Ladies and gentlemen, thank you for participating in our second quarter financial year 2023 analyst briefing. I am Faizan from MISC's Investor Relations team. We are pleased to have with us today Captain Rajalingam Subramaniam, President and Group CEO of MISC Berhad; Encik Raja Azlan Shah Raja Azwa, Vice President Finance and Interim Vice President of Corporate Planning; Che Eslyn, Head of Financial Reporting, Governance and Budget from Finance; Miss Gurkiran Kaur, General Manager Corporate Planning. Before we start with the analyst briefing proceedings, I'm pleased to invite Captain Rajalingam, President and Group CEO of MISC, to provide a short opening address. Captain Raja.
Thank you, Faizan. Very good evening, everyone, analysts. I'm advised that there's what? 12 of us, what do you call them, dialing into this Q2 financial results analyst briefing and happy to welcome everyone. Some of you have asked that I participate in the quarterly analyst briefing as well when we met up earlier this year. Here I am and happy to take you all through on the Q2 financial results and I will come back to clarify any clarifications that you require post the briefing today. Over to you, Faizan. Thank you.
Thank you, Captain Rajalingam. Before we proceed with the presentation, I would like to bring your attention to the disclaimer slide. The presentation contains some forward-looking statements with reference to our plans and expectations, whereby actual results could differ due to unknown risks, uncertainties and other factors that are in many cases beyond MISC's control. With that, I would like to invite Encik Raja Azlan for his introductory remarks on the quarter's key highlights and business updates. Encik Raja Azlan.
Thank you, Faizan. A very good evening to my dear friends from both the buy side and the sell side. It's with great pleasure that we are here to announce the second quarter results in 2023. I'll just give you the highlights before I pass on to my colleague, Eslyn, to take us through the detail. Basically, in terms of revenue, we reported revenue of about MYR 705 million, which was a 12% quarter-on-quarter. Year-on-year, it increased by about 6%. In terms of profit after tax, there was a decrease of 50% quarter-on-quarter. Although for the first half of the year, we've recorded profit of about $209 million, which is more than 100% increase year-on-year. In terms of cash flow from operations, we reported for the quarter $562 million, which is a 66% increase quarter-on-quarter.
If we look at the first half of the year, we recorded a cash flow from operations of about MYR 900 million, which is a more than 100% increase year-on-year. We'd also like to highlight that MISC received the Silver Award at The Star ESG Positive Impact Awards under the large companies tier for the environmental category, sustainable ecosystems. This recognition reflects our commitment towards caring for the ocean's health through MISC's Heart of the Ocean marine biodiversity conservation program. In July as well, AET and Eaglestar were recognized with the Chamber of Shipping of America Awards at the Annual Safety Awards. The collective efforts of two entities have set good safety records without any lost-time injuries for 48 vessels and have recorded a total of 320 years without any LTI. We can move to the next slide. We'd also like to share some notable updates during the second quarter.
On the 2nd of May, MISC unveiled its future-ready new build FPSO, known as the Mega-Module Engineering and Green Architecture, the world's first MDE-F FPSO that uses the Mega-Module topsides and incorporates sustainable technology with the potential to reduce carbon dioxide emissions by nearly 40%. The design was 24 months in the making and demonstrates our continued commitment to developing innovative solutions. In June of this year, MISC through entities AET as well as the Malaysian Maritime Academy, inked a milestone collaboration agreement with WinGD and DNV respectively to develop future-ready maritime talents and next generation ammonia engines. This will drive the development of ammonia engine for ammonia dual-fuel vessels. The signed agreement between AET and WinGD further intensifies our Group's commitment to decarbonization and is a step in the right direction towards our long-term ambitious plan.
Subsequently, in July of this year, MHB signed an MOU with Uzma Berhad to develop innovative solutions exploring opportunities within the renewable energy solutions value chain, and also to provide comprehensive services to meet the increasing demands of the oil and gas industry. That's basically some of the highlights for the second quarter of this year. I'll pass over to Eslyn to take us through some details on the results for the second quarter. Oh, sorry, before that, let's just go to the next slide. We also are happy to share, we made healthy progress on our Mero project, which is currently in the Yantai CIMC yard, where the project has achieved overall completion of close to 90% as at the end of the second quarter.
