Highlight Concern over Mokhzani's stake

Highlight Concern over Mokhzani's stake
Business & Markets 2013
Written by Madiha Fuad of theedgemalaysia.com
Friday, 05 July 2013 09:20

KUALA LUMPUR: SapuraKENCANA PETROLEUM BHD [] shareholders have raised the issue of Datuk Mokhzani Mahathir's acquisition of a substantial stake in YINSON HOLDINGS BHD [] through his private vehicle, Kencana Capital Sdn Bhd.

SapuraKencana's board, in taking a cue from its shareholders' concern, is deliberating whether Mokhzani's action has created a conflict of interest as he is SapuraKencana's non-independent executive director and executive vice-chairman.

"We [Kencana Capital] are providing details of the deal to SapuraKencana's board, and upon them receiving facts and details, they will decide whether there is a conflict of interest or not," Mokhzani told reporters after SapuraKencana's AGM yesterday.

Mokhzani, via Kencana Capital, recently pumped funds into Yinson which enabled him to increase his stake to 18.52% in the marine support services company
via a private placement. He had declared this investment to SapuraKencana.

Yinson had in early June announced a proposed a conditional takeover of Fred Olsen Production ASA (FOP) of Norway for 995.7 million Norwegian krones, which is about RM551.3 million.

Yinson has received undertakings from MALAYAN BANKING BHD [], United Overseas Bank Ltd and AmInvestment Bank Bhd saying they would be providing about RM400 million in loans for the takeover. The balance of RM176 million will be funded via a proposed private placement, share issuance and internally generated funds

FOP and its subsidiaries own and operate a fleet of three floating production, storage and offloading vessels. The group, with offices in Singapore, Nigeria, Gabon and Texas, also operates a mobile offshore production unit for an international O&G company.

Mokhzani said SapuraKencana chairman, Datuk Hamzah Bakar, had told shareholders that the issue of him (Mokhzani) taking up a substantial stake in Yinson was still being deliberated by the board.

Meanwhile, SapuraKencana is also said to be looking at opportunities from the proposed sale of US-based Newfield Exploration Co's oil and gas assets worldwide which include Malaysia.

"We are looking at it on our own for now, as we want to understand the opportunities," said the group's president and group CEO Tan Sri Shahril Shamsuddin.

He noted that although the group is taking a look at the assets, this did not necessarily mean that it is going to bidding for it.

Newfield's blocks is said to have attracted an international field of more than 30 bidders, among them US oil major, ExxonMobil Corp, and Talisman Energy Inc of Canada.

As recently reported in The Edge weekly, the US company is said to be proposing a sale of assets in Malaysia and China worth between US$2 billion and US$2.5 billion.

Newfield's assets in Malaysia comprise oil and gas blocks that are already producing as well as those ripe for development and exploration. The total net reserves of its Malaysian blocks is believed to be about 35 million barrels of oil equivalent as of last year.

On Petronas Carigali's new subsidiary, Vestigo Petroleum Sdn Bhd, Shahril said the new company would not result in other companies receiving less contracts.

"Vestigo is an entity that we can work with as a partner to address more smaller marginal fields."

He reasoned that creating a smaller firm to address smaller fields would be more effective in terms of returns.

"There are many fields with different criteria that require different partners and we have a very strong relationship with Petronas so it doesn't mean that we cannot work with Vestigo," said Shahril.

SapuraKencana's orderbook currently stands at about RM25 billion, which is expected to last the group for about four years.

However, the group is continuously bidding for more contracts, with Mexico going to be one of the main focus for the group. The group has also bid for contracts in Brazil, India and Australia.

Sharil said the group is comfortable with its current gearing of 1.1 times. “We are comfortable with this gearing.

The bulk of it is due to the debt that we took on to acquire the rig business," said Shahril, noting that SapuraKencana's rig division has a strong earnings before interest, taxes, depreciation, and amortisation which is expected to help pay off the debt.

"Our debt ratio is projected to come down to 0.6 times in two years as visibility is good and contracts are already in hand," he said.



This article first appeared in The Edge Financial Daily, on July 5, 2013.