Bursa’s E&P Sector: A Story of Reinvention Amid Volatility

Case Notes 43: In this article titled "Beyond Boom and Bust: The New Trajectory of Bursa’s Exploration & Production Players in the Oil and Gas industry", I look at how the Bursa E&P sector has performed over the past decade and provide an overview of a number of key players in the sector.

Malaysia’s oil and gas exploration and production (E&P) sector has long been a cornerstone of the nation’s industrial growth and energy security. Yet over the past 15 years, it has grappled with profound disruption.

It was caught between volatile oil prices, global geopolitical shifts, capital market pressures, and the mounting urgency of the energy transition. Once defined by boom-bust cycles, the sector is now undergoing a deeper structural transformation.

This article examines how Bursa-listed E&P companies have responded to these challenges by surviving and rethinking what it means to compete in a volatile and evolving energy landscape. 

It begins with a sector-wide analysis of long-term financial and operational trends, before drilling down into how individual companies reinvent themselves through strategic shifts, capital restructuring, and business model evolution.

In short, this is not just a story of oil – it is a story of adaptation, resilience, and reinvention in one of Malaysia’s most important and exposed industries.

Each company offers a unique window into how investment opportunities emerge from challenge and change. Viewed alongside the sector’s broader financial trends, their stories suggest that this often-overlooked corner of the market may deserve a closer look from investors.

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Contents

• Introduction

• Sector Overview: Resilience Tested, Models Evolved

• Company Analysis: Strategic Shifts in a Post-Boom Era

• Is Sapura Energy’s Comeback for Real?

• Reach Energy: A Turnaround at a Crossroads

• Petra Energy's Comeback Story—Is It Already Under Threat?

• Can Hibiscus Withstand the Slide in Oil Prices?

• MISC: A Transformation in Progress, Returns Yet to Follow

• From Shipbuilder to Profit Machine: How Coastal Contracts Reinvented Itself

• Is the Market Sleeping on Bumi Armada’s Turnaround?

• Yinson’s FPSO Fortress: Immune to Oil Price Swings?

• Conclusion

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Sector Overview: Resilience Tested, Models Evolved

Malaysia’s oil and gas exploration and production (E&P) sector has undergone a turbulent transformation over the past 15 years. Shaped by shifting oil price regimes, geopolitical volatility, and the mounting global push for decarbonisation, companies have had to adapt both operationally and financially. This environment has tested the resilience of established players and forced smaller firms to rethink their strategies.

Behind the sector’s headline growth lies a more nuanced reality - one of diverging financial outcomes, evolving cost structures, and tightening capital discipline. A closer look reveals that while some performance indicators have shown modest recovery since the mid-2010s downturn, others continue to reflect deep structural inefficiencies.

The following analysis unpacks how these sector-wide trends have played out in practice, first through a detailed look at sector performance metrics, and then through company-specific reviews that highlight the strategic paths taken by individual Bursa-listed E&P firms.

Sector details

Company size dispersion is significant, with total equity ranging from RM 832 million to RM 60 billion. This wide range explains the diverse performance profiles within the sector. Refer to Table 1.

Table 1: Sector Total Assets and Total Equity

The past 15 years have been a very mixed one for the sector. Refer to Chart 1. From 2010 to 2024, while the sector median revenue grew at 7.1 % CAGR, the median PAT only grew at 1.0 % CAGR. For most of the period, the median PAT declined and only turned around post-2020.

Chart 1: Sector Revenue and PAT

Given the profit picture, you should not be surprised to see that there was hardly any growth in the returns. Both the median ROE and median ROA in 2024 were lower than their respective returns in 2010. 

The positive point is that the returns seemed to have reached the bottom around 2018 and have been trending up since then.

Chart 2: Sector Returns

The interesting feature of the sector is the contrasting correlation between the metrics and Brent crude oil prices. Refer to Chart 3. Over the past 15 years:

• There was hardly any correlation (6%) between the sector median revenue and Brent crude oil price.

• There was a 58% correlation between the sector median ROE and Brent crude oil price, driven by the same correlation between the sector median PAT and Brent crude oil.

