ANNOUNCEMENT. KEJURUTERAAN SAMUDRA TIMUR BERHAD ( KSTB or the Company)

Transcription

1 ANNOUNCEMENT KEJURUTERAAN SAMUDRA TIMUR BERHAD ( KSTB or the Company) PROPOSED DISPOSAL OF ONE (1) UNIT OF ONSHORE TSM DOUBLE DRUMS DRILLING RIG KNOWN AS IKHLAS #3 ( THE RIG ) ( PROPOSED DISPOSAL ) 1. INTRODUCTION The Board of Directors ( Board ) of KSTB wishes to announce that on 20 May 2013, its wholly-owned subsidiary, KST Drilling Technologies Sdn. Bhd. ( KSTD or the Vendor ) had entered into a Asset Sale Agreement ( ASA ) for the proposed disposal of the rig to PT Duta Adhikarya Negeri ( DAN or the Purchaser ) ( the Proposed Disposal ), subject to and upon the terms of the ASA. 2. DETAILS OF THE PROPOSED DISPOSAL 2.1 The Proposed Disposal KSTB is proposing to dispose of its Rig to DAN for a total cash consideration of USD6.3 million (equivalent to RM million. based on the exchange rate of USD1.00: RM as at 20 May 2013). 2.2 The Rig The Rig represents one (1) set of Onshore TSM Double Drums drilling rig package including ancillaries equipment and spares known as Ikhlas #3 bearing Sertifikat Kelayakan Penggunaan Instalasi (SKPI) Instalasi Pemboran Rig Ikhlas #3 Nomor 141/IP/SKPI/18.03/DJM.T/2012 from Direktorat Jenderal Minyak dan Gas Bumi, Indonesia. The Rig is currently in located at VICO Field, Semboja, Kutai Kartanegara, Kalimantan Timur, Indonesia. KSTB invested in the Rig on 21 December 2004 following the engagement of Hyduke Energy Services Inc. to fabricate the Rig while completion was in May The original cost of investment is approximately RM million with net carrying value of the Rig as at 30 June 2012 at approximately RM million. 2.3 Details of the Purchaser DAN is a company limited by shares incorporated in Jakarta, Indonesia based on notarial deed no. 140 of Dradjat Darmadji, SH., dated 20 October It has an issued and paid-up capital of IDR 200,000,000,000 comprising 200,000 ordinary shares of IDR 1,000,000 each in DAN. DAN is principally engaged in the provision of Drilling and Workover Rig Services. The Director of DAN is Mr. Wihyandy Nurdin and the Commissioner is Mr. Ryan Natawijaya. 1

2 The shareholders of DAN are Mr. Wihyandy Nurdin (70%) and Mr. Ryan Natawijaya (30%). 2.4 Details of the Vendor KSTD is a company incorporated in Malaysia on 16 February 2004 under the Companies Act, 1965 with its registered address at Suite A-21-13A, Level 21 Menara UOA Bangsar, No. 5, Jalan Bangsar Utama 1, Kuala Lumpur. It has an issued and paid-up share capital of RM15,000,000 comprising 15,000,000 ordinary shares of RM1.00 each. KSTD is principally engaged in provision of equipment and running services and rental of land rig to the oil and gas industry within and outside Malaysia. KSTD is currently a 100% owned subsidiary of KSTB. 2.5 Salient Terms of the SPA i) Payment The total sale consideration of the Proposed Disposal is USD6.3 million in cash ( the Purchase Price ). If the Purchaser fails to pay the Purchase Price, or any part remaining unpaid thereof, within two (2) days from the Unconditional Date ( the Completion Date ), the Purchaser shall be entitled to an extension of one (1) month from the expiry of the Completion Date (the Extended Completion Period ) to pay the Purchase Price, or any part or portion remaining unpaid thereof provided always that if the payment of the Purchase Price, or any part or portion remaining unpaid thereof, is made during the Extended Completion Period, the Purchaser shall pay for the Vendor, interest on the Purchase Price or any part or portion remaining unpaid thereof, at the rate of 10% (ten percent) per annum calculated on daily rests for the period immediately after the expiry of the Completion Date until the date the Purchase Price is fully paid to the Vendor (the Late Payment Interest ). No deposit has been received from the Purchaser. ii) Conditions Precedent The obligation to complete the sale and purchase of the Rig under this Agreement is conditional upon the approval of: (a) (b) (c) the Purchaser's board of directors and, if required, shareholders for the purchase of the Rig on the terms of the ASA; KSTB, the Vendor s holding company s board of directors and, if required, its shareholders, for the Vendor to enter into the ASA; and the Vendor s board of directors and, if required, its shareholders for the sale of the Rig on the terms of the ASA, (hereinafter collectively referred to as the Conditions Precedent" and each as a Condition Precedent ) Notwithstanding the Conditions Precedent set out in the ASA, the Vendor may at their sole and absolute discretion waive the fulfilment of any one (1) or more of the same by way of written notice to the Purchaser. The Vendor and the Purchaser shall use 2

