SapuraKencana ‘on solid ground’

by tee lin say
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EARLIER this week, the market was abuzz with news that Datuk Mokhzani Mahathir (pic) and his close associate, Yeow Kheng Chew, were relinquishing their executive positions in SapuraKencana Petroleum Bhd and being redesignated to non-executive directors.
The corporate grapevine was initially of the opinion that this move was made as a result of the Yinson Holdings Bhd incident that happened in June this year.
SapuraKencana released a statement yesterday saying that prior to the merger between SapuraCrest Petroleum and Kencana Petroleum, it was decided that the leaders of the merging entities, Tan Sri Shahril Shamsuddin and Mokhzani, would come together into the newly-merged SapuraKencana to jointly refine the strategy set pre-merger and spearhead integration of the companies.
“With that integration now successfully completed, what remains is the execution of the strategy that was set by the two leaders. Execution of this strategy involves the streamlining of our company’s management. Thus, Mokhzani and Yeow have decided to relinquish their management roles in the company. They will, however, continue to actively support the company as non-executive non-independent directors,” said the statement.
“Shahril will remain as president and group CEO and lead the company through its next phase of development. Mokhzani and Yeow will continue to actively support and advise Shahril and the board on the continued growth of the company,” said the statement.
“This development is consistent with the strategy set by the leaders pre-merger, and is not in any way a response to any conflict of interest queries raised in the past,” said SapuraKencana’s chairman of the board, Datuk Hamzah Bakar.
In June, Yinson had proposed to place out some 37.81 million shares, or a 14.64% stake, to Mokhzani’s vehicle, Kencana Capital Sdn Bhd, at a price of RM2.82.
As Yinson was in the business of acquiring and leasing out floating production, storage and offloading vessels to large oil companies, talk was rife that this could pose a conflict of interest to Mokhzani, who was holding an executive position at SapuraKencana then.
Yinson’s share price rallied with Mokhzani’s entry. The stock is now up 178% year-to-date at its closing price of RM6.01.
Shortly after Kencana’s entry, Yinson announced that it was buying Norwegian offshore floating production petroleum company Fred Olsen Production ASA (FOP) for RM551.34mil. Oslo-listed FOP owns and operates three floating production, storage and offloading vessels.
Mokhzani in July told the press that SapuraKencana would be deliberating whether there was a conflict of interest with Kencana Capital making an investment in Yinson.
In an e-mailed interview, Mokhzani explains that the board of SapuraKencana had deliberated and decided in September that Kencana Capital’s investment in Yinson did not create a situation of conflict currently.
“As such, the decision to relinquish the executive roles in SapuraKencana was not due to the Yinson deal,” he says.
So what does it mean, now that Mokhzani no longer plays a non-executive role?
“The ‘non-executive’ designation simply means I’m not involved in day-to-day management activities and decisions anymore. However, as member of the board, my responsibilities towards ensuring management manages the company properly and prudently in the interest of shareholders and stakeholders remain undiminished,” says Mokhzani.
Mokhzani explains that the re-designation is a strong message by SapuraKencana that the company has aligned its organisational structure to be more efficient and clear.
“The initial hand holding period by both principals of SapuraCrest and Kencana Petroleum is over. The merger has taken hold and the ‘new’ company is on solid ground. This has always been an objective in the pre-merger discussions between Shahril and me.
“Both of us were needed to ensure the management and staff of both companies were comfortable and committed to the merged entity. Now that I’m confident that they are, and SapuraKencana is moving along the growth plan we both charted, I can take a small step back. It’s now the responsibility of Shahril to manage the execution of the plans we all made and the vision we share,” says Mokhzani.
An industry source adds that even without the Yinson deal, there were always plans of morphing the leadership of SapuraKencana right from the start.
“From the first day SapuraCrest and Kencana were merged, management knew there should be one main head,” says the source.
“Now that the integration of the companies have been completed and operations are running relatively smoothly, the clarity of leadership is necessary.”
Industry observers, however, do not believe that Mokhzani will be taking a backseat in the corporate world. They believe that with Mokhzani’s passion for creating value in businesses, he and KC will continue to sniff for deals.
Mokhzani, 52, is currently Malaysia’s 15th richest man with a net wealth of US$980mil (RM3.03bil) according to Forbes magazine,
He and Yeow have been partners since their days in Tongkah Holdings Bhd in 1987.
In Kencana, Tongkah and Pantai Holdings Bhd (all during Mokhzani’s tenure), Yeow was already holding key positions, namely as executive director. Yeow is also a director in Kencana Capital.
Mokhzani adds that while the re-designation does allow him more “freedom” to do other things, he is fully aware that he has a duty to SapuraKencana and, as a significant shareholder, he will continue to protect SapuraKencana’s interest which directly means protecting his own interest.
“There is absolutely no reason for me to invest in another oil and gas company, big or small, new or matured. Ensuring that the value of my investment in SapuraKencana continues to grow is my priority,” he says.
On a question on whether he has been going around looking for companies, Mokhzani says he has not.
“Though I am relatively still young, I don’t see myself as seeking another executive role. In the years that I’ve been doing business, I’ve met many young executives with the right credentials, attitude, drive and ambition to take on senior executive positions in any company, big or small, domestic or international. With the right corporate structure, culture and guidance, there are many others who will be better executives than me. I’d like to be in a role to help identify the destination, chart the course, enjoy the journey but let others steer the ship,” he says.
Mokhzani shares that his ambitions have evolved over the years.
“I’ve seen good and bad times, survived two economic downturns and now seeing a small measure of success because of investment decisions made 13 years ago. SapuraKencana is a dream come true and not the ambition of one person alone. Joining forces with Shahril and SapuraCrest has created a company neither of us thought would grow so quickly, to be able to seize the opportunities that have presented themselves, without taking unnecessary risk or being reckless.
“While a lot has taken place in the last 18 months, SapuraKencana has always been able to justify its investment decisions and rolled out an execution plan that is practical and achievable,” says Mokhzani.
Kencana Capital is a cornerstone investor in IHH Healthcare Bhd and Astro Malaysia Holdings Bhd.
Mokhzani currently still holds a 13.27% stake in SapuraKencana, and continues to be vice-chairman of the company.