The findings suggest that the sector appears to have stable revenues regardless of oil price movements. But its profitability is significantly affected by oil price volatility. This suggests margin-driven sensitivity to oil rather than top-line dependence.

Chart 3: Correlation between PAT, ROE with Brent Crude Oil Price

Looking at Chart 4, there seems to be a long-term decline in the median leverage, despite a surge in 2022. This is in line with the decline in the median DE ratio. Note that the surge in the DE in 2022 was more pronounced compared to the leverage. 

Chart 4: Sector Leverage and DE

The sector also saw declining asset turnover, suggesting no improvement in capital efficiency. However, not all is gloomy, as gross profitability seemed to be turning around post-2016. Nevertheless, the 2024 median gross profitability was still lower than that in 2015.

Chart 5: Sector Asset Turnover and Gross Profitability

The other positive sign is the improving gross profit margin and operating profit margin. Refer to Chart 6. 

Chart 6: Sector Gross Profit Margin and Operating Profit Margin

Company Analysis: Strategic Shifts in a Post-Boom Era

While the sector as a whole has experienced mixed fortunes, the individual trajectories of Bursa-listed E&P companies reveal the varied strategies and outcomes shaped by their size, asset base, and strategic responses.

• Sapura Energy illustrates the high-risk end of the sector, grappling with legacy contract losses, high debt, and PN17 status despite restructuring efforts, making it a speculative play best left to restructuring specialists.

• Reach Energy offers a cautionary tale of operational difficulties and funding constraints, illustrating the risks of undercapitalised expansion.

• Petra Energy. Once a brownfield services provider, Petra Energy made a bold leap into upstream operations, improving returns just as oil prices began to fall, raising questions about whether its comeback can weather another downturn.

• Hibiscus Petroleum stands out as a nimble, pure-play E&P company that has expanded through acquisitions but faces challenges in sustaining profitability amid volatile oil prices.

• MISC is in the midst of a long-term transformation into a sustainable energy logistics player, but its returns remain subdued, with capital-heavy investments yet to translate into improved profitability.

• Coastal Contracts has successfully reinvented itself from a shipbuilder to an energy infrastructure service provider with long-term gas contracts, resulting in stronger returns and reduced oil price sensitivity.

• Bumi Armada has delivered an impressive turnaround by focusing on high-margin, long-term FPSO contracts, but the market appears to be overlooking its earnings stability amid broader oil price declines.

• Yinson continues to thrive as a contract-driven FPSO operator with low near-term oil price exposure, though concerns remain about future contract flow if crude prices stay weak.

Together, these company profiles highlight how the same macro headwinds have led to very different paths - some marked by resilience and innovation, others by financial strain and strategic missteps.

The above sequence of company analyses follows the narrative arc of reinvention across the sector:

• Start with firms like Sapura Energy and Reach Energy that are navigating deep restructuring and survival challenges. 

• Petra Energy follows as a case of successful transformation from a service contractor to an upstream operator, now facing fresh pressures from falling oil prices. 

• Then move to Hibiscus Petroleum, where rapid acquisition-led growth is being tested by rising costs and softer margins. 

• Strategic repositioning efforts by MISC illustrate a transformation still underway, while Coastal Contracts and Bumi Armada showcase tangible reinvention with improved financial performance. 

• Finally, Yinson represents a forward-looking model of resilience, combining stable FPSO operations with green energy diversification. 

What follows is a closer look at how each company is charting its path through volatility.

Is Sapura Energy’s Comeback for Real?

Sapura Energy Berhad is a Malaysia-based global energy services provider, operating in over 10 countries with core businesses in EPCIC (engineering and construction), operations and maintenance, and tender-assist drilling.

Financial strain began in late 2019, driven by unprofitable legacy fixed-price contracts, a heavy debt burden from earlier expansion, and tightening working capital. The COVID-19 pandemic worsened the situation, causing delays, cost overruns, and liquidity stress.

While the company generated operating profits in most of the past 6 years, net losses were driven by significant write-offs, impairments, and high interest expenses. The positive PAT in 2025 was primarily due to gains from the disposal of investments.

