Sapura Energy’s Q1 FY2026: Navigating Deep Waters Amidst Restructuring Hopes
Sapura Energy Berhad (Sapura Energy), a name familiar to many Malaysian investors, has just unveiled its financial results for the first quarter ended 30 April 2025 (Q1 FY2026). The report paints a challenging picture of the company’s operational performance, marked by continued losses. However, the underlying narrative is one of persistent restructuring efforts, which are now entering their crucial final stages.
While the numbers reveal a significant widening of losses compared to the previous year, the company’s substantial orderbook and the submission of its Proposed Regularisation Plan to Bursa Malaysia offer a glimmer of hope. This quarter’s report is a testament to the ongoing complexities Sapura Energy faces as it strives for financial stability.
Core Data Highlights: A Quarter of Setbacks
Overall Financial Performance
Sapura Energy’s Q1 FY2026 results show a notable decline in performance, particularly when compared to the corresponding period last year and the immediate preceding quarter. The group recorded a substantial loss, impacted by operational challenges and the absence of one-off gains.
Q1 FY2026 (Ended 30 April 2025)
Revenue: RM801.4 million
Loss Before Taxation: RM471.2 million
Loss After Taxation: RM484.1 million
Loss Attributable to Owners of the Parent: RM478.0 million
Loss Per Share: (2.60) sen
Q1 FY2025 (Ended 30 April 2024)
Revenue: RM1,176.4 million
Loss Before Taxation: RM24.4 million
Loss After Taxation: RM52.6 million
Profit Attributable to Owners of the Parent: RM82.1 million
Earnings Per Share: 0.45 sen
Compared to the same period last year, revenue saw a significant drop of RM375.0 million or 31.9%. The loss before taxation widened drastically by RM446.8 million, indicating a challenging operational environment. The shift from a profit attributable to owners to a substantial loss highlights the severity of the quarter’s performance.
Looking at the immediate preceding quarter (Q4 FY2025), revenue in Q1 FY2026 was lower by RM385.0 million (32.5%). The group’s loss before taxation of RM471.2 million in Q1 FY2026 deteriorated by RM1,032.3 million compared to a profit of RM561.1 million in Q4 FY2025. This was primarily due to higher operating losses from ongoing projects, the absence of a significant RM792.1 million gain from the disposal of an associate (SapuraOMV), and a reduction of RM184.7 million in favourable settlement of claims, all of which were recorded in Q4 FY2025. However, this was partially offset by the absence of a RM209.0 million impairment of property, plant and equipment and goodwill recorded in Q4 FY2025.
Segmental Performance Breakdown
A closer look at the individual business segments reveals the specific areas contributing to the group’s overall performance.
| Business Segment | Q1 FY2026 Revenue (RM’000) | Q1 FY2025 Revenue (RM’000) | Change (%) | Q1 FY2026 PBT (RM’000) | Q1 FY2025 PBT (RM’000) | Change (%) |
|---|---|---|---|---|---|---|
| Engineering and Construction (E&C) | 503,018 | 818,919 | (38.6) | (255,175) | 83,796 | (>100.0) |
| Operations and Maintenance (O&M) | 114,389 | 143,629 | (20.4) | 20,425 | 31,691 | (35.5) |
| Drilling | 210,650 | 251,584 | (16.3) | (81,090) | (77,034) | (5.3) |
| Exploration and Production (E&P) | – | – | – | – | 41,017 | (>100.0) |
- Engineering and Construction (E&C): This segment was the primary driver of the revenue decline, falling by RM315.9 million or 38.6%. This was mainly due to the completion of existing projects, though partially offset by progress on ongoing ones. More critically, the segment swung from a profit before taxation of RM83.8 million in Q1 FY2025 to a loss of RM255.2 million in Q1 FY2026. This significant reversal was attributed to the recognition of additional foreseeable losses from a specific project, which the company’s commentary on prospects indicates is a challenging E&C project in Angola.
- Operations and Maintenance (O&M): Revenue decreased by 20.4% to RM114.4 million, driven by lower activity levels. Consequently, profit before taxation for this segment also saw a 35.5% reduction.
- Drilling: This segment’s revenue declined by 16.3% to RM210.7 million, largely due to lower rig utilisation. Some rigs remained “warm stacked” (meaning they are maintained in a state ready for quick deployment but are not actively operating) after contract completions in FY2025, awaiting new contracts. The segment’s loss before taxation increased by RM4.1 million, also impacted by higher interest costs.
- Exploration and Production (E&P): There was no contribution from the E&P segment in Q1 FY2026, as the group completed the divestment of SapuraOMV in December 2024, marking its exit from this business.
Financial Position: Liquidity and Liabilities
The company’s balance sheet continues to reflect the deep financial challenges it faces, though there are signs of maintained liquidity for immediate operations.
- Cash and Bank Balances: As of 30 April 2025, cash, deposits and bank balances stood at RM4,434.9 million. Importantly, the company highlighted an unrestricted cash balance of RM1.85 billion in the prospects section, which is crucial for its day-to-day operations.
- Shareholders’ Deficit: The accumulated losses have further increased, leading to a shareholders’ deficit of RM3,773.2 million as at 30 April 2025, compared to RM3,602.0 million at 31 January 2025. This translates to a net liabilities per share of RM(0.20).
- Borrowings: Total borrowings remained high at RM10,756.7 million. A critical point to note is that these borrowings are classified as current liabilities due to breaches of financial covenants, giving lenders the right to demand immediate repayment. This classification is a direct result of the material uncertainty related to the company’s ability to continue as a going concern, as highlighted by the auditors.
