Malaysia’s cash-strapped Sapura Energy, which is divesting assets to help keep it afloat, has triggered the Practice Note 17 (PN17) criteria and subsequently has been classified as PN17 by Bursa Malaysia Securities, which hosts the local stock exchange (Bursa Malaysia).

Sapura confirmed that it has become “an affected listed issuer” under PN17 as its 85 million ringgit (US$19.35 million) shareholders’ equity on a consolidated basis is now less than 50% of its 10.9 billion ringgit share capital.

“[Also], the company’s auditors have highlighted a material uncertainty related to going concern in our latest audited financial statements for the financial year ended 31 January 2022,” admitted Sapura.

Offshore and marine contractor Sapura, which also has upstream interests, has been unable to rectify its financial woes and will now join the extensive list of companies under PN17.

Pursuant to the PN17 requirements, Sapura is formulating a regularisation plan to address its PN17 status in tandem with a proposed scheme of arrangement and the company added it would make monthly announcements on the progress.

“We are taking the necessary steps to address our PN17 status,” Sapura said in a statement.

“As announced on 10 March, the company obtained an order pursuant to Section 366 of the Companies Act 2016 to summon meetings of the various classes of its creditors to consider, and if thought fit and appropriate, to approve, a proposed scheme of arrangement and compromise between the company and its creditors.

“We are currently undertaking a proof of debt exercise in connection with the proposed scheme of arrangement.”

Failure to comply with the PN17 status requirements, could see Sapura’s listed securities suspended from trading and have the company delisted from the exchange.

Although Sapura’s share price slumped by almost 12% on news of its PN17 status, PublicInvest Research has maintained its “neutral” rating for the company, reported The Edge Markets.

PublicInvest said that Sapura appears to be a high-profile casualty of the Covid-19 pandemic with operational challenges resulting in impairment losses on goodwill for its drilling and engineering segments and impairment on its fixed assets.

Bursa Securities said that it would continue to monitor the progress of Sapura in respect of its compliance with the main market listing requirements.

As of 1 June 2022, there were 28 companies under PN17 and GN3, which represent 3.02% of the 928 companies listed on the main and ACE markets of Bursa Securities.

Contractors that work within the oil and gas sector among those 28 companies include Barakah Offshore Petroleum, EA Technique, Scomi Energy Services, Serba Dinamik and TH Heavy Engineering, according to local media reports.

The GN3 designation means that shareholders’ equity of a listed corporation is 25% or less of that company’s share capital.