MARC has placed Bayu Padu Sdn Bhd’s RM500 million Istisna’ Serial Bonds and RM100 million Murabahah Commercial Papers/Medium Term Notes (MCPs/MMTNs) on MARCWatch Developing. However, the ratings are maintained at A+ID/MARC-1ID.

Bayu Padu Sdn Bhd, which is 100% owned by Sapuracrest Petroleum Berhad (“SapuraCrest”) is a special purpose vehicle (“SPV”) incorporated to facilitate the Islamic financing transactions involving the issuance of the Istisna’ Bonds and MCP/MMTNs, the proceeds of which are intended for utilization by the SapuraCrest group of companies.

The Company has redeemed RM250 million of the Istisna’ Bonds and the MCP/MMTNs of RM100 million nominal value on 8 December 2006. The current outstanding amount is thus RM250 million of the Istisna’ Bonds.

Sapuracrest has recorded Loss Before Tax for the third quarter ended 31 October 2006 amounted to RM19.6 million. This has resulted in cumulative Profit Before Tax to decline to RM21.3 million for the nine month period ended 31 October 2006, compared with RM88.6 million in the corresponding period in 2005.

SapuraCrest has informed MARC that out of its four business units, only the installation of pipelines and facilities (“IPF”) unit has posted a loss during the first nine months of the current financial year (i.e., Loss Before Tax of RM45 million). The company’s three other units, comprising the drilling, the marine services, and the operations & maintenance units, recorded a combined Profit Before Tax of RM112 million.

At the same time, SapuraCrest has recorded total revenue of RM1.322 billion for the nine month period, which remains in line with the company’s projected revenue for the year.

The losses for the period are due to escalation in costs under the IPF activities of the company. More precisely, these costs were due to:
• Bad weather conditions which increased the cost of IPF activities;
• Locked in revenue rates and costs under a number of contracts with the company’s IPF customers. These costs were locked in 2003 when fuel and other related costs were at much lower levels compared with this year.

Going forward, SapuraCrest has indicated that these IPF contracts are due to conclude by the end of 2006, and that the company is in talks to replace them with extensions or new contract orders at more favorable terms and conditions. At the same time, due to the stronger demand for IPF services, we were informed that the company is also in firm talks with clients which will see it maintain or exceed its volume and value of IPF contracts during the next financial year.

SapuraCrest has also informed MARC that the IPF losses will continue for the current financial quarter. However, the company expects to be back in the black by the next financial year.