Barakah aims to venture into risk service contract

  • Business
  • Saturday, 12 Oct 2013

(from left) Barakah Offshore Petroleum Bhd CEO Syed Abdul Rahim Syed Jaafar, co-founder Azman Shah Mohd Zakaria and founder Nik Hamdan Daud in an interview with StarBizWeek.

Barakah Offshore Petroleum Bhd may be a new kid on the block but its history goes back to the year 2000, when two engineers decided to set up a company of their own and founded PBJV Group.

PBJV Group is a name that is known in the oil and gas (O&G) industry, notably as one of the key pipeline activities players in the local market.

Meaning “blessed” in Arabic, Barakah survived the financial crisis in 2008 and came back stronger as it decided to build a pipe lay-cum-accommodation barge, Kota Laksamana 101, in 2009 when the economy was still recovering, founder Nik Hamdan Daud tells StarBizWeek in an interview.

“God willing, we may invest in another asset,” he says.

Barakah is a holding company that was set up for its listing, which is slated for November.

Once listed, the company intends to grow into new areas, on top of its main activities which include commissioning, offshore transportation and installation, as well as maintenance and hook-up and commissioning (HUC).

“We are looking at the potential of a risk service contract (RSC) where we can put certain activities to our existing capabilities,” he says, adding that its installation business is needed for RSC requirements.

He adds that a RSC offers good potential and the company is in the process of identifying foreign sub-surface partners, in the event of a potential RSC opportunity.

“After you go into a RSC, you have the opportunity to grow into other markets. The learning curve here in Malaysia is superb,” he enthuses.

Currently, Barakah has an orderbook of RM750mil while its tenderbook is in the excess of RM5bil.

Of the RM750mil, it clinched a RM500mil HUC contract that will last for the next five years.

Going forward, it will focus on long-term contracts to plan and manage its resources more efficiently, which will subsequently translate into more stable income streams and better margins.

At the moment, getting a RSC is just an ambition as an O&G analyst opines that the company still has a long way to go to win a RSC because it has to build its expertise and assets for that, considering that its major asset currently is a pipe-lay barge.

For its fiscal year 2012, Barakah recorded RM33.2mil in net profit on the back of RM202mil in revenue.

Based on the issue price of 65 sen per Barakah share, the analyst estimates the company’s share price to be valued at forward price-to-earnings of 10 times for the financial year 2014.

He says the valuation will put Barakah on par with other O&G players like Alam Maritim Resources Bhd and Dayang Enterprise Holdings Bhd, based on his estimations.

Nik Hamdan concedes that a RSC involves a lot of capital investment and know-how.

“If you can prove to your client that you can offer something commercially attractive and also your expertise, I don’t see it’s a big challenge. That’s why we will look for partners who can also have strong back up for the project,” he quips.

Having said that, he points out that Barakah will need to grow to a certain size before venturing into that segment.

To him, bringing the company to another level is something he is familiar with.

After all, when he started out on his own with partner Azman Shah Mohd Zakaria, they had difficulty in getting funding as they were new and had no track record to show lenders.

Nik was with ExxonMobil for a couple of years and later worked with an international O&G firm where he was involved in transferring the technical know-how from the company’s expatriates to local talents.

He handled all the operations and administrative work at that time and managed to trained Malaysians to handle offshore pipeline installation work in two years.

“The company had made a lot of money from my effort,” he laughs. However, when his then employer sold the company to a bigger outfit overseas, he decided to start his own entrepreneurial journey.

He recalls that the company’s first pipeline job was the 220km, 32-inch Angsi job, which he considers a big contract.

“The client trusted our capabilities. They tested us with a big job but from then onwards, they continued to give us jobs,” he exclaims.

“We were a new company but we delivered on time. There were no safety issues and we delivered with quality.”

Once the company learnt to finance the jobs and subsequently made reasonable gains, he continued to reinvest in the company. “From there, we bought more assets and hire more people,” he says. — By NG BEI SHAN

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