Booming Sector sparks acquisitions

The Star, 14 Mar 2005

Sumatec Resources Bhd’s move to acquire four Miri-based shipping companies recently was prompted by the strong potential in the coastal tanker sector, said its managing director James Chan.

He said there were few competitors because of the high entry point such as high prices of ships and high safety requirement standards of oil companies.

“There is also tremendous potential to expand to Indonesia, Vietnam and the Philippines which have long coast lines and large populations,” he said.

Furthermore, Chan said fuel cost was reimbursable and business was stable as it was based on long-term contracts ranging from three to 10 years depending on the age of the ships.

He said the coastal tanks bring oil products from refineries to storage terminals located near the ports and from the storage terminals, road tankers bring the oil products to the various service stations to reach the consumers.

“The sector is also a growth area as coastal tanker activities rise in tandem with population growth.

“In this respect it is very much different from other marine vessel operations which depend on offshore oil development contracts. 

“We have a clear head start in the marine transportation and logistics sector and with the oil and gas sector’s current boom, we expect to secure additional contracts from other oil majors,” he said. 

Semado Maritime Sdn Bhd, Semua Shipping Sdn Bhd, Oil Supply Sdn Bhd, Mini Tanker Chartering Sdn Bhd – were acquired at RM50 million. 

Chan said that the fleet of six ships from the acquisition has a total capacity of 33,000 metric tonnes.  

The fleet will increase by two ships by 2006 and another two by 2007.  

By 2007, the 10-ship fleet will have a total capacity of 63,000 metric tonnes. 

Sumatec’s entry into the coastal tanker business is a realisation of its diversification plans into four related areas of the energy sector – marine transportation and logistics, hazardous waste management, oil storage and renewable energy.  

The new business is in line with Petronas' encouragement for Malaysian companies to own and operate ships in the huge offshore marine transportation and logistics business, especially in the current high oil price situation where offshore oil and gas exploration and development has been intensified by all the oil and gas producing countries 

To finance the part of the acquisition, Sumatec proposes to undertake a rights issue of new shares with free detachable warrants on the basis of two rights shares with one new warrant for every eight existing shares held.  

The company had also issued a private placement of 13,287,042 new ordinary shares at an issue price of RM1.00 per share on 25 February 2005, representing 10% of the issued and paid-up share of the company. 

Sumatec has been in the onshore oil and gas business for 25 years.  

It is a PKK Class A and CIDB G7 construction capable of handling total integrated multi-disciplinary construction jobs in the oil and gas industry.

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