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Writedowns push SapuraKencana Q3 profit down 63% to $30m

Writedowns push SapuraKencana Q3 profit down 63% to $30m
The weak oil price environment continues to weigh on Malaysian oil and gas (O&G) players with SapuraKencana Petroleum Bhd (SapKen), seeing third quarter net profit drop 62.7% to MYR129.9m ($30,2m) despite a 19.9% increase in revenue to MYR2.9bn as the group took the lower value of its assets on its books and made provisions.

Provisions for impairment on property, plant and equipment and O&G properties came up to MYR317.3m, basically reflecting the sharply lower price of oil.

Furthermore, lower profits from the energy division as a result of a lower average realised price per barrel achieved exacerbated the weak performance.For the year-to-date, net profit fell almost triple to MYR494.6m from MYR1.3bn previously, also mainly due to provisions totalling MYR805m. Revenue however was up 5% to MYR7.9bn.

For the first nine months, the services divisions (drilling and engineering and construction) reported operating profits of MYR1.4bn. However, the energy division expectedly, reported an operating loss of MYR550m due to weak oil prices and the provisions.The group's cash position remained strong, with a current cash and bank balances of MYR2.4bn, a gain of MYR566m from the previous quarter. The company has a current orderbook of MYR21bn.SapKen president and group ceo Shahril Shamsuddin said the industry continued to face pressure over the medium term due to weak oil prices and the resultant reduction in capital spending.

“Despite this, our services business continues to secure and deliver work in key markets such as Brazil, India, West Africa and Malaysia. The group remains focused on its strategy of strengthening its position in these key markets, while continuing to work closely with customers to deliver solutions that meet their technical and commercial needs,” he said.

The company is also positive on its performance in Brazil and India.

In Brazil, for example, its operations continue to achieve high vessel utilisation (an average of 98.6%) and the Sapura Onix commenced operations two and a half months ahead of schedule. Meanwhile in India, engineering, procurement, construction, installation and commissioning work has started on the Vasai East and Mumbai High South projects

.In its energy segment, SapKen has received approval for its first gas field development, the B15 field in block SK 310 offshore Sarawak, where first gas is targeted for the fourth quarter of 2017.