By Khairul Khalid
The dip of oil price to around US$30 per barrel is below SapuraKencana Petroleum’s breakeven threshold for oil production.
“The breakeven level for SapuraKencana’s oil production assets is US$55 per barrel, far above current prices,” said AmResearch in a report.
This week, the Brent crude benchmark broke below US$30 for the first time since 2003, prompting market observers to predict that it may even dip to US$20 this year.
“We have lowered our crude oil assumption for SapuraKencana’s forecast for financial year 2017 (FY17F) from US$50 per barrel to US$40 per barrel, which reduces our core earnings forecasts by 14%,” said AmResearch.
The report also expects sentiments on SapuraKencana’s stock to remain bearish considering the slump of oil price to US$30 per barrel, which could lead to further asset impairments and losses from SapuraKencana’s oil production division.
According to AmResearch, in the first nine months of SapuraKencana’s financial year 2016 (9M16) it has total asset impairments of RM857 million based on valuation estimates assuming crude oil prices above US$55 per barrel.
Yesterday, SapuraKencana announced that it has just won contracts and extensions from local and foreign firms worth approximately US$117 million (RM503 million).
SapuraKencana’s currently has an orderbook of around RM21 billion providing earnings for the next two to three years.
AmResearch has downgraded SapuraKencana Petroleum from “buy” to “hold” with a fair value of RM1.50.
At 12.15pm today, SapuraKencana’s shares were trading at RM1.71, down 3 sen.
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