We had the successful execution of the top side modules, the lifting campaign, the safe completion of the initial marine gas oil bundling operation, and also we accomplished the completion of the marine cable pulling activities. As at the end of the second quarter, in terms of on the ground, the construction completion progress is about 93%. The overall completion is about 89%. Thank you. Over to you, Eslyn.
Good evening, everyone. Thank you to Captain Raja and T Azlan for the introduction section. Thank you to the participants for joining MISC Berhad's quarter 2023 analyst briefing. I'll bring you guys to the page eight of our AB pack. First, I'm going to talk about our revenue. Higher revenue for the year-on-year, mainly due to the higher revenue received from an ongoing heavy unit and offset with the lower revenue from offshore business with lower revenue recognition from FPSO conversion following lower project progress in the current quarter.
For the profit before tax from operations, higher profit before tax from operations as compared to year-on-year, mainly due to the improved margins on freight rate in the petroleum segment, as well as positive contribution from offshore segment as previous corresponding quarter was affected by the increase in construction cost of an FPSO arising from the global supply chain issues and lockdowns in parts of China. Whereas lower profit before tax from operations for the quarter-on-quarter position are mainly due to the additional cost provision recognized for an ongoing heavy unit project in the heavy unit segment. Profit after tax movement as compared to year-on-year and quarter-over-quarter are in line with the revenue and PBT prompt mentioned above, as well as a result from the lower impairment provision that we captured in the current quarter.
Cash flow from operations improved in the current quarter, mainly coming from the higher operating performance in the current period and the receipt of the charter hire payment for the two floating storage units. Moving on to page nine. Our balance sheet is very solid with a prudent risk management. The overall group total assets, total equity, and total liabilities showed a marginal movement since the end of the last financial year with total asset of about $ 14.1 billion. Our gearing ratio remains low at 0.45 times, supported by strong generation positions. The impact on interest rate hike is very limited given the current debt mix composition that MISC Group have at this juncture. Moving on to page 10, the cash and debt balances. Our cash balances remains healthy at $1.6 billion as of this quarter.
Lower cash balance as compared to the previous corresponding period, mainly due to the $1 billion bonds issuance that we had in the previous quarter. While we are serving the debt service obligations as we go along, there's some payback payments in the current quarter, and partly offset with one of the payments from the client. At this juncture, our debt balance remains around $3.9 billion following loan quarter, as well as lower loan drawdown in the current quarter. On page 11, this is the financial performance by business segment. I'll start off with the gas segment. Revenue was comparable between year-on-year, quarter-on-quarter position. Profit before tax was better than previous corresponding period as a result of lower vessel operating costs. There are also impairment charges in this quarter as the impairment assessment was done at an interval point in time.
We would like also to emphasize that this is purely an accounting treatment as most of the assets are close to the end of their useful life, whereby we fully recover the accumulated amortized during the contracted period. For the petroleum segment, overall revenue and profit before tax was higher as compared to the two quarters, mainly high freight rate observed in the current quarter. For the offshore segment, lower revenue as compared to the corresponding quarter, as well as preceding quarter, mainly due to the lower construction revenue pace on the project progress that I mentioned earlier. Higher PBT as compared to the previous quarter, mainly due to construction costs that we captured due to the global supply chain issue and lockdown in parts of China. Finally, the marine and heavy unit segments.
Higher revenue as compared to the previous corresponding quarter and preceding quarter, mainly due to the higher revenue from an ongoing project
Loss before tax in the current quarter was due to the additional cost provision as a result of work scheduled for ongoing projects during the quarter. With that, thank you. I'll pass to Miss Gurkiran to present on the market outlook.
Thank you very much, Eslyn. Good evening, the analysts. I shall take you through the market environment that we are in today. Starting off with the LNG shipping segment, spot rates have increased slightly in June following the increase in chartering activities, mainly in the Atlantic basin. There were production setbacks in the U.S. and other locations in May. On top of that, we see that there will be a rebounding of energy demand due to the restocking for winter requirements as well as the depletion of inventories in the summer given the frequent heat waves that we've heard about. Premise on this, the gas segment will continue to pursue available growth opportunities while our operating income continues to remain solid, supported by our current portfolio of long-term charters. Next slide, please.
