Sapura Energy's wholly owned subsidiaries served with notices of arbitration from Brunei Shell Petroleum Co

Friday 05 Jul 2024

KUALA LUMPUR (Oct 2): Sapura Energy Bhd announced that two of its wholly owned subsidiaries, namely Sapura Fabrication Sdn Bhd (SFSB) and Sapura Offshore Sdn Bhd (SOSB), were served with separate notices of arbitration. The arbitration notices involve disputes with Brunei Shell Petroleum Company Sdn Bhd (claimant).

The first arbitration against SFSB is regarding a contract for engineering, procurement, construction and installation works related to the Salman project in Brunei. Brunei Shell Petroleum Co had purportedly terminated part of the contract for cause on March 13, 2023, for various alleged breaches of the contract by SFSB.

The second arbitration against SOSB is in regards to a contract for the pipeline replacement project in Brunei in 2020 (PRP disputes).

Under the first arbitration, which was filed with the Singapore International Arbitration Centre (SIAC), Brunei Shell Petroleum Co has sought the following relief:

A declaration that the Brunei Shell Petroleum Co had validly terminated part of the Contract for cause;
A declaration that SFSB had breached certain provisions of the contract; and
Award of monetary relief to the extent necessary to fully compensate the Brunei Shell Petroleum Co for the damages suffered resulting from the breaches and termination event;
An order for indemnification of the Brunei Shell Petroleum Co for all costs, expenses, and fees in the arbitration as well as pre- and post-award interest.

As for the second arbitration, Brunei Shell Petroleum Co has sought the following relief:

A declaration that Brunei Shell Petroleum Co had validly reduced the scope of the contract for cause;
Declaration that SOSB had breached certain provisions of the contract;
Award of monetary relief to the extent necessary to fully compensate the Brunei Shell Petroleum Co for the damages suffered resulting from the breaches and termination event leading to the Brunei Shell Petroleum Co’s reduction of the scope of the contract for cause;
An order for indemnification of the claimant of all costs, expenses, and fees in the arbitration; and pre- and post-award interest.

Under SIAC rules, SFSB and SOSB are required to file a response to the notices of arbitration with the SIAC within 14 days of receipt of the notices, that being by or before Oct 16, 2023.

According to Sapura Energy’s announcement, there is at present a pending application in the General Division of the High Court of the Republic of Singapore filed by both SFSB and SOSB for, among other things, a recognition of the reorganisation proceedings in Malaysia and a stay of all legal proceedings concerning both company’s properties, rights, obligations and liabilities. (Singapore Recognition Application).

This means that creditors (including the claimant) that are based in Singapore, or creditors that have commenced and/or intended to commence legal action against SFSB and SOSB in Singapore, or whose applicable dispute resolution clause specified that any dispute with either of the companies is to be resolved by way of arbitration in Singapore or litigation through the Singapore courts, have been notified of the Singapore Recognition Application.

It is SFSB and SOSB’s position that the Singapore Recognition Application, if granted, should also operate to stay in both arbitrations.

Sapura Energy has two months to submit regularisation plan

In a separate filing, Sapura Energy said it has two months to submit its regularisation plan to Bursa Securities for approval.

In June this year, the oil and gas company had been granted an extension till Nov 30, 2023 to do so.

“The company together with the appointed advisers are in the midst of developing and fine-tuning its proposed regularisation plan to holistically restructure its business and financial condition,” Sapura Energy said in a filing with Bursa Malaysia on Monday.

It added that it will make the necessary announcement with regards to any development on the matter.

The group slipped into Practice Note (PN17) status on May 31, 2022 due to going concerns over its shareholders’ equity position of RM85 million as of Jan 31, 2022, which was less than 50% of its share capital of RM10.9 billion.

For the first six months ended July 31, 2023 (1HFY2024), the firm saw its net profit more than double to RM188.89 million from RM89.34 million in the previous corresponding period, while revenue grew 1.7% to RM2.09 billion from RM2.06 billion.

The higher profitability for 1HFY2024 was lifted by better earnings contributions from its drilling and exploration and production segments.

Sapura Energy said its 1HFY2024 results showcased its resilience in overcoming multiple operational challenges, including escalating project and financing costs, as well as a lack of access to bank guarantees and working capital, which in turn affected order book replenishment.

Shares in Sapura Energy rose half a sen or 9.09% to five sen, bringing the company a market capitalisation of RM799 million.

Edited ByEsther Lee

Text Size