (PN17) status that includes a few corporate exercises to put the company on a stronger financial and operational standing. The company said in a statement that the plan would be finalised soon and includes a fund-raising initiative in which the Finance Ministry through Malaysia Development Holding Sdn Bhd (MDH) will subscribe up to RM1.1bil in redeemable convertible loan stocks (RCLS) to fund its repayment to vendors. 'MDH will become a major shareholder upon full conversion of the RCLS, which will result in MDH holding more than 33% of SEB's enlarged share capital,' the upstream oil and gas operator said. There would also be a proposed capital reconstruction involving a 99.99% capital reduction to offset accumulated losses; and a 20-to-1 share consolidation to enhance share trading prices and reduce price volatility. 'A comprehensive proposed debt restructuring exercise will reduce SEB's total borrowings from about RM10.8bil to RM5.6bil, yielding substantial interest savings and reduced financial burden, through several mechanisms that, among others, includes debt conversions to equity and equity-like instruments and a debt waiver,' SEB explained. The company added that under its reset plan, there would be a focus on improving bidding and project delivery capabilities. The plan has resulted in a sustained annual revenue of RM4bil since its launch in 2022. Meanwhile, the company said it would continue its efforts in repositioning itself for long-term sustainability and profitability. For its financial year ended Jan 31, 2025, the company posted a net profit of RM190mil on the back of RM4.7bil in revenue. Its order book currently stands at RM8.2bil. Group chief executive officer Muhammad Zamri Jusoh said with the strategic initiatives and the successful implementation of the proposed regularisation plan, SEB is confident in its path to operational recovery, improved financial health, and eventual upliftment from PN17 status. 'We are hopeful that this plan will not only enable SEB's recovery but also catalyse the growth of the country's energy ecosystem,' he said. Muhammad Zamri added the plan, plus the company's continued focus on its core business in engineering and construction, drilling, and operations and maintenance, represents the most viable pathway to a turnaround in its financial status. 'We are confident the successful execution of the plan will return the group to profitability and restore confidence among stakeholders,' he noted. Its share price remained unchanged at 4.5 sen yesterday, with a market capitalisation of RM661.53mil.