By 2022, Sapura Energy was classified as a PN17 issuer, prompting a comprehensive Reset Plan focused on debt restructuring, exiting loss-making segments - particularly exploration and production - and refocusing on core operations. It also launched Kitar Solutions, a joint venture offering offshore decommissioning services, aligning with its sustainability goals and energy transition strategy.

However, the turnaround and restructuring plan did not anticipate renewed oil price declines stemming from tariff-related tensions. Lower prices now add pressure on revenue and cash flows, with recovery hinging on timing, execution discipline, and continued stakeholder support.

For most retail investors, Sapura Energy remains a high-risk proposition - best approached by those with expertise in financial restructuring and the oil and gas sector.

Reach Energy: A Turnaround at a Crossroads

Reach’s core business is the exploration, development, and sale of crude oil and petroleum products. Since 2019, the company has been in turnaround mode, and while losses have narrowed significantly, it remained in the red in 2024. 

A major shift came in 2023 when Super Racer Limited, a Hong Kong-based investor, became the controlling shareholder through a debt-to-equity swap. The board was restructured, and strategic control shifted from Malaysian operators to Hong Kong financial professionals.

Reach began repositioning itself - from a technically driven E&P operator to a financially driven energy investment platform. The focus shifted from field expansion to balance sheet repair and asset optimization.

Now, just as the turnaround seemed to be gaining traction, the company faces a new challenge: declining crude oil prices triggered by tariff pressures. This may force Reach to accelerate its repositioning, prioritizing:

• Cost containment and operational downsizing.

• Asset monetization or divestment.

• Strategic partnerships.

• Diversification beyond upstream oil and gas.

In short, Reach Energy is no longer a straightforward oil producer. For fundamental investors, unless there is high conviction in a clear catalyst or turnaround outcome, it remains a speculative and special situation play.

Chart 7: Reach Energy - Business. Market. Value as of 20 April 2025

Petra Energy's Comeback Story—Is It Already Under Threat?

In 2019, Petra Energy was primarily a brownfield services provider, focused on hook-up and commissioning, maintenance, construction, and marine support. By 2023/24, it had transformed into a petroleum contractor and operator:

• Sole operator of the Banang oilfield under a Technical Services Agreement with PETRONAS.

• Production sharing contract (PSC) operator for Block SK433 (onshore Sarawak) via a Petroleum Contract with PETROS.

This marked a strategic leap from service contractor to resource holder. Profitability declined from 2019 to 2022 due to transitional costs, pandemic-related project delays, and early upstream investments.

A turnaround followed in 2023, driven by improved marine utilization, stronger service execution, and higher contributions from Banang. This progress is reflected in its Goldmine position on the Fundamental Mapper.

Yet, just as returns improve, Petra now faces the challenge of falling crude oil prices. While its PSC terms are undisclosed, such contracts typically link revenue to oil prices through cost recovery and profit-sharing mechanisms.

If prices stay low, financial performance may come under renewed pressure, depending on the duration of the current tariff war. The question is: Has the market priced this in?

Chart 8: Petra Energy - Business. Market. Value as of 18 April 2025

Can Hibiscus Withstand the Slide in Oil Prices?

In 2024, Hibiscus can be described as a regionally focused, independent upstream oil and gas company. It has operatorship control over a diversified portfolio of producing and development assets across Malaysia, Vietnam, and the United Kingdom. 

This marks a significant evolution from just six years ago, when Hibiscus had only two core assets. Since then, its total assets have nearly tripled, from RM2.4 billion in 2019 to RM6.6 billion in 2023, reflecting the company’s strategic acquisition-led growth.

To fund this expansion, Hibiscus has tapped both debt and equity markets. Between 2019 and 2024:

• Total debt increased from RM5 million to RM749 million.

• Total equity expanded from RM1.2 billion to RM3.1 billion.

While ROA improved from 11.6% in 2019 to 13.1% in 2024, the enlarged capital base has diluted returns to shareholders. ROE declined to 16.1% in 2024, down from 20.6% in 2019, despite a spike to 35.5% in 2022 following the Repsol acquisition and elevated oil prices.