On the global liquefaction capacity, we expected to increase five projects to be sanctioned this year. As you can see from the graph, there are many projects, about 100 over projects for pre-FID slated for 2023. Next slide. With the increase in planned liquefaction projects expected to reach FID, as mentioned just now, the new building orders have accelerated, despite tight yard capacity and high building prices. As of today, the order book, we have 320 LNGs in the global order book. On top of that, we also expect the surge in new ordering to expand from the order book fleet ratio to over 55%. There will be a push for fleet renewal replacements, especially for steam turbine ships, following the IMO requirements. Moving on to petroleum shipping. Overall, the average rates remain slightly lower but firm, in line with the normal seasonality.
Looking ahead, we expect another period of strong tanker rates to develop during the winter months, with continued strength for the next two to three years due to the very positive fleet supply fundamentals. In terms of the petroleum shipping order book, there were very few orders or hardly any new orders. The order book for tankers has been restrained by the higher asset prices as well as the uncertainty over sustainable fuels into the future. That has actually curbed the fleet growth and hence we have a tight tonnage today. In terms of the order book, it is mainly dominated by the Suezmaxes, followed by Aframaxes. Most of these are LNG-fueled vessels. Moving on to the deliveries.
We see that due to the low order book and the less scrapping activities, this has actually brought about a tight tonnage supply, and therefore few deliveries are expected due to tighter yard slot availability. On the offshore segment, we see that the growth on upstream spending alongside an increase in energy demand and projects to the oil and gas sector. In 2024, there is a spending of MYR 163 billion, and it is expected to go up to MYR 213 billion in 2027. The growth is mostly coming from the Latin American region as well as the Asia Pac region, which includes Australasia. In terms of award of potential projects, the increase will come from, again, South America as well as West Africa. As of quarter two 2023, there are about 35 FPSOs on order, and there are about 26 projects to be awarded in the next 12 months.
While the inflation and rising rates have increased development costs, the economics for most of these projects are still quite robust and should proceed to FID. With that is the end of my market segment updates. Hand over to Faizan.
Thank you, Miss Gurkiran, and also to Che Eslyn. Ladies and gentlemen, we will begin the Q&A session shortly. For participants with questions to pose, please use the raise hand function to ask your questions. We will read out your name. Kindly introduce yourself before asking your question. Please take note that each participant may only ask two questions for the first round. Should you have further questions, you will have to use the raise hand function again to ask your questions. We will now begin the question and answer session. Firstly, we have Mr. Ben Shane from Macquarie Capital. Please go ahead, Ben.
Hi, good evening. Thanks for the call, and appreciate Captain being on this call. My first question is regarding the heavy engineering segment. Could you give a number on how much of the one-off provision that was?
I mean, we booked in the loss, as you can see from the results, the two projects there. We're not going to share with you exactly what the provisions are, but from the loss that was reported, you can see roughly what were the provisions there.
It's about MYR 300 million-MYR 400 million.
Yeah. I think what was reported in the segment was MYR 385 million.
Yep. Okay. All right, I will just assume that. Next up, I saw that your dividend took a bit of a step up. Just want to understand, is this just a one-off tied to that one-off prepayment on the LNG side, or can we expect your quarterly dividend to hold at this level?
I mean, as far as the dividend, firstly on the heavy engineering. When the heavy engineering team provisions is for the life of the project, it does not mean that it has been expensed off. That's the provisions that we're booking in primarily for that new project which MHB has booked in. We need to get that clear. The second one is that in terms of dividends, we've always said that we want to maximize the shareholder value. Some of the analysts that we have met, the investors that we have met, the request has been done. In this quarter, and as Eslyn has mentioned just now, our balance sheet is strong, our financial position is strong. Yes, we have allocation of capital for future growth, and we find that we are able to do this sort of a dividend, which is MYR 0.10 per share.
In terms of future quarters, of course, we will do our best in terms of maintaining previous quarterly dividends or improving it, we just have to assess and evaluate as we move along.
