SESB is a wholly-owned subsidiary of SapuraCrest Petroleum Berhad, an integrated oil and gas service provider. SESB’s two core business divisions comprise marine services, and operations and maintenance (O&M), with the former accounting for more than 75% of the Group’s revenue for the past three years. Marine services provided by SESB include vessel operations, underwater and topside maintenance, hook-up and commissioning as well as refitting and modifying platforms. Its O&M division is involved in the provision of power turbine maintenance services, automation solutions and asset management services. SESB’s marine engineering contracts may be short or long-term in nature. The Group maintains a mixture of variable and fixed pricing terms with variable rates providing upside potential on daily charter rates while fixed rates impart stability to its future revenue stream. Historically, SESB’s income was mainly derived locally while continued efforts to expand into regional markets saw its maiden contract from India’s Oil and Natural Gas Corporation (ONGC) which was awarded in December 2005. To date, the ONGC is SESB’s largest overseas contract with a value of RM274 million.

SESB’s financial results improved significantly in FY2007, posting a pre-tax profit of RM13.7 million on the back of 56.6% revenue growth or RM382.5 million. The improvement in revenue was primarily attributable to the execution of the ONGC contract which contributed approximately 39% to total revenue. Meanwhile, SESB also recorded higher charter rates and increased utilisation of vessels and remotely operated vehicles. As a result, its operating profit margin increased to 8.0% compared to 5.1% in the previous year.

In the nine-month period up to 31 October 2007 (3QFY08), SESB’s operating profit margin narrowed significantly to 3.6% on account of escalating manpower rates, vessel and equipment rental rates and additional time required to implement the ONGC project. MARC is of the view that the extended contract period could impact SESB’s liquidity. Mitigating this somewhat is the amount billed and collected up to 3QFY08 from the ONGC contract to date which has cumulatively exceeded 40% of the contract value. In addition, SESB has received RM20.0 million in respect of variation order claimed.

As at 31 October 2007, the Group’s debt leverage level increased marginally to 1.9 times (FY2007: 1.8 times). However, in December 2007, its debt leverage declined following the RM25 million redemption of the BaIDS.