SapuraKencana Plans Mexican Expansion to Tap Growth in AmericasElffie Chew
SapuraKencana Petroleum Bhd., 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 today. The Americas, including Brazil, account for almost half of the company’s order book of about 28 billion ringgit ($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 $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 Plc and Chevron Corp. are among companies that have said they plan to rein in spending. International Monetary Fund Managing Director Christine Lagarde yesterday signaled a cut in the institution’s global growth forecasts, saying investment is still weak and that risks remain in the U.S. 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.”
The company has been awarded survey work in central America, he said. It targets winning about 10 billion ringgit of contracts in total a year, and completes about 7 billion ringgit to 8 billion ringgit of projects annually, he said.
SapuraKencana emerged as the world’s largest operator of tender rigs last year after buying part of Seadrill Ltd.’s business for $2.9 billion. In February, it completed the purchase of Newfield Malaysia Holdings Inc. for $895.9 million.
“The company has good earnings visibility with its 30 billion ringgit order book, and we are starting to see earnings from the Newfield assets,” said Arhnue Tan, an analyst at Alliance Investment Bank Bhd. 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 Corp.’s Malaysian oil and gas assets that were up for sale, Shahril said they are bidding to take over some of Petroliam Nasional Bhd.’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 19.2 billion ringgit of debt outstanding, according to data compiled by Bloomberg.