• Sapura Energy announced that it will dispose its entire stake in SapuraOMV to TotalEnergies for a cash consideration of USD530.3mn as well as the release of SapuraOMV share pledge of USD175mn.

• Despite its financial difficulties, the company managed to avoid a distressed valuation for SapuraOMV, underpinned by oil price assumption of USD75-82.5/bbl over 2024-26. Overall, we think the purchase consideration is fair as it is largely inline with our initial estimate.

• The company expects to net a gain of RM793mn or 5sen/share from the disposal. Moving forward, we think the company need to recapitalise its debt by at least RM3-4bn so that its capital structure be more sustainable.

• Maintain our TRADING BUY call on Sapura Energy with an unchanged SOP-derived TP of RM0.06.

Exiting SapuraOMV

Sapura Energy announced that it has entered into a conditional Sale and Purchase Agreement (SPA) with TotalEnergies Holdings SAS to divest its 50% stake in SapuraOMV Upstream Sdn Bhd (SapuraOMV) for a cash consideration of USD530.3mn (or RM2.53bn). In addition, it will also be relieved of its obligation in respect of financing facility extended by OMV E&P to SapuraOMV amounting to USD175mn.

Purchase Consideration is Fair

We are positive with this announcement as the disposal is one of key conditions of its debt restructuring plan, hence paving way to address its PN17 status. Besides that, the price consideration for the disposal is also largely within our fair value estimate of RM2.5bn. For comparison, this is only 4% lower than the price tag that TotalEnergies is paying to OMV for the latter’s 50% stake at USD553mn.

Earnings Impact

Upon completion of the disposal, the company expects to realise a pro-forma gain of RM793mn or 5sen/share. This will reduce the consolidated shareholder’s deficit by 19% to RM3.4bn from RM4.2bn as at end 4QFY24. The company will channel the sales proceeds towards the repayment of liabilities including to MCF financiers amounting to RM2.25bn. We expect this to result in annual cost savings of c.RM100mn from lower finance cost. Moving forward, we think the company need to recapitalise its debt by at least RM3-4bn so that its capital structure to be more sustainable.

Maintain TRADING BUY with unchanged TP RM0.06

We maintain our TRADING BUY call on Sapura Energy with unchanged SOP-derived of TP of RM0.06 (see Table 1). We expect a favourable outcome from its proposed restructuring scheme (PRS) amidst the upcycle in O&G development projects.

Source: BIMB Securities Research - 23 Apr 2024