KUCHING: RAM Ratings has reaffirmed the AAA(fg)/Stable rating of the RM635 million five-year tranche of Perdana Petroleum Bhd’s (Perdana Petroleum) RM650 million sukuk murabahah programme (2016/2028).
The reaffirmation reflects an irrevocable and unconditional financial guarantee extended by Danajamin Nasional Bhd (rated AAA/Stable/P1), which enhances the credit profile of the five-year tranche beyond the group’s stand-alone credit strength.
“Independent of the guarantee, Perdana Petroleum’s stand-alone credit strength reflects synergies with its parent, Dayang Enterprise Holdings Bhd (Dayang), and its substantial presence in the domestic accommodation work barge (AWB) and mid-sized anchor handling tug supply (AHTS) vessel segments.
“Notably, the group’s vessels are suited to Dayang’s hook-up and commissioning and maintenance activities. Additionally, domestic providers of marine support services are protected to a certain extent from foreign competition by Malaysia’s cabotage law.
“That said, we note that Perdana Petroleum has been affected by the current oversupply of offshore support vessels (OSVs) and changing industry dynamics.
“As with other OSV providers, Perdana Petroleum’s performance in fiscal 2016 was impacted by the expenditure cuts of oil majors amid persistently low crude oil prices, which had exerted pressure on the Group’s vessel utilisation and daily charter rates (DCRs). Further, the group’s long-term charter contracts had seen premature terminations,” the ratings agency said.
In the financial year 2016 (FY16), the utilisation of Perdana Petroleum’s vessels fell to 58 per cent, while some of its vessels commanded lower DCRs.
“This resulted in a 15.99 per cent year-on-year (y-o-y) decline in revenue for the fiscal year and the group recording its second consecutive year of pre-tax losses.
“In line with a lacklustre performance, Perdana Petroleum’s funds from operations (FFO) debt cover slipped to 0.08 times for the fiscal year.
“Nevertheless, its operating cashflow debt cover improved due to advances from Dayang and an increase in accrued expenses, as well as lower capex.
“Its gearing ratio also eased to 1.23 times as at end-December 2016 owing to a lighter debt load vis-à-vis our expectation of 1.46 times. The cancellation of orders for two new work barges has provided the Group with more headroom to manage its balance sheet and cashflow,” it added.
Overall, it believed Perdana Petroleum could remain in a loss-making position in FY17, given that DCRs for some of its vessels had been recently renegotiated downwards by some 25 per cent.
“However, its performance should improve thereafter on the back of an anticipated pickup in vessel utilisation as maintenance activity increases and in view of the group’s recent inclusion in Petronas Carigali Sdn Bhd’s umbrella contract,” it pointed out.
Listed on the Main Market of Bursa Malaysia, Perdana Petroleum provides OSVs to the O&G industry, owning a fleet of 17 vessels that include eight AHTS vessels, seven AWBs and two work boats.