3 their best endeavours to procure the fulfilment of all the Conditions Precedent above, and in particular shall furnish such information, supply such documents, and do all such acts and things as may be required to enable such Conditions Precedent to be fulfilled. Where required by the Purchaser, the Vendor shall assist the Purchaser to procure the fulfilment of the Condition Precedents including without limitation to furnish such information, supply such documents and do all such acts and things as may be required to enable the Conditions Precedent to be fulfilled. Each of the Parties hereto shall keep the other informed as regards the progress of the fulfilment of the Conditions Precedent by way of written notification fortnightly. Upon all the Conditions Precedent being fulfilled, the Parties shall confirm the date on which the last of the Conditions Precedent have been fulfilled. Unless specifically waived by the Purchaser or the Vendor, if any of the Conditions Precedent shall not be fulfilled on or before the Unconditional Date or such other date as the Parties may mutually agree in writing, where the party in default are the Vendor, then any sum previously paid by the Purchaser shall be refunded free of interest to the Purchaser and where the defaulting party is the Purchaser, then the Vendor shall at its option be entitled to the right of specific performance of the terms of this Agreement and thereafter this Agreement shall ipso facto cease and determine and none of the Parties shall make any further claims against the other. If any Party becomes aware that a Conditions Precedent set out in the ASA is satisfied or it s incapable of being satisfied, it shall on immediate basis upon receipt of the confirmation of the same notify the other Party in writing. Where a Condition Precedent is incapable of being satisfied by the Party responsible for its fulfillment as per the ASA and is not waived by the other Party, then:- a) where the Party in default is the Purchaser, the Vendor shall either forthwith, by notice to the Purchaser, terminate the ASA, whereupon, without prejudice to the Vendor s right to claim damages, all monies previously received together with all interest earned thereon shall be forfeited by the Vendor and the Vendor shall be entitled to deal with, sell or otherwise dispose of the Rig in such manner as the Vendor deems fit as if the ASA had not been entered into or at its option seek specific performance of the ASA from the Purchaser and be entitled to all reliefs flowing therefrom; or b) where the Party in default is the Vendor, the Vendor shall refund all monies previously received to the Purchaser and thereafter the ASA shall determine and neither Party shall have any claim against the other; or c) where the Condition Precedent is incapable of fulfilment due to reasons beyond the control of both parties and not due to the willful default of either Party, then the ASA shall be determined by mutual consent of both parties and the Vendor shall refund all monies previously received free of interest to the Purchaser and thereafter the ASA shall determine and neither Party shall have any claim against the other. The date falling within fourteen (14) days from the date of the ASA 3

4 or such later date as the Parties may agree on which the last of the Conditions Precedent shall have been fulfilled shall be the Unconditional Date. iii) Default of Parties If the Purchaser fails neglects or refuses to observe or comply with any of the terms and conditions of the ASA, or the Purchaser goes into liquidation whether compulsorily or voluntarily or is unable to or admits inability to pay its debts as they fall due or proposes or enters into any composition or other arrangement for the benefit of its creditor generally or commit any act jeopardizing in any manner its ability to fulfil its obligations under this Agreement or an administrator or receiver and manager or liquidator is appointed over any part of the assets or undertakings of the Purchaser, the Vendor may at its discretion either:- (i) (ii) seek specific performance of the ASA from the Purchaser and entitled to all reliefs flowing therefrom; or forthwith, by notice to the Purchaser, terminate the ASA, whereupon, without prejudice to the Vendor s right to claim damages, all monies previously received together with all interest earned thereon shall be forfeited by the Vendor and the Vendor shall be entitled to deal with, sell or otherwise dispose of the Rig in such manner as the Vendor deems fit as if the ASA had not been entered into. Where the Vendor exercises its right to terminate in accordance with the ASA and has resold or otherwise dispose of the Rig:- (i) (ii) any deficiency in price which may result from the resale of the Rig (i.e. the resale price of the Rig is less than the Purchase Price) and all costs and expenses attending such resale or attempted resale shall be made good by the Purchaser and shall be recoverable by the Vendor as damages; and any gain in price which may result from the resale of the Rig (i.e the resale price of the Rig is higher than the Purchase Price), the difference between the price of the resale and the Purchase Price shall belong absolutely to the Vendor and the Purchaser shall have no claim whatsoever over it. If the Vendor fails to observe or comply with any of the terms and conditions of the ASA when the Purchaser shall have paid the Purchase Price and the Late Payment Interest (if any), the Purchaser shall be entitled to terminate the ASA by notice in writing to the Vendor; and the Purchaser shall only be entitled to a refund, upon demand, of an sums paid towards the account of the Purchase Price without any interest nor damages payable. 2.6 Basis and justification for the sale consideration The sale consideration of USD6.30 million (equivalent to RM million. based on the exchange rate of USD1.00: RM as at 30 May 2013) for the Proposed Disposal was arrived at on a willing buyer-willing seller basis after taking into consideration of the remaining drilling programme of the present project-base charter arrangement as well as the prospect thereof. 4

