Petra Perdana Bhd - 2007

MARC has affirmed the rating of A+ with stable outlook to Petra Perdana Berhad’s (Petra) issuance of up to equivalent RM800 million Dual Currency Revolving Financing Facility comprising RM400 million Nominal Value Secured Serial Bonds (“Bonds”) under Tranche 1 and up to RM400 million Dual Currency Revolving Financing Facility under Tranche 2.

The rating reflects the Group’s above average competitive position as an integrated services provider to creditworthy oil and gas multinationals, favourable growth prospects for its businesses, and healthy profitability trends, but is constrained by the Group’s relatively high debt leverage.

The favourable outlook for the upstream oil and gas sector augurs well for Petra’s businesses. Petra’s ability to win or renew contracts continues to be underpinned by its strong operating and safety track record. The principal customers of Petra’s integrated services division are Sabah/Sarawak Shell Bhd, Petronas Carigali Sdn Bhd, and Talisman Malaysia Ltd. Through its integrated services division, Petra offers a comprehensive range of services covering project management, seismic acquisition and interpretation, oilfield optimization, design and engineering, fabrication, installation and commissioning. Estimated yearly contributions from the existing long-term contracts as at 31 May 2007 in relation to the provision of integrated services is about RM261.68 million. Petra owns one of the largest Malaysian-owned fleet, 22 vessels, for marine support services to the oil and gas industry.

In its FY2006, Petra reported an increase in revenue of 10.0% to RM543.4 million, and a 9.2% increase in pre-tax profit to RM66.5 million. Operating profit margin in FY2006 reached a record high of 17.5% compared with 16.1% in FY2005. The higher operating profit margin in FY2006 was attributed to higher integrated brownfield and marine activities, higher margins, higher vessel utilisation and improved charter rates relative to FY2005. In FY2006, integrated services provider, Petra Resources Sdn Bhd (PRSB), was the main revenue contributor to the Group, contributing about 74.5 % and 54.6% in unconsolidated revenue and pre-tax profit, respectively. Intra Oil Services Berhad, a marine support services provider, contributed about 20.3% and 41.8% in terms of unconsolidated revenue and pre-tax profit, respectively. Cash flow from Operations (CFO) Interest Coverage, nonetheless, deteriorated in FY2006 to negative 0.05 times from 4.8 times in FY2005 as a result of increased working capital requirements to fund increases in trade receivables and inventories.

The integrated services division is expected to remain as the Group’s main revenue contributor, while the offshore marine support services division its primary profit driver. The current mix of spot and time charters helps Petra achieve balance between maximising revenue during periods of high spot rates and achieving earnings stability.

As at end FY2006, the Group’s debt-to-equity (DE) ratio increased to 2.15 times relative to 2.08 times at end FY2005. Under the terms of the issuance, the Group is required to observe a maximum DE ratio of 2.50 times in FY2007 (the maximum covenanted DE ratio is to be decreased gradually thereafter) and a minimum  consolidated  debt  service coverage  ratio of 1.50 times  throughout the tenure of the Facility.

The drawdown of Tranche 2 of the Facility or any further indebtedness to be incurred by Petra will be subject to the financial covenants (i.e. DE and debt coverage) and affirmation of the rating at a minimum A+ under the issue structure. Todate, Petra had only drawndown RM50 million the RM400 million Tranche 2 of the Revolving Financing Facility.

The outlook on the rating is stable. Petra is well positioned to capture growth from across the upstream oil and gas sector, and is likely to continue its strong operating and financial performance in 2007.