Sorry, this one very clear. You have a very nice dividend payout profile. Normally, you sustain about MYR 0.07. Should we expect at least MYR 0.10 going forward? Is that the message?
Ben, you're asking me to make a future statement. Read between the lines. We have a good cash position, and we always try to maximize shareholder value. Yeah.
Okay. I'll try my best to read the lines. Thanks. Those are my two questions.
Thank you.
Thank you, Ben.
Thank you, Ben. Mr. Raymond Yap from CGS-CIMB Securities. Stand by.
Hi, thank you, Faizan. Yeah, thank you, Faizan, and a big thank you to Captain Raja for finally coming on. Really appreciate you coming on. Thank you. Back to the dividend question. I heard the word improve there, Captain Raja, I shall take it that you are hinting that the dividends will be stronger going forward, yeah. Maybe I'll just leave it there. I just want to talk a little bit about what Raja Azlan mentioned just now about the completion rate for the Mero 3. You mentioned 93% and 89%. Raja , could you just elaborate a little bit about the difference between these two completion rates?
Yeah. The 93% is relating to the construction component. If you look at it, the project has got various components. You've got the procurement component, the engineering component, construction component, and then lastly, the hookup and commissioning component. For the construction component, we reported about 93%, but in terms of overall progress, it is 89%.
Okay. In the previous quarter, you mentioned that it was 85% complete as at 31st of March. Is that on an overall basis, that 85%?
Yes, I believe so.
Okay. At 31st December, it was 75%, and then 31st March it was 85%, and then now 89%. There seems to be a bit of a slowdown in the progress. Am I right to say that, or is it just natural for it to slow down as the project is completed?
Yeah, you are right. Basically, in last year overall, there was about 40% progress. This year, overall, you're going to see overall progress of 20% as we reach the tail end.
Okay, it's natural for the percentage of completion progress-
Yeah
to actually slow down.
Yeah. There's no need for any alarm because we are on track based on the revisement.
Okay. Is there any change in your guidance that the FPSO will be completed by May or June this year? Sorry, next year.
It remains as we have mentioned before. There's no change to that.
Okay. Just to drill down a little bit, when you say that completion in May or June, do you mean that the sail away is in May or June, or the sail away is a bit later than that?
The sail away is slightly earlier. The sail away will be in the first quarter, and then it will reach the site in the second quarter.
I see. Okay, sure. One more question before I just go-
This is the onsite Raymond, as well as when we talk about construction, we talk about overall progress, right? Construction has caught up and then as per the rebaselining. As we start doing the commissioning, the commissioning it will be between now, and this is the precom at the yard between now and the sail away. The sail away, we expect sometime in quarter one. To be on-site in Brazil for the hookup and commissioning by the tail end of quarter two, May, June, that sort of period. It does the on-site commissioning. We're still on target. I visited the asset recently, and I'm quite pleased with the progress overall. Clients have also visited the asset quite recent and appreciate the schedule catch-up, plus also the quality of the asset. This is the latest on progress.
You should not be alarmed in terms of the punchiness of progress since last year.
Okay. Maybe just one final question before I go back to the queue. Captain, could you talk a little bit about the reports in upstream, talking about you being interested to bid for further projects in Brazil? You mentioned previously that you will only start bidding only after you complete the Mero 3. Have you sort of accelerated that?
As far as prospects, Raymond, we do have to evaluate prospects. If you take what I've mentioned previously, in terms of the construction of any new assets There's a prospecting phase, there's a bidding phase, and there's also a construction of any new assets that we decide to bid and go for an FID. The guidance is always this. In terms of the construction phase of any new offshore assets that we're going to do will only be after successfully delivering the Mero 3 to our client, including the acceptance stage. We still hold firm to that. Whatever market news that you hear in terms of prospecting, potential bidding, et cetera, is market news. We still hold firm as far as the construction is concerned of any new offshore assets that we are taking to the size of that mega projects.
It's only after our cash flow starts coming in for our existing projects.
Okay. Thank you so much.