With crude oil prices declining in the wake of ongoing trade tensions and tariff-related uncertainties, there are concerns about Hibiscus’s ability to sustain its current profit levels. 

Lower demand and weaker pricing could pressure margins, particularly given the company’s increased cost base. The declining share price since the start of the year may be a reflection of these market concerns.

However, one mitigating factor is the historically moderate correlation between oil prices and Hibiscus’s ROE. Over the past 12 years, the correlation between year-end Brent crude prices and the company’s ROE has only been about 40%. 

This suggests that while oil prices do influence profitability, ROE is shaped by a more complex mix of factors, including production volume, capital discipline, cost control, and timing of investments. As such, the potential profit impact of lower oil prices may not be as severe as feared.

Chart 9: Hibiscus - Business. Market. Value as of 19 April 2025

MISC: A Transformation in Progress, Returns Yet to Follow

Between 2019 and 2024, MISC Berhad transitioned from a conventional energy shipping company into a forward-looking provider of sustainable maritime and energy solutions. This transformation was shaped by decarbonisation trends, the energy transition, and a strategic push toward innovation. 

A key milestone was the successful commissioning of the FPSO Marechal Duque de Caxias in Brazil, with the Offshore Business contributing about 12% of Group revenue in 2024.

Despite these strategic shifts - global expansion, entry into deepwater markets, and fleet modernisation - financial returns have yet to show meaningful improvement. 

ROE in 2024 stood at 3.2%, below the 4.0% recorded in 2019, despite a brief rebound during 2022–2023. This reflects a transitional earnings phase, as capital-intensive projects like FPSOs and low-emission tankers are only beginning to contribute materially to earnings.

Legacy challenges, especially in Marine & Heavy Engineering, and a large equity base have also suppressed ROE. As a result, MISC currently maps into the Quicksand quadrant in the Fundamental Mapper, where strategic intent is clear, but financial outcomes lag.

However, this should not be mistaken for a failed transformation. With new assets now operational and legacy drag expected to ease, MISC is well-positioned to improve its returns, though the market has yet to fully price in this potential. 

In the context of the Fundamental Mapper, MISC could move out of its current position in the Quicksand quadrant once improving returns begin to materialise. The recent decline in its share price suggests that the market has not yet recognised this trajectory.

Chart 10: MISC - Business. Market. Value as of 19 April 2025

From Shipbuilder to Profit Machine: How Coastal Contracts Reinvented Itself

In 2019, Coastal was primarily engaged in shipbuilding, ship repair, and vessel chartering. Yard operations and marine-related activities were the core of its business. Since then, the company has undergone a strategic transformation:

• 2021–2023: Coastal significantly reduced its emphasis on shipbuilding and shifted its focus toward offshore gas infrastructure, particularly in gas processing and compression services.

• 2024: Coastal is now predominantly involved in energy infrastructure support services, delivered through long-term contracts under joint ventures, most notably the Perdiz and EMC gas compression projects in Mexico.

This transformation has placed the company in a stronger profit position. Return on equity rose from 1.2% in 2019 to 9.3% in 2024, reflecting improved capital efficiency and a more resilient income base.

Importantly, this change in business model is fortuitous, given the declining crude oil prices following the global tariff war. In 2019, Coastal's performance was closely tied to oil prices, as demand for newbuild vessels and charter services moved in tandem with offshore exploration activity. 

By contrast, in 2024, while it still serves the upstream oil and gas sector via PEMEX, its exposure to volatile crude prices is now indirect. 

However, the decline in Coastal’s stock price appears to contradict its improved fundamentals and lower risk profile as shown in the Fundamental Mapper.

Chart 11: Coastal Contracts - Business. Market. Value as of 18 April 2025

Is the Market Sleeping on Bumi Armada’s Turnaround?

Over the past six years, Bumi Armada has transitioned from a dual-segment model - comprising FPSO operations and Offshore Marine Services - into a focused, integrated offshore production business. 

