This article first appeared in The Edge Financial Daily on December 31, 2019

KUALA LUMPUR: With Singapore’s Lecca Group Pte Ltd no longer the potential white knight for Barakah Offshore Petroleum Bhd, the debt-laden oil and gas outfit is under pressure to seek a new buyer for its pipe-laying barge Kota Laksamana 101 (KL101).

Meanwhile, Barakah is scrambling to get the prized asset to work overseas as its operations here have been halted due to a three-year suspension since July 2019 by Petroliam Nasional Bhd (Petronas).

“Lecca is not in the game anymore,” group president and chief executive officer Nik Hamdan Daud told reporters after Barakah’s annual general meeting yesterday.

Barakah is now in talks with two parties — one local and another international — to rent out KL101, which caused nearly half of the group’s losses on financing and maintenance costs.

KL101’s holding company Kota Laksamana 101 Ltd received a notice of termination, recall and demand from Export-Import Bank of Malaysia Bhd in October for defaulting on US$43.59 million (RM182.6 million).

“A disposal is a potential step to ease our burden for now,” Nik Hamdan said, adding that nothing has been firmed up so far.

Barakah pulled the plug on its debt restructuring scheme last August, and is now seeking a new investor to be part of its regularisation plan due in May 2020.

Under the now-scrapped proposal, Barakah and its wholly-owned PBJV Group Sdn Bhd were supposed to receive a haircut on their debts, while Lecca Group was to be a major shareholder of Barakah and to acquire KL101 for some US$21 million in cash.

The scheme was cancelled after Petronas suspended PBJV’s operating licence for three years from July 8, 2019 relating to its non-performance involving underwater services for Petronas Carigali Sdn Bhd.

It effectively rendered PBJV as unable to undertake and bid for new contracts from Petronas, its subsidiaries and any petroleum arrangement contractors during the suspension period.

It also means over the next few years, Barakah will miss out on a pick-up in activities under the niche pipe-laying segment, still with a few local competitors. “We were hit with the Petronas suspension by surprise,” Nik Hamdan recalled.

The group is not hopeful for a quick resolution to the suspension. As such, it is seeking alternative sources of income beyond Malaysia, such as in Vietnam, Brunei and Thailand where cabotage laws are less stringent.

“There are also [opportunities in] other services such as pipeline pre-commissioning, topside maintenance and repair which we can easily offer to the rest of the region while still adhering to local requirements in terms of cabotage assets,” said Nik Hamdan.

“Our tender book, at RM800 million, is not big now. That is why in the first quarter of 2020, we need to be very aggressive in our approach.”

Locally, Barakah plans to offer its expertise such as pipeline maintenance and minor fabrication to clients from other industries. However, that will take some time considering the licensing involved.

The only good news: It is still allowed to complete its existing and ongoing contracts in Malaysia, now at some RM450 million outstanding.

In the first financial quarter ended June 30, 2019, Barakah was cash flow negative while its net loss widened to RM5.78 million on a revenue of RM56.25 million. Its cumulated losses stood at RM361.31 million, with short- and long-term borrowings at RM25.51 million and RM155.59 million respectively.

“What had happened, happened,” said Nik Hamdan, who left the company temporarily from April to July 2019.

“They (Petronas) did give us a three-year suspension. [However,] in general we are open. It knows we are a serious local company built from scratch in 2000.

“Petronas and other major operators know our capabilities. Locally, we have delivered RM4.3 billion worth of projects since 2000. Our contribution to the industry cannot be denied.

“We are considered small and still at a developing stage. So, what we are doing here is, I can say, we are trying to survive in this challenging industry. Hopefully, they understand [this part].”

Still, Barakah has three legal proceedings against Petronas.

In August, Barakah demanded RM1.02 billion from Petronas for the “unwarranted” three-year suspension notice. It also filed a notice of arbitration on Petronas Gas Bhd to claim RM179.84 million concerning the Pengerang Gas Pipeline project, and a counterclaim against PRPC Utilities and Facilities Sdn Bhd concerning project P14.

Once a company boasting a market capitalisation of over RM800 million, Barakah was valued at RM20.9 million yesterday, closing at 2.5 sen apiece.