Thank you. Thank you, Raymond. Just a reminder, should you have any questions, please use the raise hand function to ask your questions. Okay. Next we have Mr. Steven Chan from Affin Hwang. Please proceed, Mr. Steven.
Hello. Hi. Thank you for the call. I'll limit myself to just two very short questions. Number one, what is your current term to spot ratio for your petroleum tanker segment?
I'm guided that for this quarter we are at 88% term to spot, 88% term and 12% spot.
Your spot vessels are mainly which type?
The spot vessels will be a small mixture of VLCCs and our Aframaxes.
Okay. Mainly it's from Aframax.
Yeah.
All right.
The portfolio of Suezmax is actually quite small.
Okay.
It's mainly Aframaxes and a small portfolio of VLCC.
All right. My second question is in regards to your cash flow. In your slides you said adjusted cash flow, operating cash flow is about MYR 560 million. Just have a rough sense of how much of your operating cash flow comes from the LNG segment?
I think about 40% or so.
40%. What about the contributions from other segments?
We have got petroleum, 30%-40%, and offshore about 20%.
Okay. All right. Thank you. I'll go back to the queue. Thank you very much.
Okay. Thank you. Thank you, Steven. Next, we have Mr. Kong Ho Meng from UOB Kay Hian. Please go ahead, Ho Meng.
Hi, Ho Meng here. Can you hear me?
Yes, you can.
Okay. Just to double-check the non-recurring items for the quarter, can I know what was in your P&L, the finance lease gain for the FPSO Mero Three in the second quarter alone that they recognized in the profit and loss? Also the JV and associate income was almost breakeven. Are there any one-off items there?
As usual, it's not much. Per quarter, between MYR 10 million-MYR 20 million of construction profit recognition.
Okay. $20 million U.S. dollar. Okay.
Between MYR 10 million-MYR 20 million.
Okay. All right. Under the share of profit of joint venture associates, is that a normal amount or was there any one-off items?
The share profit is very minimal. You're talking about the year to date, is it?
In the quarter itself, it's almost breakeven.
Yeah. The year to date one, there was one gain from our Vietnamese JV. There was a contract extension gain.
Okay. My second question is to check on your CapEx plan. The number of investors you have is still roughly the same. Vessel prices for new build is high. Just want to know, at which point in time that you will-- As and when you rejuvenate your fleet. When will you be ready to invest again in new, of course greener vessels, but new vessels for growth? Are you waiting for prices to go down a bit? The thing is the yards are all very full right now, all the way for the next few years.
Okay.
Yeah.
Maybe let me take it in this sphere.
In some of the previous discussions that we've had and also a review of our commercial strategy of our existing assets. We have done a review of the commercial strategy of our existing assets, especially our gas assets, our LNG assets. We find that there is a preference to take in terms of extending the life of our assets, which is reaching that 20 years of age because there is a life and a home for those assets. That is more or less sweating the assets in the right manner.
Okay
maintaining the cash flows on existing assets. In terms of our potential FIDs, we are very careful in the FIDs all for the right reasons that you have mentioned just now in terms of asset pricing, as well as our stated 2030 and 2050 decarbonization agenda, decarbonization and our GHG agenda. We do not flip-flop over this. We are very focused. When we evaluate the assets that we want to go for, we want to ensure that the emissions of the assets are amongst the best, use technology which will support decarbonization and also at the right asset pricing. There are a couple of tenders currently in terms of whether clients denominated tenders have got some sweet spot prices for the assets. We are evaluating participating in those tenders both for our gas and our petroleum assets.
At the same time, we are also very careful in terms of our gearing, in terms of our debt headroom and being very careful in the choices that we make. It is a combination of sweating our existing assets because there's life on those assets and there's a commercial value for those assets. At the same time, evaluating in terms of the new FIDs that we want to go for because we still want to do the FIDs not on a speculative basis. We want to do the FIDs based on cover for those investment decisions. As we speak, there are a couple that we are evaluating. We'll be very careful in those choices. Ensure the right quality of income, the right quality of the asset.
Our partnership is very, very good with the clients outside there, including our platinum clients, including PETRONAS Group as a client. This is our focused approach, which the team is into approaching assets.
