The MARC-2ID/AID ratings are predicated upon Oilcorp Berhad’s (Oilcorp) position as an integrated engineering, procurement and construction (EPC) services provider in various industries; strong historical profitability measures; and its low debt leverage position. The ratings, however, are moderated by the sustainability of its revenue and profits post-FY2005 given that Oilcorp’s on-going contracts are expected to be fully completed within FY2004 and FY2005. Potential new projects may require Oilcorp to gear up from its current low leverage position.

Oilcorp is an investment holding company with its subsidiaries providing integrated engineering services to the oil and gas, petrochemical, power generation, semi-conductor and other related industries. Contracts from these activities contributed to the upward trend in its revenue since FY2001; accompanied by double digit operating profit margins for three consecutive years. The group is also involved in property development, resort operation and property investment.

As of June 2004, the group’s on-going projects are valued at approximately RM182.0 million, half of which are expected to be completed within this year and the balance in 2005. So far, Oilcorp has tendered for projects amounting to RM493.0 million, of which 85.0% are oil and gas-related. Past experience indicates that the company’s minimum success rate for its tendered jobs was approximately 30.0%.

Oilcorp is in the final stages of completing the first phase of its new facilities comprising a fabrication yard, office building and workshops in Pulau Indah, Selangor and expects to start production in the fourth quarter of 2004. The new facilities shall enable Oilcorp to provide complete and comprehensive services to its customers, venture into oil and gas offshore construction and fabrication activities and diversify into marine related businesses like shipbuilding and repairs and construction of power barges.

The group is projecting an average and minimum DSCR of 11.9x and 3.9x respectively during the tenure of the MUNIF/IMTN facilities. Although its projections are quite sensitive to the reduction in revenue for its services divisions, where a 10% revenue reduction year-on-year will cause the projected DSCR to dip below the covenanted level of 1.5x, MARC views the group’s venture into the fabrication business positively because it is generally longer term in nature and provides a steady stream of recurring income.

In terms of its debt leverage position, Oilcorp has been a lowly geared company. The average debt-to-equity ratio for the past four financial years was 0.4x. Upon full drawdown of the RM70.0 million facilities, the pro-forma debt-to-equity ratio is expected to be 0.4x. The covenanted debt leverage ratio of 2.5x affords the group additional capacity for financing to capitalize on the active exploration and production activities in the oil and gas industry.