Saturday,    12 July 2017.

Oil and gas company revives attention with a RM206mil contract win in Myanmar

After a lull of almost three years, oil and gas services provider ENRA Group Bhd, the company formerly known as Perduren (M) Bhd, suddenly stirred when it announced that it had received a US$48mil (RM206.3mil) contract in Myanmar from Petroliam Nasional Bhd (Petronas) to provide storing and offloading services. ENRA’s 60%-owned subsidiary, ENRA SPM Sdn Bhd, has accepted a letter of award from PC Myanmar (Hong Kong) Ltd (PCML), a subsidiary of Petronas, for the leasing of a single-point mooring system and storage tanker facilities.


ENRA says the award is for a four-year period and the leasing period is estimated to commence upon the facilities being commissioned and delivered to PCML. The facilities will provide condensate storing and offloading services for the Yetagun offshore gas field operated by PCML in the Andaman Sea off the coast of Myanmar. While the amount of this contract is not huge by oil and gas standards, it does put ENRA back in the spotlight. Back in early 2015, there was much ado when a group led by Datuk Kamaluddin Abdullah and Datuk Mazlin Junid took control of Perduren, after they acquired 93.5 million shares, or a 69.3%, stake in the company. Kamaluddin is the son of former prime minister Tun Abdullah Ahmad Badawi and a co-founder of Scomi Group Bhd. Meanwhile, Mazlin was formerly the president and CEO of Daya Materials Bhd. Kamaluddin and Mazlin had acquired the shares in Perduren via a direct business transaction from its major shareholder, Tan Sri Law Tien Seng. Subsequently they issued a notice of an unconditional takeover offer for Perduren at a cash offer price of RM1.60 per share. The company was then named ENRA. The list of board members in ENRA features an all-star team. The big names on the board include Petronas ex-president and CEO Tan Sri Shamsul Azhar Abbas, Datuk Ali Abdul Kadir, the former chairman of the Securities Commission, and Datuk Anuar Ahmad, the former executive vice-president of Petronas’ gas and power business.


On Aug 24 last year, another heavyweight, Datuk Wee Yiaw Hin, who is the former executive vice-president of Petronas Upstream Business, was appointed as an independent director of ENRA. Nonetheless, it was probably the worst time to be in the sector. In mid-2015, oil prices started crashing from the US$100 level and halved in six months. At its current share price of RM3.10, ENRA has a market capitalisation of RM415.55mil. The stock is up 51.96% on a year to date basis, on very thin volume. Trillion Icon Sdn Bhd is the single largest shareholder with a 17.05% stake, followed by Mizreen Capital Sdn Bhd and Kamaluddin with a 13.64% and 9.27% stake respectively.


A different sort of oil player

In an interview with StarBizWeek, ENRA president and group chief executive officer Datuk Mazlin Junid explains that ENRA SPM is a 60:40 JV with Banner Industries of Australia. Banner specialises in designing and constructing Single Point Mooring Systems for offshore chemical/oil transfer where jetties are not feasible. “In this particular case, ENRA SPM was approached to come up with a solution to replace an existing ‘turret FSO’ which had been in service for close to 25 years in this particular gas field that is operated by Petronas Carigali Myanmar Ltd (PCML). “It had become uneconomical to operate, given the low oil price and declining production in the Yetagun gas field,” “Over the past 18 months, we helped develop a solution which provided significant savings to PCML with zero capex costs to them. This was the major attraction to make this solution work. “To ensure transparency and proper governance, PCML turned this into a competitive bid and major FSO providers from international companies were invited too. We won the contract fair and square” he says. Mazlin said ENRA has in the pipeline several oil and gas related proposals but they have not been converted into bids or contracts yet. In its order book presently, including downstream chemical supply, it has some RM500mil worth of jobs. “As I mentioned a couple of years ago when my partner Kamal decided to team up, our approach in the oil and gas services space is one of caution and calculated risk.

“We realise that there is a dearth of service providers who are heavily in debt and desperate for work. This means that there will be some serious price undercutting just to generate cash flow in order to service debts,” he says.

Mazlin explains that ENRA has a four-point approach to doing business - it does not burden itself with unnecessary debt; it seeks to take advantage of depressed priced assets in the market; finds novel ways to bring down opex for their oil company customers and where possible, offer little or no capex solutions to them. “These are the principles that I had challenged my team to work on if we want to survive in this game. “We have the talent and experience in our human capital pool and have avoided working with outside parties in developing our solutions. Our engineering team is small but dedicated in our vision to make ENRA a niche player in several areas of offshore solutions,” he says. He adds that the challenges faced by many oil and gas service providers today is that they are hardpressed to ensure a high usage of their existing assets due to the high operating costs they have. This means these firms are less likely to propose new innovative solutions to their customers. Mazlin says that ENRA is now bidding for projects around this region, including Malaysia, Thailand, Myanmar, Vietnam, Indonesia, Brunei and Australia. He adds that Malaysia is not ENRA’s main focus as there are simply too many players here in a relatively small market. However, if an opportunity arises, ENRA will look at it seriously.


Becoming a rail player?

In a move that perhaps puzzled the market, ENRA announced last month that it had inked an agreement with Emrail Sdn Bhd to jointly set up a company and provide total engineering solutions and services for rail and track transportation projects in Malaysia. The joint-venture (JV) company will provide engineering solutions and services that also involve civil works, rolling stock, project management, asset management and maintenance services. The JV is in line with ENRA’s plans to explore new businesses with growth potential. The question now is, does ENRA have the expertise to move into the rail sector, considering that its primary focus has been the O&G sector? “Our partner, Emrail Sdn Bhd, is one of Malaysia’s largest rail contractors with an exemplary track record. As such the JV that was set up between ENRA and Emrail has the requisite expertise,” he says. Mazlin says that ENRA’s immediate plans are to bid for trackwork jobs for inter-state type projects, for example the upgrading of the double-tracking lines. “We do not envisage bidding for urban rail projects at this stage, though if such opportunities arise between us and our partner, we will consider it,” he says. So for instance, the RM8bil Gemas-Johor Baru double-tracking project would fall under the category of projects ENRA will consider bidding for.


Diversified company

The group’s business activities currently comprises of property development, oil and gas services and investment holdings. The group’s property development division comprises of the development of a joint-venture property project in Taman Shamelin Perkasa and the redevelopment of a property in Central London. Mazlin says that property will still be a core business of the group and will provide a solid earnings to support the growth of their other areas of business. “Undoubtedly, oil and gas services and solutions will grow exponentially and more immediate as our board and management team have many years of experience and talent in this area,” says Mazlin. He adds that the key success factor will be identifying areas where ENRA puts this knowledge and expertise into.


“In short, we are hoping to be a diversified company operating in fundamental brick and mortar industries.

“We observed how exposure to one industry can cause volatility in a company’s financial performance and position (for example the oil & gas business) and it became important to us to ensure we build an earnings base which can weather such situations in the long run,” he sums up. For the fourth quarter to March 31, 2017, ENRA recorded losses of RM87.8mil on the back of revenue of RM17.11mil. This was mainly the result from discontinued operations in relation to its investment properties business, the Holiday Plaza and Shamelin Business Centre that had been classified as non-current assets held for sale.


Thus for the full year, ENRA made losses of RM72.08mil from a previous net profit of RM8.91mil.

Revenue increased to RM179.34mil from RM122.31mil.

Breaking the fourth quarter results down, losses from continuing operations were a mere RM1.05mil.

For the full financial year ended March 31, 2017, ENRA’s profit from its continuing operations was RM19.53mil, compared to losses from discontinued operations at RM64.48mil.

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