This article first appeared in The Edge Malaysia Weekly on August 12, 2024 - August 18, 2024

THE future of offshore support vessel (OSV) provider Icon Offshore Bhd (KL:ICON) is in the balance, following reports of an explosion on one of its platform supply vessels (PSVs) in the waters off Sarawak that killed two people and seriously injured a third.

It is understood that oil majors, including Petroliam Nasional Bhd (Petronas), which is the regulator of the oil and gas (O&G) industry in Malaysia, are expected to take a close look at the incident that occurred near an oil platform in Samalaju on Aug 2 and find out what led to the explosion on PSV Icon Amara.

In the O&G industry, health, safety and environment, or HSE, is viewed as paramount, and such an incident where there was loss of life could adversely affect Icon Offshore’s ability to secure future contracts.

“Petronas and basically all oil companies will take the incident seriously when it comes to maritime safety involving their contractors. Since the explosion claimed the lives of two seamen on board the vessel, it will not be something that Petronas can ignore,” an industry observer tells The Edge.

In the chairman’s statement in Icon Offshore’s 2023 annual report, Datuk Abdul Mutalib Alias is quoted as saying that the group has maintained “a zero record of work-related fatalities, a testament to our commitment to the safety of our people. We have reinforced this by sending 52 of our onshore staff members for health and safety standards training”. This suggests how important HSE is in any O&G contract.

Petronas did not immediately respond to questions from The Edge as to whether it was going to investigate the incident and take action against Icon Offshore. At press time, the Lim family of Yinson Holdings Bhd (KL:YINSON) also had not given an answer to The Edge.

According to multiple news reports on Aug 3, quoting Bintulu police chief superintendent Nixon Joshua Ali, an explosion occurred at around 10.40pm on Aug 2 on a vessel near an oil platform in Samalaju, killing two crew members and severely injuring another in the face.

The superintendent confirmed that the vessel was PSV Icon Amara, operated by Icon Offshore.

However, up until press time, neither Icon Offshore nor Petronas had made any statements or announcements regarding the explosion.

“Icon Offshore should have made a statement regarding the explosion. It is an issue that involves public interest. And yet we don’t know what happened,” says another industry observer.

Nevertheless, a source close to the Lim family of Yinson says that Icon Offshore is conducting its own investigation into the explosion. Until a report is completed, the group or its major shareholder will not be making any statements regarding the explosion, he says.

The Lim family had acquired Ekuiti Nasional Bhd’s (Ekuinas) 50.2% stake in Icon Offshore in March this year for RM172.2 million, triggering a mandatory general offer. As at May 9, Liannex Maritime Sdn Bhd, the private vehicle used by the Lim family for the acquisition, held a 56.67% stake in Icon Offshore.

To recap, Ekuinas’ decision to sell its stake in Icon Offshore to the Lim family was criticised because the state-owned private equity (PE) firm had been set up to promote equitable and sustainable bumiputera wealth creation and economic participation by supporting bumiputera entrepreneurs.

The sale also raised questions as to whether Icon Offshore, with its new non-bumiputera controlling shareholder, would be able to win jobs from Petronas, which leans towards awarding contracts to bumiputera-controlled entities.

The recent explosion is expected to put a dent in Icon Offshore’s track record. Already, the group is bleeding red ink — in the first quarter ended March 31, 2024 (1QFY2024), it saw its net loss widen to RM23.6 million from RM4.26 million a year ago.

The bigger loss was attributed to additional provisions amounting to RM13.1 million related to the charter of replacement vessels and impairment of receivables, said Icon Offshore when announcing the quarterly results on May 23. Low utilisation of vessels due to the late start of chartering because of the monsoon season and planned maintenance also contributed to the loss. Revenue for the quarter shrank 30% year on year to RM43.3 million.

Icon Offshore’s loss was in sharp contrast to the performance of its peers in the OSV segment. They have turned around, buoyed by better charter rates and a dearth of vessels.

Icon Offshore slipped into the red in 4QFY2023, when it recorded a net loss of RM1.54 million on revenue of RM42.17 million. This was its first quarterly net loss since 1QFY2023.

However, the group sees stronger performance in the remaining quarter of the current financial year, supported by sustainable crude oil prices and strong O&G activity.

“The group remains committed to its core business strategies by focusing on operational improvement, cost optimisation and conserving cash to register stable business and financial performance,” said Icon Offshore in its filing with Bursa Malaysia.

As at March 31, Icon Offshore’s order book for its OSV segment stood at RM322 million, with long-term contracts accounting for 87% of the orders. It said it was focused on improving the OSV business.

Icon Offshore’s share price dropped 15.6% last Monday (Aug 5) to 92 sen, in line with the crash in regional markets but the stock pared its losses to close at RM1.03 last Friday, valuing the group at RM641.24 million. Year to date, the counter has risen 80.7%. 

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