- Current Liabilities Exceed Current Assets: The report reiterates that as of 31 January 2025, the Group’s current liabilities exceeded its current assets by RM11,251.4 million. This indicates severe liquidity constraints and underscores the urgency of the ongoing debt restructuring.
Navigating the Future: Risks and Prospects
Restructuring Efforts: The Path Forward
Despite the challenging quarter, Sapura Energy’s core focus remains on its comprehensive debt restructuring exercise. This is a critical undertaking aimed at transforming its financial health and exiting its PN17 status.
The Proposed Regularisation Plan was submitted to Bursa Malaysia Securities Berhad on 27 May 2025, a significant milestone. The company targets the Restructuring Effective Date (RED) by August 2025 or, at the latest, by the Longstop Date of 11 March 2026. This plan is multi-faceted, encompassing:
- Proposed Capital Reconstruction: Aimed at adjusting the company’s capital structure.
- Proposed Debt Restructuring: Targeting a substantial reduction in total borrowings from RM10.8 billion to RM5.6 billion. This is a massive undertaking that, if successful, would significantly alleviate the company’s financial burden.
- Proposed Fund-Raising: To inject fresh capital into the business.
- Proposed Exemption: Likely related to regulatory compliance and the PN17 status.
Operationally, the group’s orderbook stands at RM7.9 billion, with an additional RM4.8 billion held by its joint venture and associate entities. The E&C and O&M segments are actively pursuing new prospects, focusing on key areas like transportation & installation, subsea inspection, repair & maintenance, and decommissioning, while also aligning with Environmental, Social, and Governance (ESG) principles.
The company anticipates an improvement in financial performance in subsequent quarters, driven by progressive revenue recognition from ongoing E&C projects and the deployment of certain Drilling rigs on new contracts.
Key Risks and Uncertainties
While the restructuring is progressing, several risks and uncertainties continue to loom over Sapura Energy’s future:
- Going Concern Uncertainty: The auditors have expressed an unqualified opinion with material uncertainty relating to going concern. The ability of the group to continue as a going concern is highly dependent on the timely approvals, execution, and completion of the Proposed Regularisation Plan. Any delays or failure to secure the necessary approvals could have severe implications.
- Operational Execution: The recognition of additional foreseeable losses from a specific E&C project (likely Angola) highlights ongoing operational challenges and cost overruns. The ability to execute current and future projects profitably will be crucial.
- Market Conditions: The oil and gas services sector remains volatile, influenced by global energy prices, geopolitical factors, and client spending. While the report notes that operations are not materially affected by seasonal or cyclical factors except for severe weather, broader market downturns could impact future contract awards and profitability.
- Litigation Landscape: Sapura Energy is involved in numerous material litigations, including arbitration proceedings and winding-up petitions. While many of these petitions are currently stayed due to the court-sanctioned Schemes of Arrangement (SOA), their eventual resolution and potential financial impact remain a concern. For instance, the ongoing appeal against the arbitration award in the Sarku Engineering Services case and the various disputes involving Petrofac, Sapura Energy do Brasil, Brunei Shell Petroleum, and Yunneng Wind Power illustrate the complex legal environment the company operates in. The success of the SOA is critical for managing these liabilities.
- Regulatory Approvals: The Proposed Regularisation Plan requires approvals from Bursa Malaysia and shareholders. Any unexpected hurdles in obtaining these approvals could delay the restructuring process.
Summary and Outlook
Sapura Energy’s Q1 FY2026 report reflects a period of significant operational headwinds, resulting in a widened loss. The decline in revenue across key segments and the recognition of unforeseen project losses underscore the challenges within its core businesses. The company’s financial position remains precarious, with a substantial shareholders’ deficit and borrowings classified as current liabilities, highlighting the critical nature of its liquidity constraints.
However, the quarter also saw tangible progress in its monumental restructuring journey. The submission of the Proposed Regularisation Plan to Bursa Malaysia and the clear targets for debt reduction and capital injection are positive indicators. The company’s healthy unrestricted cash balance and substantial orderbook provide some operational runway, and the expectation of improved financials in coming quarters from ongoing project recognition offers a cautious optimism.
The path ahead for Sapura Energy is undoubtedly complex, heavily reliant on the successful and timely execution of its restructuring plan. The ability to navigate the intricate legal landscape, manage operational costs, and secure new contracts will be paramount to its long-term viability.
Key points from this report include:
- Significant widening of losses in Q1 FY2026 due to operational challenges and absence of one-off gains.
- E&C segment’s swing to substantial loss due to foreseeable losses from a specific project.
- Restructuring efforts are in their final stages, with the Proposed Regularisation Plan submitted to Bursa Malaysia.
- Targeted debt reduction from RM10.8 billion to RM5.6 billion under the restructuring plan.
- Ongoing material uncertainty regarding going concern, contingent on the timely completion of the Proposed Regularisation Plan.
- Multiple ongoing litigations and winding-up petitions, largely stayed but requiring careful management and successful resolution through the Schemes of Arrangement.
What’s Next for Sapura Energy?
From a professional standpoint, Sapura Energy’s Q1 FY2026 results are a stark reminder of the deep-seated issues that have plagued the company. Yet, the relentless pursuit of its restructuring plan offers a credible, albeit challenging, route to recovery. The coming quarters will be pivotal, as the market keenly watches for the approvals of its Regularisation Plan and the tangible impacts of its debt reduction efforts.
Do you think Sapura Energy can successfully complete its ambitious restructuring and return to sustainable profitability in the face of these ongoing challenges? Share your thoughts in the comments below!
