Petronas licence for Barakah’s unit suspended on non-performance

The unit is allowed to continue and complete existing contracts with Petronas, its subsidiaries, as well as any PACs

by MARK RAO / pic by BLOOMBERG

THE operating licence for Barakah Offshore Petroleum Bhd’s wholly owned unit, PBJV Group Sdn Bhd, was suspended by Petroliam Nasional Bhd (Petronas) due to reported nonperformance.

This comes after Petronas’ upstream vehicle, Petronas Carigali Sdn Bhd, filed an adverse report pertaining to the nonperformance of PBJV’s responsibilities for an underwater services contract.

Consequently, Petronas moved to suspend the equipment and service provider’s licence for a period of three years effective July 8 this year, Barakah stated.

“The implication of the letter is that Petronas, including its subsidiaries and any petroleum arrangement contractors (PACs), will not award any new contracts to PBJV during the suspension period,” the offshore oil and gas (O&G) service provider noted in an exchange filing yesterday.

“PBJV will not be allowed to bid for new projects undertaken by Petronas, including its subsidiaries and any PACs during the suspension period.”

However, PBJV is allowed to continue and complete existing and ongoing contracts with Petronas, its subsidiaries, as well as other PACs based on the terms and conditions of the respective contracts, Barakah noted.

The firm said it will seek clarification from Petronas and appeal against the suspension.

According to the company’s website, PBJV is entrusted with 30 categories of Petronas licensing to provide equipment and services in Malaysia’s O&G industry, without which the company cannot operate in the country.

The suspension of its operating licence not only prevents the company from working with Petronas, but also PACs such as Royal Dutch Shell plc, Murphy Oil Corp, Exxon Mobil Corp and JX Nippon O&G Exploration Corp.

Petronas’ decision to suspend PBJV’s licence is a setback for Barakah, who recently secured a white knight to help the company regularise its financial condition and lift itself out of Practice Note 17 (PN17) status.

As part of its proposed regularisation, the loss-making company agreed to dispose of its pipelay barge to Singaporean ship bunkering services company Lecca Group Pte Ltd for US$21 million (RM88 million).

The proceeds from the asset disposal — which is currently owned by PBJV’s wholly owned unit, Kota Laksamana 101 Ltd — will be fully utilised to pay the debt owed to Export-Import Bank of Malaysia Bhd (Exim Bank).

Barakah slipped into PN17 status on May 17 this year after failing to make instalment payments totalling US$2.65 million to Exim Bank owed by Kota Laksamana 101.

Lecca Group also agreed to subscribe to 375 million new placement shares in Barakah or 44.87% of the company’s issued share capital at four sen each, as well as RM25 million in five-year 10% redeemable convertible unsecured loan stocks (RCULS).

The exercise will raise up to RM40 million in funds, of which 80% or RM32 million will be used to pay back creditors.

Lecca Group has the option to subscribe to a further 250 million placements shares in Barakah, also at four sen apiece, within five years of when the first placement is completed.

The exercises will result in Lecca Group becoming a majority shareholder in the company and, as a result, Barakah is seeking to exempt the company from undertaking its mandatory takeover obligation.

Barakah also intends to reduce its issued share capital from RM231.89 million to RM46.38 million, resulting in an RM185.51 million credit to offset accumulated losses which totalled RM326.14 million as at May 31 this year.

The company is further seeking a waiver of debt amounting to RM153.99 million owed to creditors, as part of its undertaking to settle the amount owed by the company and PBJV.

This includes a RM32 million cash payment and the issuance of RM33 million in five-year 3% RCULS and RM69 million in five-year 5% redeemable unsecured loan stocks at RM1 each to creditors.

The company’s regularisation needs a sign-off from Bursa Malaysia Securities Bhd, as well as approval from the Securities Commission Malaysia for the RCULS issuance and Lecca Group’s exemption from its mandatory takeover obligation.

Barring unforeseen circumstances and subject to all relevant approvals being secured, Barakah expects to complete its proposed regularisation by the first quarter of 2020.