The offshore support vessel segment was gradually scaled down, and by 2022, all operational assets were consolidated under a single Operations unit. A new Technology, Engineering & Projects unit was also established to provide engineering consultancy and project support services.

Geographically, Bumi Armada streamlined its footprint while maintaining a presence in key offshore regions across Asia, Africa, and Europe. By 2023, its operations spanned five continents, but with fewer, more strategically aligned assets focused on high-value, long-term production contracts.

These strategic shifts have yielded strong results. Net profit surged from RM 38 million in 2019 to RM 656 million in 2024, while ROE improved from 1.2% to 11.3%. This improvement is reflected in its Goldmine quadrant in the Fundamental Mapper.

Can this performance be sustained amid declining crude oil prices triggered by the current tariff war?

According to the company, its core revenue is not directly tied to crude oil prices. This is due to its long-term, fixed-rate FPSO contracts, which provide stable cash flows regardless of short-term oil price movements. 

While broader market conditions, such as lower crude prices, may affect future contract opportunities or investment cycles, Bumi Armada’s current revenue base remains largely insulated from these fluctuations. 

Has the market missed this picture, given the declining stock price since the start of the year? 

Chart 12: Bumi Armada - Business. Market. Value as of 18 April 2025

Yinson’s FPSO Fortress: Immune to Oil Price Swings?

Over the past six years, Yinson’s core FPSO business has not only remained central - it has grown stronger, more technologically advanced, and better aligned with ESG goals.

While the company has diversified into renewables and green technologies, this has not diluted its FPSO identity. On the contrary, diversification has de-risked and future-proofed the business, while the FPSO segment continues to serve as its financial and operational bedrock.

Yinson’s FPSO revenue is contract-driven, offering long-term stability and earnings visibility with minimal sensitivity to crude oil prices. Revenue growth is primarily driven by project execution, fleet expansion, and operational performance, not oil price movements.

As such, a short-term decline in crude oil prices due to tariff-driven macro concerns should not materially affect Yinson’s profitability in the immediate to short term.

However, it is important to note that future demand for FPSO projects is indirectly tied to crude oil prices, as lower prices can reduce upstream investment appetite. If prices remain depressed over a prolonged period, this could slow the award of new FPSO contracts and affect long-term growth prospects.

Given this context, the recent decline in Yinson’s share price could reflect market concerns over a potential prolonged downturn in crude oil prices and its implications for future contract flow, even if near-term earnings remain stable. This could explain its Quicksand position in the Fundamental Mapper.

Chart 13: Yinson - Business. Market. Value as of 18 April 2025

Conclusion

The past 15 years have tested Malaysia’s E&P sector in ways few could have foreseen - from oil price shocks and debt-fueled expansions to pandemic disruptions and an accelerating energy transition. 

Through this turbulence, Bursa-listed companies have responded in markedly different ways:

• Some were forced into painful restructurings.

• Others are seizing the moment to reinvent their models.

• A few are proactively positioning themselves for a low-carbon future.

The financial outcomes, as shown, are as varied as the strategies. Firms like Sapura and Reach remain high-risk recovery stories, while Petra and Hibiscus navigate post-expansion pressures. MISC is still in the midst of transformation, yet to translate vision into returns. Coastal and Bumi Armada have rebuilt around more resilient operating models, and Yinson stands out as a rare example of reinvention from strength, not necessity.

What unites these companies is a shared imperative - the need to evolve in a sector where volatility is not the exception but the rule. Investors must now judge not only past performance but also the credibility and timing of each company’s strategic response. In this post-boom era, reinvention is no longer optional – it is the price of survival.

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PS: If you are in Malaysia or Singapore, the e-book can only be download from Kobo and Google Play. 

Disclaimer & Disclosure

I am not an investment adviser, security analyst, or stockbroker.  The contents are meant for educational purposes and should not be taken as any recommendation to purchase or dispose of shares in the featured companies.   Investments or strategies mentioned on this website may not be suitable for you and you should have your own independent decision regarding them. 

The opinions expressed here are based on information I consider reliable but I do not warrant its completeness or accuracy and should not be relied on as such. 

I may have equity interests in some of the companies featured.

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