OilTools buy expected to boost Scomi profit by 50%

SCOMI Group Bhd expects the proposed acquisition of a 70.9% stake in OilTools International to boost Scomi's earnings by 50% for the financial year ending Dec 31, 2004, said a company spokesman. 

OilTools generated US$116.9mil in revenue for its financial year ended June 2003, and an operating gross profit of US$19.2mil. It, however, posted a net loss of US$9mil for that year due to a large provision on its investment. 

Scomi anticipates the revenue of OilTools, which is involved in drilling waste management services, to increase to US$152mil and register an operating profit of US$27.1mil for financial year 2004.  

A bulk of OilTools' earnings comes from the Asia Pacific region, and its drilling waste management services contribute about 70% of its earnings. 

At a media briefing yesterday, the spokesman said Scomi had submitted a bid to Murphy Oil, the company that had three new discoveries in east Malaysia, for the supply of mud engineering services.  

He said the tender would close on Nov 10, and its outcome is expected to be announced early next year.  

Scomi has signed a sale and purchase agreement with venture capital company 3i group (which bought the stake in Oiltools from Antah Holdings Bhd in 1999) and Pall Corp on Wednesday to buy their respective 50.9% and 20% stakes in OilTools for US$77.3mil. 

Scomi also entered into a call and put option agreement and shareholder agreement with Derrick Corp and Christopher Pianca, the CEO of OilTools, to acquire the remaining equity in the company. 

The acquisition will be initially financed by a one-year RM300mil bridging loan. Scomi will also raise about RM429mil via the issue of a 7-year Islamic bond, rights issue of warrants and private placement of 10 million shares at RM12.50 each.  

Of the RM429mil to be raised, a total of RM300mil will be utilised to refinance the bridging loan, RM60mil for working capital and another RM60mil to be injected into its marine vessel business.  

In a statement yesterday to the KLSE, Scomi is also proposing a 3-for-5 bonus issue after the private placement, and share split of each 50 sen share into five shares of 10 sen each. 

Following the proposed acquisition of OilTools, Scomi would be one of two integrated drill fluid management companies in the world.  

OilTools' core business – drilling waste management services, machine shop services and distribution of related equipment – was complementary and synergistic with Scomi's existing business. 

Scomi provides drilling mud and mud engineering services for petroleum exploration, and the proposed acquisition would give Scomi a presence in 29 countries and a platform to expand overseas.  

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