Barakah Offshore Petroleum is an oil and gas service sector company with a dismal track record.  It traded at RM 1.8 after IPO in 2013. Unfortunately, the financial situation worsened soon after. Shareholders experienced heavy losses for years with no respite from the Company Management. The main cause of it all was barakah’s purchase of a white elephant (pipelay barge kota laksamana 101) in 2013. The barge was underutilized and caused years of operational and maintenance expenses without sufficient revenue to offset them. By 2018 barakah’s share price dropped to about RM 0.1. Barakah lost 95% of the value as per graph below:

A reasonable investor would expect the Company to cut losses by selling the elephant (pipelay barge), or by putting it to hard work. However, no such actions were taken. As the crude oil price dropped in 2015, new contracts became hard to secure. Barakah changed strategy. It focused on spreading the misery to all the stakeholders (partners, clients, creditors, and contractors, etc.) by extracting funds from them. With the losses building up and up, the white elephant sitting idle or underutilized as it was too precious for ordinary tasks of pipeline laying - the issues became serious.

The Company kept incurring annual expenses (elephant’s upkeep was up to RM 50 million per year, but this amount is very uncertain with the creative accounting used as a smoke screen). Someone had to pay the price.  Management decided that their subcontractors made perfect scapegoats that could be sacrificed.  Their bills were (allegedly) delayed.  In response, contractors complained to the clients, destroying reputation of barakah and the relationships within the service chain. Bad karma was accumulating. A few subcontractors launched court cases later. A few jumped the ship and joined other projects.

Subcontractor payment delays could only buy limited time.  Another potential victim was identified.  And so came the time for creditors to pay their share. EXIM bank did not receive the loan instalment due. EXIM Bank called in the loan of about USD 40 million, secured by the barge in May 2019. That resulted in PN17 being triggered by the Bursa.

With the sub-contractors and creditors fully ‘squeezed’ the other obvious participant to share the misery with was the client.  Thus, the litigation against Petronas (who suspended the licence for underperformance in the subsea area) was started.  The litigation against EnQuest also commenced. Of course, barakah could not resist litigation against subcontractors, and their sub sub-contractors, e.g., Bumi Armada for anchor dropping incident.  The solicitors for barakah Messrs. Ram Reza & Muhammad and Messrs Dinesh Praveen Nair for PBJV, and those for opponents sure make good money on all the cases they handle. How many cases?  That number even barakah probably does not know, as there are not enough fingers on both hands to count them, while the office dress policy prevents management from utilizing toes.

We are now approaching the endgame stage. Barakah spread the misery all over, among the subcontractors, creditors, clients and third parties alike.  As is frequently the case, the developments took a full circle and returned to the very beginning.  We started with the losses by the investors. Since the misery and contagion touched all, it is time for investors to pay again.  And here it comes, in the form of a PN17 REGULARISATION PLAN required by the bursa, but imposed by barakah. But that is already a new circle and a new story.