This article first appeared in The Edge Malaysia Weekly on September 16, 2024 - September 22, 2024

AILING oil and gas (O&G) outfit Barakah Offshore Petroleum Bhd (KL:BARAKAH) is in tail-end negotiations to sell its pipe-laying barge, Kota Laksamana 101 (KL101), to an Indonesian party, sources familiar with the matter tell The Edge.

It is understood that the ongoing discussions are pegged at valuations of less than US$10 million (RM43.05 million) for the 12-year-old vessel, which is under the US$11.4 million (RM49.18 million) tag Barakah had attached to the vessel in March this year, when it decided to sell the prized asset.

Barakah did not respond to questions sent by The Edge and its group president and CEO Datuk Seri Nik Hamdan Daud, who also acts as an executive director, could not be reached for comment.

“There had been a number of interested parties for the vessel (KL101), but it is being targeted more as a modified accommodation barge, so the US$11.4 million price tag [initially set by Barakah] may not be realistic. From what we know the talks are ongoing and Barakah is pushing hard for the sale to go through,” one source says.

Another source familiar with the discussions says he has heard that Export-Import Bank of Malaysia Bhd (Exim Bank) has been consulted and briefed on the possible sale.

To put things in perspective, the timing of the sale of KL101 is imperative as Barakah has about six weeks, or until Oct 31, to submit its regularisation plan to the relevant regulatory authorities for it to exit the Practice Note 17 (PN17) financially distressed category, failing which the company may be delisted from Bursa Malaysia. Barakah slipped into PN17 status in May 2019, and has obtained a number of extensions from Bursa to regulate its financial condition. Whether the regulator will grant another extension or choose to delist the company remains to be seen.

It is also noteworthy that the company’s financial predicament resulted in a default on instalment payments for KL101 then — with Exim Bank — and triggered the PN17 status, which is why the bank is aware of the move to sell the vessel.

In March this year, Exim Bank had agreed to grant an extension until Oct 31 for the purpose of payment of the agreed settlement sum by Barakah. It is not clear how much Barakah owes Exim Bank.

As at end-June this year, Barakah had cash and bank balances of RM16.01 million, short-term investments of RM28.2 million, while on the other side of the balance sheet it had short-term borrowings of RM51.91 million and no long-term borrowings. Barakah had chalked up accumulated losses of RM133.76 million. It is also noteworthy that Barakah’s operating cash flow for the 12 months ended June 2024 (FY2024) was a negative RM13.36 million.

Other than the sale of KL101, the management of Barakah has been looking to revive the company for the past five years at least, and sought a number of methods to resuscitate the company.

There are other ongoing issues plaguing Barakah. The company obtained a favourable verdict from the courts in a lawsuit against EnQuest Petroleum Production Malaysia Ltd in September 2021, where EnQuest was required to pay RM73.57 million, before end-January 2022, with an interest at a rate of 5% per year until full payment. EnQuest’s attempt to appeal the verdict was dismissed at the Federal Court in mid-August this year.

To recap, Barakah’s wholly-owned unit PBJV Group Sdn Bhd had made a claim for works done and/or services rendered for the outstanding sum up until the year 2020 pursuant to a letter of award dated July 2018 and signed, where PBJV was engaged by EnQuest as the contractor for the execution of the provision of the Pan Malaysia Maintenance, Construction and Modification contract from 2018 to 2023.

However, in January 2022 EnQuest filed notice of arbitration against PBJV for alleged losses suffered by Enquest arising from the termination of PBJV as EnQuest’s contractor. Arbitration between EnQuest and PBJV is ongoing.

How this arbitration pans out is anyone’s guess.

With KL101 being idle and laid up, Barakah’s hook-up, commissioning and maintenance arm has been its main revenue generator, contributing about 78% of the group’s RM133.82 million revenue for FY2024. Some 20% or RM26.5 million in revenue was from Barakah’s transport and installation wing.

For FY2024, Barakah chalked up a net profit of RM42.37 million compared with a net loss of RM4 million in the previous financial year. Revenue, however, fell to RM133.82 million in FY2024 from RM136.32 million in FY2023.

The company’s profit in FY2024 was bolstered by a reversal provision accrued purchases of RM70.22 million, which was offset by an impairment of non-current asset held for sale and higher professional fees billing for legal cases of RM16.12 million.

Barakah shares closed unchanged at five sen apiece last Friday for a market capitalisation of RM50.2 million. 

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