KUALA LUMPUR: Petrol One Resources Bhd’s auditor, KPMG, has for the third time expressed a disclaimer of opinion on the oil and gas storage facility company for its financial position as at June 30, 2014 (FY14), raising questions on its ability as a going concern entity and on the carrying value of its assets.  

KPMG has expressed the same opinion towards Petrol One’s FY12 and FY13 accounts.

In the auditor’s report released today, KPMG said “there are material uncertainties that may cast significant doubt on the ability of the group and the company to continue as going concerns”.

It drew attention to Petrol One’s group and company loss of RM6.18 million and RM4.27 million respectively, that the group’s current liabilities exceeded its current assets by RM92.7 million, as well as a deficit seen in the group’s shareholder’s equity of RM89.76 million.

KPMG noted the going concern assumption is highly dependent upon the successful execution of the debt settlement agreement (DSA) and supplementary settlement agreement (SSA) — between Petrol One and its subsidiary with their respective lenders — of an outstanding loan obligation of RM6.5 million.  

“The going concern assumption is also highly dependent on the successful approval and implementation of the regularization plan, and the ability of the group and company to attain profitable operations to generate sufficient cash flows to fulfil their obligations, as and when they fall due,” it said.  

To recap, Petrol One and its subsidiary were unable to meet their loan obligations since January 2011 and March 2010, respectively. The DSA was entered into on Dec 24 last year, terms which were varied on Oct 16 this year, and to be formalized in a SSA on or before Nov 12 this year.

It is also worth noting that Petrol One was classified as a Practice Note 17 listed issuer on Aug 30, 2012, as a result of the group’s consolidated shareholder’s equity being less than 25% of its issued and paid-up capital, and was less than RM40 million.  

Petrol One had on Nov 15, 2013, proposed to undertake a business turnaround strategy and regularization plan — which comprises a proposed capital reduction, share premium reduction, private placement, rights issue with warrants, scheme of arrangement, and amendment — to address its PN17 issues.  

It submitted the proposed regularization plan on March 28 this year, of which is still pending approval from Bursa Malaysia.  

“In the event that these are not successfully implemented, the group and company may be unable to realize their assets and discharge their liabilities in the normal course of the business,” KPMG reasoned.  

KPMG also pointed out that there were no projections of future cash flows by management or valuations obtained to support the carrying value of marine equipment of the group, which amounted to RM2.34 million as at June 30.  

Thus, it is unable to verify the appropriateness of the carrying value.  

Additionally, there were also no projections of future cash flows prepared by management to support the carrying value of investments in subsidiaries and amount due from subsidiaries in the company’s books, which amounted to RM939,177 and RM70.75 million respectively.

“Because of the matters described in the Basis for Disclaimer of Opinion paragraph however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion,” KPMG said.

Petrol One shares have been suspended from trading since May last year.