5 In addition to the internal assessment on the value of the Rig, the sale consideration was also derived by reference to the relevant publicly available new and secondary market value of onshore rigs with draw work capacity and other parameters within the range of the Rig in the industry. The cost of investment of the Rig is approximately RM million while the net carrying value as at 30 June 2012 was at approximately RM million. KSTB will conduct an inspection and appraisal exercise on the Rig and the details report will be included in the Circular to Shareholders in relation to the Proposed Disposal to facilitate the comparison analysis by the shareholders of KSTB. The Rig are to be sold on an as is where is basis, free from all encumbrances and subject to the conditions of title express or implied in the issue document of titles thereto, and upon the terms and conditions contained in the ASA. 2.7 Liabilities to be assumed There are no other liabilities to be assumed by the Purchaser pursuant to the Proposed Disposal. 2.8 Proposed utilisation of proceeds The Company intends to utilise the cash proceeds from the Proposed Disposal in the following manner: Purpose Note Estimated timeframe for utilisation Repayment of 1 Within 6 months from the borrowings completion of the Proposed Disposal RM ,797 Estimated expenses to be incurred for the Proposed Disposal 2 Within 1 month from the completion of the Proposed Disposal 220 Total 19,017 Notes: 1 The allocated proceeds shall be used to repay borrowings with financial institution. KSTB Group has a total borrowings of approximately RM million as at 30 June On the assumption of a prevailing rate of about 3.5% for the USD denominated borrowings identified to be repaid pursuant to the abovementioned, the proposed repyment of borrowings will enable KSTB Group to reduce its interest cost by approximately RM0.658 million per annum. 2 The estimated expenses include professional fees, fees payable to relevant authorities and other related expenses incurred on the Proposed Disposal. Any shortfall or excess in funds allocated for estimated expenses will be funded from its internally generated funds or used for working capital purposes. 5

6 2.9 Rationale for the Proposed Disposal KSTB Group currently has three (3) principal activities namely, provision for Tubular Handling Services Division ( Tubular Handling Services ), provision of tubular Inspection and Maintenance Services ( Inspection and Maintenance Services ) and provision of Land Drilling Services ( Land Drilling Services ). The Land Drilling Services unit continued to produce dismay financials with no revenue reported for the second quarter ended 31 December There was no revenue accrued/recognised by the Land Drilling Services unit for the second quarter ended 31 December 2012 as both of its rigs were only on revenue-generating mode for about three (3) weeks (in December 2012) for which billable operating hours are pending verification and certification. Contribution of the various segments to the KSTB Group s revenue for the FYE 30 June 2012 and the segment assets and liabilities of KSTB Group as at 30 June 2012 are as follows: Segment (In RM Million) Revenue Tubular Handling Services Inspection and Maintenance Services Land Rig Services Total During the exercise of the Renounceable Rights Issue of 71,513,250 Warrants in November 2012, KSTB had via the Circular to Shareholders dated 2 November 2012 and Abridged Prospectus dated 7 December 2012, indicated its intention to dispose off its Land Drilling Services business. In view of the challenges facing in Land Drilling Services such as incompatibility of the Rig with the specification requirement of prospective customers which reduces the availability of potential projects, short term nature of work orders or contracts and high gearing level of the Rig assets, KSTB Group is considering investment options for the Rig Division including time charter of the land Rig and/or joint venture with oil contractors/ operators to enhance utilisation of the land Rig and related assets as well as looking for suitable investor(s) to invest in its Rig Division or to buy out its Land Drilling Services business together with its assets. The Proposed Disposal enables KSTB to realise its investment in Rig Division while the proceeds of which could be redeployed to further reduce the borrowings or gearing of the KSTB Group. The Proposed Disposal is further expected to reduce the operational losses of KSTD for which KSTB would have to consolidate going forward. On the assumption that the Proposed Disposal had been completed on 30 June 2012, the KSTB Group would record a proforma loss on disposal (after deducting the estimated expenses of RM220,000 to be incurred for the Proposed Disposal) of approximately RM14.67 million. The Proposed Disposal is not expected to result in the Company becoming a Cash Company nor a PN17 Company as defined under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ) ( Listing Requirements ). 6

