KUALA LUMPUR (Oct 29): Barakah Offshore Petroleum Bhd's external auditor Messrs HLB AAC PLT has expressed a qualified opinion in the company’s audited financial statements for the financial year ended June 30, 2021 (FY21), as well as flagged the existence of material uncertainty related to its ability to continue as a going concern.

In a bourse filing on Friday, HLB AAC, which was appointed as the auditor of the group in 2020, said the basis for the qualified opinion was due to the existence and valuation of inventories as at June 30, 2019 that was issued in the previous auditor’s report.

"(However,) we were not able to observe the counting of the physical inventories or satisfy ourselves concerning those inventory quantities as at the beginning of the previous financial year by alternative means. Since opening inventories affect the determination of the results of operations, we were unable to determine whether adjustments to the results of the operations and opening retained earnings might be necessary for 2020.

"Our audit opinion on the current year’s financial statements is also modified because of the possible effect of this matter on the comparability of the current year’s figures and the corresponding figures," it noted.

As for casting doubt on Barakah's ability to continue as a going concern, HLB AAC drew attention to the group’s current liabilities, which had exceeded its current assets by RM166.737 million as at June 30, 2021, as well as its deficit shareholders’ fund of RM89.777 million.

The external auditor also highlighted Barakah's indirect wholly-owned subsidiary Kota Laksamana 101 Ltd's receipt of a first and second notice of demand of its term loan facilities from a licensed bank on an event of default in payment of loan instalments on May 17, 2019 and Aug 16, 2019 respectively. On Oct 22, 2019, the unit received a notice of termination, recall and demand of the facilities for an outstanding amount of US$43.59 million.

On May 17, 2019, Barakah had also slipped into Practice Note 17 (PN17) status. Then on July 8, 2019, a wholly-owned subsidiary PBJV Group Sdn Bhd had received a notice of suspension of its licence from a major customer — Petroliam Nasional Bhd (Petronas) — for a period of three years. "During the suspension period, Petronas, including its subsidiaries and any petroleum arrangement contractors, will not award any new contracts to PBJV, and PBJV will not be allowed to bid for new projects undertaken by Petronas," said HLB AAC.

Lastly, Barakah is involved in several pending material litigations, it added.

Meanwhile, Barakah said it is currently formulating a plan to regularise its financial conditions to uplift itself from the PN17 status, which is due for submission on Nov 17.

"Barring any unforeseen circumstances, the company expects to resolve the above-mentioned issues relating to the qualified opinion and material uncertainty related to going concern in the subsequent financial year," it added.

Barakah shares closed unchanged at 9.5 sen on Friday, bringing a market capitalisation of RM95.28 million.