KUALA LUMPUR (Oct 28): Petrol One Resources Bhd said its external auditors Messrs Baker Tilly Monteiro Heng have expressed a disclaimer opinion in the Practice Note 17 (PN17) company’s latest financial statements for the financial year ended June 30, 2016 (FY16).
In its report to the company's shareholders that was filed to Bursa Malaysia today, Baker Tilly expressed “significant doubt” on Petrol One’s ability to continue as a going concern pending the shareholders approving a regularisation plan and its successful implementation, the settlement of defaulted debts, and the ability of the company to attain profitable operations to generate sufficient cash flow to fulfil its obligations as and when they fall due.
The auditors said there were unable to obtain sufficient audit evidence to support the carrying value of the group's marine equipment worth US$623,638 (RM2.51 million), which has not been in use since the disposal of the vessel owned by a subsidiary, One Petroleum (L) Ltd.
Baker Tilly added that it was also unable to ascertain the appropriateness of the carrying value of investments in subsidiaries and amount due from subsidiaries in the books of the company.
"The carrying value of investments in subsidiaries and amount due from subsidiaries in the books of the company, amounted to RM939,177 and RM66.36 million respectively. The projections of future cash flows prepared by the management to support the aforesaid carrying value of investments in subsidiaries and amount due from subsidiaries are based on the assumptions that the proposed regularisation plan have been implemented," it added.
As at June 30, 2016, Petrol One recorded net current liabilities of RM107.36 million and capital deficiency of RM103.5 million. The group have also recorded accumulated losses of RM143.22 million.
To recap, Petrol One and its wholly-owned indirect subsidiary, Arus Dermaga Sdn Bhd, had defaulted on the term loans totalling RM83.4 million provided by RHB Bank (L) Ltd and RHB Bank Bhd since March 31, 2010 and Jan 31, 2011, respectively. As a result, Petrol One slipped into PN17 status on Aug 30, 2012.
On Nov 15, 2013, it had proposed to undertake a two-pronged approach, comprising the group’s business turnaround strategy and the proposed regularisation plan to address its PN17 issues.
The proposed regularisation plan comprises a capital reduction, a share premium reduction, a private placement, a rights issue with warrants, a scheme of arrangement and an amendment to memorandum and/or articles of association.
On Dec 24, 2013, Petrol One and Arus Dermaga entered into a debt settlement agreement with their respective lenders whereby the outstanding loan obligations would be settled in full by a cash payment of RM6.5 million. However, this was later revised to the RM6.5 million being settled by the sale, by the lender, of the shares in the company which had been pledged by a third party as security for the loan of RM3.04 million and the remaining RM3.46 million in cash.
"On Nov 21, 2014, RM6.5 million was paid to the lenders. The group and the company, however, have not recorded the effect of the waiver of the debt pending the completion of the disposal of the pledged shares.
"In view of the matters set out above, there are material uncertainties that may cast significant doubt on the ability of the group and the company to continue as going concerns," said Baker Tilly.
Trading in Petrol One shares has been suspended since May 22.