7 3.0 Risk Factors Completion risk The completion of the Proposed Disposal is conditional upon the conditions as set out in Section 2.5 (ii) above being satisfied in accordance with the terms of the ASA. There can be no assurance that such approvals will be obtained and/or satisfied. KSTB will take all reasonable steps to ensure the satisfaction of the conditions to ensure completion of the Proposed Disposal. Business risk Upon completion of the Proposed Disposal, KSTD would only be left with one rig known as KST #1. The Company is open to consider disposing the same if there is a desirous offer to exit completely the Land Rig Services business. 3 EFFECTS OF THE PROPOSED DISPOSAL 3.1 Issued and paid-up share capital The Proposed Disposal will not have any effect on the share capital of KSTB as it does not involve any issuance of new KSTB shares. 3.2 NA and gearing For illustrative purposes and based on the audited consolidated financial statements of KSTB as at 30 June 2012 and on the assumption that the Proposed Disposal had been effected on that date, the proforma effects of the Proposed Disposal on the NA and gearing of the KSTB Group are as follows: Audited as at 30 June 2012 (I) (II) (III) After CLO After Settlement After (I) First-time and Rights and adoption Issue of Proposed of MFRS Warrants Disposal RM 000 RM 000 RM 000 RM 000 Share capital 42,908 42,908 42,908 42,908 Share premium 8,412 8,412 7,849* 7,849 Other reserves 3,801 (1,379) (1,379) (1,379) Warrant reserves - - 3,576** 3,576 (Accumulated losses) (28,838) (23,658) (15,673) # Equity attributable to 26,283 26,283 37,281 22,616 owners of the parent Non-controlling (201) (201) (201) (201) interests Total equity/na 26,082 26,082 37,080 22,415 Number of shares in issue ( 000) 143, , , ,027 Interest bearing borrowings (RM 000) 63,656 63,656 50,137^ 31,340^^ NA per share (RM)

8 Audited as at 30 June 2012 After First-time adoption of MFRS (I) (II) (III) After CLO Settlement After (I) and Rights and Issue of Proposed Warrants Disposal RM 000 RM 000 RM 000 RM 000 NTA per share (RM) Gearing (times) Notes:- Proforma 1 Proforma 1 incorporates effect of the first-time adoption of Malaysian Financial Reporting Standards ( MFRS ). Proforma 2 On 28 June 2012, the Company announced that KSTB had entered into a settlement agreement with the Issuer, Prima Uno Berhad and Trustee, Malaysia Trustee Berhad for the purposes of the settlement of the outstanding unsecured term loan facility under a Primary Collateralised Loan Obligation Programme of up to RM30.0 million ( CLO Facility ) entered into amongst the Issuer, RHB Investment Bank Berhad and KSTB ( CLO Settlement ). On 26 December 2012 and as announced on 27 December 2012, the Company completed the CLO Settlement which resulted in recognition of waiver of principal sum and other amount due of the CLO Facility amounted to RM7.985 million as other income for the current financial year ending 30 June On 24 September 2012, the Company announced it proposed to undertake and implement a renounceable rights issue of 71,513,250 warrants at an issue price of RM0.05 for each warrant on the basis of one (1) warrant for every two (2) existing KSTB Shares ( Rights Issue of Warrants ) held at the entitlement date being the time and date on which the shareholders of KSTB must be registered in the Record of Depositors of KSTB in order to be entitled to participate in the Rights Issue of Warrants. The Rights Issue of Warrants was completed on 8 January 2013 with the listing of 71,513,250 warrants on the Main Market of Bursa Malaysia Securities Berhad. Proforma 2 incorporates effect of the cumulative effects of Proforma 1 and the CLO Settlement and Rights Issue of Warrants which were completed during the financial year ending 30 June 2013 as follows: CLO Settlement # After recognition of waiver of principal sum and other amount due of the CLO Facility of RM7.985 million pursuant to the CLO Settlement. ^ After deducting the settlement sum of RM13.0 million and recognition of waiver of principal sum of the CLO Facility of RM7.0 million pursuant to the CLO Settlement as well as adjusting for the credit facility used to partially fund the payment of RM13.0 million together with the proceeds of RM3.15 million raised from the Rights Issue of Warrants. Rights Issue of Warrants * After deducting corporate expenses relating to the Rights Issue of 8

