KUALA LUMPUR: TH Heavy Engineering Bhd
(THHE) and US engineering, procurement, construction and installation (EPCI) company McDermott International Inc are parting ways after a three-year partnership.
On Friday, the two parties began to unwind their joint ventures that started in October 2013 with McDermott Capital Malaysia Sdn Bhd taking a 30% stake in THHE Fabricators Sdn Bhd and THHE acquiring a 30% stake in McDermott International’s indirect unit Berlian McDermott Sdn Bhd (BMD), which builds and installs offshore pipelines and structures.
The partnership had allowed THHE to offer end-to-end EPCI service solution, including design, transportation and installation.
In a filing with Bursa Malaysia, THHE said McDermott would give it back the 30% stake in THHE Fabricators while THHE would transfer its 30% stake in BMD to McDermott Holdings (M) Sdn Bhd or its nominee(s). The deemed value for both stakes is RM71.73mil, so they offset each other with no proceeds being raised.
On the unravelling of the ventures, THHE said it and McDermott had decided to “pursue different business paths” due to the dampening crude oil price and persistent supply overhang.
“THHE has begun diversifying away from the upstream sector of the oil (business) into downstream and other non-oil and gas businesses such as marine vessel construction and repairs. THHE’s immediate plan of diversifying into non-oil gas business such as marine vessel construction and repairs will mitigate the recurring volatility of the upstream sector of the oil and gas industry and provide a more recurring income,” it said.
Moving forward, it said it expected the fabrication business to remain challenging in view of the present competitive environment and capital expenditure cuts announced by oil majors.
The group plans to expand into the refurbishment and maintenance works and non-oil and gas related fabrication works to get a more stable and recurring income.
As at Aug 30, THHE and its subsidiaries have an outstanding main fabrication order book of RM132.5mil and outstanding minor fabrication, crane manufacturing & repairs and supply of equipment order books of RM9.4mil.
In April, THHE made a surprise announcement that Petronas Carigali had barred THHE Fabricators from participating in its future tender for two years due to “performance related issues” pertaining to the execution of the contract for the KKNPG-B Topside PH II project.
The company said then it would be seeking clarification from Petronas Carigali.