Nagendran returns to Perisai

Almost a year after his departure from Perisai Petroleum Teknologi Bhd, Nagendran Nadarajah, one of the company’s founding members, is making a comeback to the oil and gas service provider.

Yesterday, Perisai proposed the acquisition of Garuda Energy (L) Ltd from Nagendran for US$70 million (RM212 million) to be satisfied by way of US$50 million cash and the issuance of new Perisai shares at an issue price of 65 sen per share.

Based on Perisai’s estimated enlarged capital, Nagendran would own about 12% of Perisai should the deal go through.

Garuda Energy owns a jack-up rig, namely Rubicone, which is being converted into a mobile offshore production unit (MOPU) and the makeover works are expected to be completed by May.

Garuda Energy is poised to enter into a bareboat charter agreement with Gryphon Energy (M) Sdn Bhd (GEM), which has in turn been awarded a contract by a major oil and gas player to lease, operate and maintain a MOPU for two years with extension for another two years.

A bareboat charter arrangement of the MOPU with GEM is expected to generate a revenue of about US$25 million per annum.

What’s interesting is that on April 9 last year, Nagendran proposed to dispose of his 19% interest in Perisai to HCM Logistics Ltd, a wholly-owned subsidiary of Ezra Holdings Ltd which is listed on the Singapore Stock Exchange.

The disposal was completed about two weeks later, and based on filings, it was transacted at 48.5 sen per share for a total of RM64 million.

Subsequently, Nagendran was redesignated non-executive director of Perisai after the share sale. His departure led to the entry of current managing director Zainol Izzet Mohamed Ishak who was the former chief executive officer of SapuraCrest.

Apart from Zainol, Adarash Kumar Chiranji Lal Amarnath who sits on the board of Ezra, had also joined Perisai as executive director then.

In tandem with his departure, Nagendran also proposed to acquire Garuda Energy and Hummingbird Energy (L) Inc. Garuda Energy owned a jack-up drilling rig Hercules 191 which was undergoing works to be converted into a MOPU, while Hummingbird Energy had paid a deposit to acquire another jack-up rig named Hercules 255.

Subsequently Nagendran acquired Garuda Energy for US$1 and repaid some US$5 million (estimated RM15.95 million then) owed by Garuda Energy to Perisai. In conjunction with the sale, Nagendran was also to be responsible for all costs and expenses agreed in relation to all the works for converting the jack-up rig into a MOPU.

As for Hummingbird, Nagendran acquired it for US$1 and also advanced US$750,000 as a loan to the company (Hummingbird).

Both Garuda Energy and Hummingbird were loss-making entities during that period when oil prices were low and the demand for jack up rigs was poor, causing rates to plummet. This also explains why Perisai wanted to dispose of these assets.

But now the jack up rigs that can be converted into MOPU are in demand especially with the development of marginal oil fields.

In an announcement to Bursa yesterday, Perisai in its rational for the deal stated that the proposed acquisition of Garuda Energy was a strategic move to expand its asset base and would position the company to offer solutions for marginal oil field projects and diversify its revenue stream.

At the moment, Perisai is an offashore service provider for major oil and gas companies and apart from vessels, its expertise also lies in anti-corrosion materials.

Yesterday, ahead of the announcement, Perisai shares rose to its highest since its listing in July 2004 on speculation that the oil and gas support services provider may embark on growth plans to expand its asset base.

Perisai shares rose as much as six sen to 83 sen in intraday trade yesterday before closing at 81 sen, up four sen from a day earlier. The third most actively-traded stock saw some 60 million shares done.

The stock has gained 49% so far this year, significantly outperforming the FBM KLCI’s 0.1% rise.

The market was expecting asset injection by Ezra Holdings, which is Perisai’s second largest shareholder. According to a report by TA Securities on March 24, the research house had indicated that Perisai may acquire strategic assets including vessels, and rigs or possibly a strategic stake in a risk-sharing contract for a marginal field.

The research firm said the price of Perisai shares was slightly toppish, possibly, due to the fact that the market had already priced in potential acquisitions by the company.

Perisai had cash of RM26.22 million versus debt obligations of RM191.75 million as at Dec 31 last year. This translates into a net debt of some RM165 million.

Excluding its 51%-owned subsidiary Intan Offshore Sdn Bhd’s assets, Perisai has three marine vessels – the Alpha Shield and Allied Shield, apart from the Enterprise 3, according to its website.

Among the three, the only revenue-generating asset is the Enterprise 3, a Derrick Lay Barge which is on contract till June 2013. Via Intan, Perisai also owns eight vessels which are bareboat-chartered to Emas Offshore (M) Sdn Bhd.

Intan’s earnings are expected to be registered in Perisai’s books starting from the second quarter of current financial year ending Dec 31, 2011.

The entry of Ezra as a major shareholder of Perisai is deemed strategic considering that Perisai can capitalise on the foreign entity’s prowess in the oil and gas support services market in Asia.

At the same time, Perisai also offers a gateway for Ezra to expand its presence in the Malaysian oil and gas market.

Mercury Pacific Marine is the single largest shareholder with a 23.18% stake in Perisai , followed by Ezra and Legg Mason Inc with some 19% and 5.18% respectively. US-based Legg Mason emerged as a major shareholder in Perisai last week.

Now, Nagendran is poised to emerge as the third largest shareholder based on the enlarged capital of Perisai, and he still has another jack-up rig with Hummingbird.

What he plans to do next will be interesting. - by Chong Jin Hun of theedgemalaysia.com