9 Warrants of RM0.563 million. ** Incorporating warrant reserve of RM3.576 million arising from the Rights Issue of Warrants. Proforma 3 Proforma 3 incorporates effect of the cumulative effects of Proforma 2 and the Proposed Disposal as On the assumption that the Proposed Disposal has been effected on that date, the KSTB Group expects to realise a proforma loss on disposal of property, plant and equipment (after deducting the estimated expenses of RM220,000 to be incurred for the Proposed Disposal) of approximately RM7.985 million as calculated below: RM 000 Sale consideration 1 19,017 Less: Net carrying value of the Rig as at 30 June 2012 based on the audited financial statements of KSTB as at 30 June 2012 Estimated expenses to be incurred for the Proposed Disposal (33,462) (220) Loss on disposal of the Proposed Disposal (14,665) 1 USD6.300 million or RM million equivalent, based on exchange rate of RM for USD1.00 by reference to middle rate at pm on 20 May 2013 from Bank Negara Malaysia website. ^^ After deducting proposed partial settlement of the borrowings of RM million from proceeds to be raised from the Proposed Disposal. 3.3 Shareholdings of the major shareholders The Proposed Disposal will not have any effect on the major shareholders shareholdings as it does not involve any issuance of new KSTB shares. 3.4 Earnings and earnings per share The Proposed Disposal is expected to be completed by 30 November For illustrative purposes, based on the audited consolidated financial statements of KSTB as at 30 June 2012 and on the assumption that the Proposed Disposal had been effected on that date, KSTB expects to realise a proforma loss on disposal (after deducting the estimated expenses of RM220,000 to be incurred for the Proposed Disposal) of approximately RM14.67 million, which translates to a proforma non-recurring loss on disposal per KSTB share of about sen. However, following the completion of the Proposed Disposal, the KSTB Group is expected to have lower loss consolidation from KSTD or the Land Drilling Services division which has been reporting dismay performance for the past four (4) financial period/years ended 30 June 2009 to The audited loss net oftax, representing total comprehensive loss for the year of KSTD consolidated with the KSTB Group for the FYE 30 June 2012 was amounted to approximately RM7.34 million. 9

10 4 APPROVALS The Proposed Disposal is subject to the following being obtained: (i) approval of the shareholders of KSTB at the forthcoming extraordinary general meeting; and (ii) any other approvals, waivers and/or consents from any other relevant authorities, body and/or persons, where required. Barring any unforeseen circumstances, the submission of the draft circular to shareholders to Bursa Securities on the Proposed Disposal will be made within three (3) months from the date of this announcement. 5 DIRECTORS AND/OR MAJOR SHAREHOLDERS INTERESTS AND/OR PERSONS CONNECTED TO THEM None of the directors and/or major shareholders of KSTB and/or persons connected to them has any interest, direct or indirect, in the Proposed Disposal. 6 DIRECTORS STATEMENT The Board of KSTB is of the opinion that the Proposed Disposal is in the best interest of KSTB. 7 ESTIMATED TIMEFRAME FOR THE COMPLETION OF THE PROPOSED DISPOSAL Subject to all the required approvals being obtained, the Proposed Disposal is expected to be completed by 30 November HIGHEST PERCENTAGE RATIO APPLICABLE TO THE PROPOSED DISPOSAL PURSUANT TO PARAGRAPH 10.02(G) OF THE LISTING REQUIREMENTS ( PERCENTAGE RATIO ) Based on KSTB s audited consolidated financial statements for the FYE 30 June 2012, the highest Percentage Ratio applicable to the Proposed Disposal is approximately %. Therefore, based on paragraph of the Listing Requirements, KSTB must issue a circular setting out the required information pursuant to the Listing Requirements to its shareholders, and seek shareholders approval on the Proposed Disposal in a general meeting. 9 DOCUMENT FOR INSPECTION The ASA is available for inspection at the registered office of the Company at Suite A-21-13A, Level 21 Menara UOA Bangsar, No. 5, Jalan Bangsar Utama 1, Kuala Lumpur during normal business hours from Mondays to Fridays (except for public holidays) for a period of three (3) months from the date of this announcement. 10

11 This announcement is dated 20 May