Daewoo’s LNG carrier with air lubrication system
Daewoo’s LNG carrier with air lubrication system
This undated photo, released by South Korean shipbuilding giant Daewoo Shipbuilding & Marine Engineering (DSME) on Nov. 18, 2019, shows a liquefied natural gas (LNG) carrier equipped with an air lubrication system, a method to reduce the resistance between the ship’s hull and seawater using air bubbles. The company has delivered the 173,400-cubic-meter carrier to Greek shipping company Maran Gas Maritime. (Yonhap)
BTM Resources agreement sparks deja vu
KUALA LUMPUR: Little known BTM Resources Bhd hogged the limelight last week. The saw miller’s share price doubled in two trading days. The sudden surge in interest happened after the company’s announcement on its plan to venture into liquefied petroleum gas (LPG).
BTM last Wednesday announced it entered into a heads of agreement with Tan Sri Halim Saad-controlled Markmore Energy (Labuan) Ltd (MELL) for an LPG production project in Kazakhstan.
BTM intends to build a LPG production and gas processing facility with a capacity of 100 million standard cubic feet per day at its own cost near Rakushechnoye Oil and Gas Field that is owned by MELL.
The plant will source its natural gas from Rakushechnoye Oil and Gas Field, according to the announcement on Bursa Malaysia.
Under the agreement, BTM will be entitled to the profit of up to 166 tonnes per day of LPG and 3,700 barrels per day of condensate produced at the LPG plant. The company is expected to enjoy a guarantee of an operational profit of minimum return of 12% per annum (profit guarantee) for the project.
Loss-making BTM said that the proposed LPG production will enable it to diversify and expand its source of income, considering how its existing operations in recent years have been affected by higher production cost and lower profit margin of wood products, while the prospects of the wood-based industry for the years ahead remain weak.
MELL is wholly owned by Markmore Sdn Bhd, an investment holding company in which Halim has a 99.99% stake, while Sumatec Resources Bhd’s managing director Abu Talib Abdul Rahman holds the remaining one share in the company.
In fact, MELL also wholly-owns CaspiOilGas LLP (COG) — a company that has terminated the joint investment agreement (JIA) for the development and extraction of hydrocarbon it had with Sumatec. COG’s oilfield is also located at Rakushechnoye.
It might not be surprising BTM’s announcement sparks a sense of deja vu to shareholders of Sumatec, which shares have been suspended from trading infinitely earlier this month after it had received a winding-up order in respect to a winding-up petition.
Now, turn back the clock to seven years ago.
On March 8, 2012, Sumatec signed a framework agreement with COG for the partnership on development and extraction of hydrocarbon in the Shelly Oil Field (which is now known Rakushechnoye Oil and Gas Field).
The announcement on Sumatec venturing into upstream oil and gas activities that formed part of Sumatec’s regularisation plan then, fuelled a share price rally.
Sumatec’s share price surged to 13.7 sen in a single day, from 9.9 sen. However, the surge was short-lived, it fell below 10 sen in two months.
Sumatec, which was categorised as a Practice Note 17 firm, soon embarked on its restructuring journey. It undertook capital reduction and rights issue.
Two years later, Halim emerged as the major shareholder in Sumatec, according to the company’s filing with Bursa, with a total of 23.17% direct stake or 807.04 million shares as at March 10, 2015. His shareholding was perceived to be making a comeback to the local corporate scene then.
Sumatec’s timing, however, was not that ideal as crude oil prices collapsed in the fourth quarter of 2014 and dipped lower to below US$40 from US$105.
The oil prices started to recover in 2016. Nonetheless, Sumatec’s upstream venture did not seem to be able to benefit from the oil price recovery.
COG cited constraints faced under Sumatec’s current financial and legal predicaments as a reason for the termination of the JIA.
“[The constraints have] impacted Sumatec’s wholly-owned subsidiary Sumatec Oil And Gas LLP’s ability to comply with COG’s obligations to carry out appropriate investment or work programmes and provide the necessary funding for the petroleum operation under the JIA,” COG told Sumatec in the termination notice last month.
In a nutshell, given its legacy shipping debts, Sumatec’s inability to raise fresh funding for the oilfield operation has caused the venture to fail.
Since last year, Halim has been paring down his shareholding, the businessman has ceased to be Sumatec’s substantial shareholder as at January this year, leaving him with a 3.168% stake in the group. He remains as the vice-chairman of the group.
Halim highlighted in a recent statement that he joined the board in end-March 2018 to salvage Sumatec, and he had advanced more than RM160 million to sustain its operations over the years.
“Sumatec was always short on cash and I have been supporting the group since then. At the peak, I advanced RM86.5 million directly to Sumatec and around RM81.02 million indirectly for the oil and gas operations,” Halim wrote in the statement.
Halim explained that in 2015, a corporate guarantee that was given to “so-called” creditors had surfaced.
And that the company seal was used by two non-executive directors who committed the company to large legacy debts, which were related to shipping.
Over the past three years, Sumatec has been below 10 sen for most of the time. Its shares were suspended at half a sen on Nov 7.
Back to BTM, the partnership between MELL raises the question whether Halim would acquire stakes in BTM.
That aside, BTM’s venture into the LPG production also raises the question whether the wood-based company could manage it? Furthermore, this is not the first time that BTM has looked for alternative to diversify its business, so far none has been fruitful.
Will the former Renong boss Halim have better luck this time round to unlock the value of his oilfield in Kazakhstan? As the saying goes, time will tell.