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SapuraKencana Plans Mexican Expansion To Tap Growth In Americas
Perspective | 09 July 2014

SapuraKencana Petroleum, Malaysia’s biggest listed oil and gas services company by market value, is seeking to expand operations in Mexico as it taps growth in the Americas.

SapuraKencana may set up a base and enter into joint ventures in the North American nation, chief executive officer, Shahril Shamsuddin, said in an interview in Kuala Lumpur on 7 July, 2014. The Americas, including Brazil, account for almost half of the company’s order book of about RM28 billion (US$8.8 billion).

“They are growth markets and they are opening up,” Shahril said. “Our assets are new, they are efficient, which would allow us to bid very, very competitively. We are bidding on projects” worth about US$3 billion in the Americas, he said.

SapuraKencana is expanding its business into new markets even as rivals such as Technip SA said spending growth in the industry may ease. The Kuala Lumpur-based company’s strategy is to redeploy assets to growth areas including Africa when it sees any slowdown in some of its markets, Shahril said.

Total SA, Royal Dutch Shell and Chevron Corporation are among companies that have said they plan to rein in spending. International Monetary Fund managing director, Christine Lagarde, signaled a cut in the institution’s global growth forecasts on 6 July, 2014, saying investment is still weak and that risks remain in the US even as its rebound accelerates.

“For the past three years, we’ve seen a slowing down on some of the work being dished out,” Shahril said. “But there’ll always be work from the national oil companies, which need to do work because hydrocarbons are what fuel revenue for their countries.”

Contract Targets
The company has been awarded survey work in Central America, he said. It targets winning about RM10 billion of contracts in total a year, and completes about RM7 billion to RM8 billion of projects annually, he said.

SapuraKencana emerged as the world’s largest operator of tender rigs last year after buying part of Seadrill’s business for US$2.9 billion. In February 2014, it completed the purchase of Newfield Malaysia Holdings for US$895.9 million.

“The company has good earnings visibility with its RM30 billion order book, and we are starting to see earnings from the Newfield assets,” said Arhnue Tan, an analyst at Alliance Investment Bank in Kuala Lumpur. “The company would have to maintain its order book levels to sustain its contracts burn rate.”

While SapuraKencana isn’t interested in Murphy Oil Corporation’s Malaysian oil and gas assets that were up for sale, Shahril said they are bidding to take over some of Petroliam Nasional’s holdings in Vietnam. The company won’t rule out the possibility of spinning off some of its units if it helps in expansion of the business, he said.

The company has RM19.2 billion of debt outstanding, according to data compiled by Bloomberg.


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