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Press Release
26 May | Friday
RAM Ratings reaffirms rating of Perdana Petroleum’s sukuk
RAM Ratings has reaffirmed the AAA(fg)/Stable rating of the RM635 million 5-year tranche of Perdana Petroleum Berhad’s (Perdana Petroleum or the Group) RM650 million Sukuk Murabahah Programme (2016/2028).The reaffirmation reflects an irrevocable and unconditional financial guarantee extended by Danajamin Nasional Berhad (rated AAA/Stable/P1), which enhances the credit profile of the 5-year tranche beyond the Group’s stand-alone credit strength.
 
Independent of the guarantee, Perdana Petroleum’s stand-alone credit strength reflects synergies with its parent, Dayang Enterprise Holdings Berhad (Dayang), and its substantial presence in the domestic accommodation work barge (AWB) and mid-sized anchor handling tug supply (AHTS) vessel segments.Notably, the Group’s vessels are suited to Dayang’s hook-up and commissioning and maintenance activities. Additionally, domestic providers of marine support services are protected to a certain extent from foreign competition by Malaysia’s cabotage law.
 
That said, we note that Perdana Petroleum has been affected by the current oversupply of offshore support vessels (OSVs) and changing industry dynamics. As with other OSV providers, Perdana Petroleum’s performance in fiscal 2016 was impacted by the expenditure cuts of oil majors amid persistently low crude oil prices, which had exerted pressure on the Group’s vessel utilisation and daily charter rates (DCRs). Further, the Group’s long-term charter contracts had seen premature terminations.
 
In FY Dec 2016, the utilisation of Perdana Petroleum’s vessels fell to 58% (FY Dec 2015: 63%), while some of its vessels commanded lower DCRs. This resulted in a 15.99% y-o-y decline in revenue for the fiscal year and the Group recording its second consecutive year of pre-tax losses. In line with a lacklustre performance, Perdana Petroleum’s funds from operations (FFO) debt cover slipped to 0.08 times for the fiscal year (FY Dec 2015: 0.09 times). Nevertheless, its operating cashflow debt cover improved due to advances from Dayang and an increase in accrued expenses, as well as lower capex. Its gearing ratio also eased to 1.23 times as at end-December 2016 (end-December 2015: 1.34 times) owing to a lighter debt load vis-à-vis our expectation of1.46 times. The cancellation of orders for 2 new work barges has provided the Group with more headroom to manage its balance sheet and cashflow.
 
Perdana Petroleum is envisaged to remain in a loss-making position in FY Dec 2017, given that DCRs for some of its vessels had been recently renegotiated downwards by some 25%. However, its performance should improve thereafter on the back of an anticipated pickup in vessel utilisation as maintenance activity increases and in view of the Group’s recent inclusion in Petronas Carigali Sdn Bhd’s umbrella contract.
 
Listed on the Main Market of Bursa Malaysia, Perdana Petroleum provides OSVs to the O&G industry, owning a fleet of 17 vessels that include 8 AHTS vessels, 7 AWBs and 2 work boats.
source: RAM Rating Services Berhad
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