THE DOWNFALL OF MALAYSIA'S LARGEST PRIVATE COMPANY

Summary

Sapura Energy Berhad, once a prominent Malaysian oil and gas giant with a global presence, has seen a dramatic downfall. From a peak valuation of $6 billion in 2013, the company now struggles with a market cap of just $200 million. The key factors behind this decline include fluctuating oil prices, a shrinking order book, and mounting losses, which led to crippling debt. Despite attempts at restructuring and government intervention, Sapura's future remains uncertain, highlighting the challenges faced by even the most successful companies in volatile industries.

Takeaways

• 😀 Sapura Energy Berhad was once one of Malaysia's largest integrated oil and gas companies, with assets in over 20 countries worldwide.
• 😀 The company peaked with a stock price of 4.9 Malaysian Ringgit in December 2013, valuing it at 26.8 billion Malaysian Ringgit ($6 billion USD).
• 😀 Sapura Energy employed tens of thousands of people and made significant contributions to Malaysia's economy through tax payments.
• 😀 By 2021, Sapura Energy’s stock price dropped to just 0.045 Malaysian Ringgit, reducing the company's valuation to just 800 million Malaysian Ringgit (~$200 million USD).
• 😀 The company’s financial downfall was marked by a significant drop in its revenue, from 10.1 billion Malaysian Ringgit in 2015 to 4.1 billion Malaysian Ringgit in the latest report.
• 😀 Sapura Energy suffered a net loss of approximately 9 billion Malaysian Ringgit (~$2 billion USD), highlighting the severity of its financial troubles.
• 😀 The company's downfall can be traced to fluctuations in oil prices, with a major meltdown in 2014 causing a drop in oil prices and affecting Sapura Energy's profitability.
• 😀 Another factor contributing to the company's fall was its overbooked order book, which was significantly affected by falling oil prices and demand for oil and gas services.
• 😀 Despite efforts to secure new orders, Sapura Energy’s order book continued to decline, with a significant drop from 30 billion Malaysian Ringgit in 2014 to just 7.5 billion Ringgit in 2021.
• 😀 The company faced ongoing net losses every year after 2014, with total losses amounting to 13.1 billion Malaysian Ringgit by 2022.
• 😀 In response to mounting financial difficulties, Sapura Energy engaged in debt restructuring and received support from the government through Permodalan Nasional Berhad (PNB), which increased its stake in the company in 2018.

Q & A

What was Sapura Energy Berhad's peak market valuation?

At its peak in 2013, Sapura Energy Berhad had a market valuation of approximately 26.8 billion Malaysian Ringgit, or about 6 billion US dollars.

What caused Sapura Energy's downfall?

The main factors contributing to Sapura Energy's downfall were fluctuations in oil prices, a shrinking order book, sustained annual losses, and increasing debt.

How much did Sapura Energy’s stock price fall from its peak?

Sapura Energy’s stock price fell from 4.9 Malaysian Ringgit in December 2013 to just 0.045 Malaysian Ringgit as of the time of writing the script.

What impact did the oil price collapse in 2014 have on Sapura Energy?

The collapse of oil prices in 2014, which saw a drop from $98 to $53 per barrel, directly affected Sapura Energy's revenues, market valuation, and overall financial health.

What was the status of Sapura Energy's order book in 2014 compared to 2021?

In 2014, Sapura Energy's order book was valued at 30 billion Malaysian Ringgit, but by 2021, it had decreased significantly to just 7.5 billion Ringgit.

How did Sapura Energy handle its sustained losses over the years?

To cope with its losses, Sapura Energy increased its debt and sold assets to raise funds, resulting in a net debt increase from 4.9 billion Malaysian Ringgit in 2013 to over 10 billion by the latest year.

What was the total loss reported by Sapura Energy from 2013 to 2022?

From 2013 to 2022, Sapura Energy reported a total loss of 13.1 billion Malaysian Ringgit.

What financial measures did Sapura Energy take to restructure its debt?

Sapura Energy obtained a restructuring order under Section 368, which allowed the company to negotiate with creditors and suspend legal proceedings against it, helping to manage its debt situation.

What role did the Malaysian government play in Sapura Energy's struggle?

The Malaysian government, through the state-owned Permodalan Nasional Berhad (PNB), increased its stake in Sapura Energy to over 40 percent in 2018, hoping to stabilize the company and prevent its collapse.

How did the price of oil impact other major oil companies like Royal Dutch Shell compared to Sapura Energy?

Like Sapura Energy, other large oil companies such as Royal Dutch Shell also suffered market valuation drops when oil prices fluctuated downwards, as these companies depend heavily on oil price stability. However, their size and diversification allowed them to weather the storm better than Sapura Energy.