Malaysia offshore contractor TH Heavy Engineering Berhad (THHE) and US-based McDermott have entered a framework agreement to terminate four joint venture (JV) firms by mutual agreement.
The companies had established the JV firms in 2013 to provide services for the offshore oil and gas industry in Malaysia and enhance THEE’s service offering.
“THHE has begun diversifying away from the upstream sector of oil the oil into downstream and other non-oil and gas businesses such as marine vessel construction and repairs”, the company informed in a statement to Bursa Malaysia.
McDermott and THHE Separate in Malaysia
According to THHE, the JVs terminated include Berlian McDermott JV, THHE Fabricators JV, THHE McDermott Projects Services JV and THHE McDermott Engineering JV.
The aim of the JV firms was for THHE to offer, in collaboration with McDermott, a service solution that would enable it to ender high-value business sectors, cross-sell ancillary services and score EPCI jobs with oil majors where it could gain a higher margin.
This would enable THEE to become a Tier 1 player in the Malaysian oil and gas sector, the company informed.
However, with the downwards trend on crude oil prices and the supply glut, the companies have decided to part their ways.
THHE Focus on Non-Oil Businesses
Under the agreement signed, THHE will transfer its 30% interest to McDermott, and the latter with transfer its 30% share to THHE, in a transaction valued at RM 71.73 million (£13.39 million) for each.
In response, THHE has started to diversify from the upstream sector into the downstream sector and other businesses not related with oil and gas such as marine vessel construction and repairs.
According to the company, this should help mitigate the volatility of the upstream sector and provide it with a more recurring income.
In the meantime, THHE is looking to raise funds to complete the FPSO Layang conversion works and monetise and unlock the value of the group’s assets to generate cash flows and improve working capital.