KUALA LUMPUR (June 12): Cash-strapped Sapura Energy Bhd (KL:SAPNRG) said it expects to agree to a scheme of arrangement with its creditors by achieving a majority support in a court-convened meeting.

This expectation is based on the group's ability to offer higher recovery through the scheme of arrangement compared to liquidation, said the oil and gas service provider in a bourse filing on Thursday.

“The group has sufficient funds to sustain its operations until such scheme is concluded," it added.

Last week, Sapura Energy secured a nine-month extension of a standstill period granted by the Corporate Debt Restructuring Committee (CDRC), which shields it from actions from its multi-currency financing creditors, till March 10, 2025, in consideration of the current status of the company’s proposed restructuring scheme.

Additionally, Sapura Energy had obtained a nine-month extension for the convening and restraining orders from the High Court, which will be in effect from June 11 this year till March 10, 2025. This marks the third set of convening and restraining orders that the group obtained from the court since March 2022, giving it more time to work on its debt-restructuring scheme without creditors' interference.

As part of its reset plan to divest non-core business and assets, the group is selling its remaining 50% stake in SapuraOMV Upstream Sdn Bhd, an exploration and production unit it bought in 2014, to TotalEnergies Holdings SAS for US$705.3 million (RM3.37 billion) — comprising US$530.3 million cash and US$175 million relief on debt obligations.

The group has also applied to Bursa Securities for a third extension to submit its Practice Note 17 regularisation plans, seeking an additional six months, from May 31, 2024, to Nov 30, 2024

In its filing on Thursday, Sapura Energy announced that its external auditor had expressed an unqualified opinion with material uncertainty related to going concern in respect of the group’s audited financial statements for the financial year ended Jan 31, 2024 (FY2024).

According to the report from the auditor, Ernst & Young PLT, the financial statements indicated that the group incurred a net loss of RM518.7 million, while the company incurred a net loss of RM430 million for FY2024.

“As of that date, the group’s and the company’s current liabilities exceeded their current assets by RM14,528.6 million and RM2,173.2 million respectively,” the auditor noted.

It added that Sapura is facing severe liquidity constraints and together with its 22 units have obtained restraining orders under Section 368 of the Companies Act 2016 which will expire on June 11, 2024.

It also noted Sapura Energy is in the process of undertaking schemes of arrangement and compromise.

These events or conditions, along with other matters related to the financial statements, indicate the existence of material uncertainties that may cast significant doubt on the group’s and the company’s ability to continue as a going concern, said Ernst & Young.

“Nevertheless, the financial statements of the group and of the company have been prepared on a going concern basis, the validity of which is highly dependent on obtaining extensions of the restraining orders; favourable outcomes of the legal claims for the terminated engineering & construction projects; and the successful and timely implementation of the proposed scheme of arrangements which requires that the applicants to secure approvals from at least 75% of the scheme creditors in the court convened meetings,” it added.

Shareholders of Sapura Energy include Permodalan Nasional Bhd via Amanah Saham Nasional Bhd (40.75%). Brothers Capital Sdn Bhd, linked to Tan Sri Shahril Shamsuddin and Datuk Shahriman Shamsuddin, owns a 11.25% indirect stake in the listed entity. Shahril also owns a 0.95% direct stake in Sapura Energy, its 2024 annual report showed.

The group remained in the red in FY2024, as all segments bled, with a full-year net loss of RM508.66 million on revenue of RM4.26 billion.

Shares in Sapura Energy ended unchanged at four sen on Thursday, valuing the group at RM735 million.