Problem
Case
Mutiara Energy Berhad, a public limited liability is a Malaysian integrated oil and gas services company based in Kajang, Selangor. It is a global integrated energy services and solutions provider operating across the entire upstream value chain, including renewables. Mutiara Energy trades in over 20 countries, such as China, Australia, United States of America, and those in Western Africa and the Middle East, employing approximately 13,000 people. The company was form in year 2000 and trades on the Main Market of Bursa Malasia Securities Berhad on May 2012.
Mutiara Energy Berhad via its Group is principally engaged in Engineering and Construction, which includes the creation of offshore platforms and marine pipelines for oil exploration. Secondly, the core business of Mutiara Energy Berhad is operations and maintenance. Through its engineering, procurement, construction, installation, and commissioning solutions, Mutiara Energy also offers its clients in the oil and gas industry operations and maintenance services.
The founder of Mutiara Energy Berhad is Mr Adam Ahmad, who is also founded numerous sister company of Mutiara Energy holds on an effective shareholding of 60%. That makes him the Chairman and Managing Director of Mutiara Energy. Together with him is his brother Allan Ahmed as the Executive Director of the company and three other directors.
Mutiara Energy was once a profitable company. In a press release dated 25 July 2017, Mutiara Energy Berhad reported Profit after tax of RM206 million in financial year ended 31 January 2017. Mutiara has stated that the Group's coordinated effort towards market expansion and cost reduction has resulted in RM 7.7 billion in revenue and PBT margins before impairment of 8.7%.
It is also highlighted that the industry environment remains challenging with increased competition in the services segment due to the widespread cuts in capital expenditure. Mutiara has been competitive in securing new work worth RM6.3 billion for FY2017. With this, we know that Mutiara has been in a highly competitive position with a rapid market growth.
In terms of the Exploration and Production segment, Mutiara has made significant progress in commercializing their gas fields. The additional gas discoveries for enhances Mutiara's position as an Asian-based independent and it continues to leverage their in-house expertise to identify new opportunities to add further to the company's portfolio of resources and reserves. This indicates that the competition for Mutiara Energy Berhad remain intense.
However, in a press release dated 8 December 2021, Mutiara Energy Berhad declared the company is facing a going concern and short-term cash flow as well as liquidity issues. Due to the mounting issues that it has suffered, Mutiara Energy was listed as one of PN17 status company when Bursa Malaysia released the PN17 listing on 1 June 2022.
Mutiara Energy also confirmed that it has become "an affected listed issuer" under PN17 as its 85-million-ringgit (US$19.35 million) shareholders' equity on a consolidated basis is now less than 50% of its 10.9 billion ringgits share capital.
Mr Adam called for an urgent board meeting to decide on the delisting issue. He also made a phone call to the Chief Finance Officer (CFO), Mr Woon and requested him to provide his opinion about the delisting issue during the meeting:
"We are now at the juncture to decide whether to make an appeal to Bursa Malaysia regarding the delisting of the company. Woon please advise the board members on the effect of delisting and how it would affect our company's financial management and the funding of our regularization plan. On top of that I was thinking on the strategy to focus on long-term sustainability, the Board Restructuring Task Force initiated a reset plan that aims to strengthen the balance sheet, improve our financial framework, streamline our operating model, and chart future business direction. I cannot make up my mind whether to hold on to our listing status or not. Your input will be very much needed for the board members to deliberate on this issue."
Mr. Adam at the same time admitted that the company's auditors have highlighted a material uncertainty related to going concern in their latest audited financial statements for the financial year ended 31 January 2022.
Pursuant to the PN17 requirements, Mutiara is formulating a regularisation plan to address its PN17 status in tandem with a proposed scheme of arrangement and the company added it would make monthly announcements on the progress.
"We are taking the necessary steps to address our PN17 status," Mr Adam said in a statement.
"As announced on 10 March, the company obtained an order pursuant to Section 366 of the Companies Act 2016 to summon meetings of the various classes of its creditors to consider, and if thought fit and appropriate, to approve, a proposed scheme of arrangement and compromise between the company and its creditors.
"We are currently undertaking a proof of debt exercise in connection with the proposed scheme of arrangement."
Failure to comply with the PN17 status requirements, could see Mutiara's listed securities suspended from trading and have the company delisted from the exchange.
After a series of discussion with Board of Directors and Mutiara top management, the company decided to call up a consulting firm, Jenny and Co to get its advice on how to save Mutiara Energy.
"We need fresh advice from consultant like you to help us get out of trouble. It would be good if your firm could table a regularization plan in our next Board meeting for our deliberation on how to revive Mutiara Energy."
When Mr. Adam is about to leave his office this evening, Mutiara Union representative gather in front of his office to protest on the planning to retrench 200 Mutiara Energy staff. They demanded some reasonable arrangement or they would complaint to the government. Mr. Adam promises to look into this matter with Vice President Human Resource Department.
With all the issues stumbling around Mutiara Energy, Mr. Adam stood puzzling whether and how Mutiara Energy would be great again.