Understood. Let's say we go by business segments, just to get it right. For LNG, it's more like you are looking at ways to extend your old assets. To say that any CapEx will be more like retrofitting them to be greener and things like that, not selling them away. That's for LNG.
Yeah.
For FPSOs, the offshore side is more like FID, but you'll be very selective in choosing the right kind of projects for FSOs, and for petroleum site, it's also not just a matter of greener, but also the right asset pricing. Right? For the petroleum site. Yeah.
Exactly. Right asset price, right technology.
Okay. All right.
Thank you. Thank you, Ho Meng .
Thank you.
Okay. Next, we have Mr. Jeremie Yap from Hong Leong Investment Bank. Please go ahead, Jeremie.
Hi. Thanks for the opportunity. Just want to ask, actually, what is this cost provision under MHB? Do you mind explaining a little bit more, and which projects are these for? That's my first question.
I mean, you would have actually got the detail in the analyst briefing with MHB. If you did not attend, it is a disappointment. Whatever it is, there was an agreement with the client to perform additional work on the structure onshore instead of offshore in preparation for the load outs the other way and installation for offshore provisioning. As a result of this, there was additional cost. It was agreed with the client. I mean, we got two projects that have incurred. As you can see from our announcement, we mentioned the Kasawari project. The bulk of the provision relates to the Kasawari project.
Okay.
If I can add on, Jeremie, if I can add on to everyone else in this call. It's quite straight and simple. There are legacy contracts that MHB has assumed, and that legacy contracts are lump sum contracts. At the end of the day, irrespective, we deliver on the projects as an organization. There are additional onshore works we deliver on the projects, and the projects, in terms of the cost provisions that we have made, that MHB has made, it is on the life of the project. When we say life of the project, we're talking about the life of the project until final delivery is prompt into Q1 and Q2 next year. We have booked in that cost provisions based on the forecast that we see and the additional works.
Anything which is factual and credible. They have got a milestone payments as far as the project timelines are concerned. It will follow the milestone payment recovery from the client. Any additional claims that MHB will put to the clients will be fact-based and credible, and that is all subject to negotiation based on the facts and credibility of the claims. Naturally, MHB will try to do their very best in terms of their claims recovery. As far as currently, we have booked in the cost for the life of the project. MHB, we have consolidated into the MISC Group books. That's why it gets consolidated into our Q2 numbers.
Thank you so much. I'm just trying my luck for the next question. Is it possible that you guys will be able to disclose the Mero 3 daily charter rate after Petrobras discovers first oil?
You know that is something that we cannot divulge because of confidentiality agreements, right? Those are commercially sensitive information.
Oh, okay.
Once the cash flow comes in the end of next year, I'm sure that you can do the math.
I see. Okay. That's all.
Thank you, Jeremie.
Any range? Probably like a hint of a range or so?
No, Jeremie, come on. We can't do that.
Okay. Thank you so much then. Thank you.
Thank you, Jeremie. We now have another question from Raymond Yap, CGS-CIMB. Please go ahead, Raymond.
Okay, Faizan. Thank you. I'll just run through a couple of questions. I think the first one is on LNG. The Puteri Delima contract expired earlier this year, and I believe the Puteri Nilam Satu will also expire sometime this year. May I know what you intend to do with these vessels? Are you trading them in the spot market or the short-term charter market?
You're talking about Puteri Delima Satu, right, Raymond? Is it Puteri Delima Satu? Is it Puteri Nilam Satu?
Yeah. Puteri Delima and Puteri Nilam Satu.
Yeah. It is the Puteri Delima Satu, which is currently prospecting for a project with a client which remains unnamed at this stage. We hope to conclude those discussions pretty soon. All right? Once done, we will make a market announcement. As far as the Puteri Nilam Satu, our plan is to extend a commercial life instead of our previous proposition in terms of divestment when it comes to the H20. We are evaluating Entirely up to 37 class in terms of extending the commercial life of the asset. These assets have got a design life of between 25- 30 years, so they're only 20 years. I won't say they are old vessels. All right? They're experienced vessels in the industry.
They have a commercial life and that's the one that I think I mentioned during earlier question, where we extend the commercial life of this asset. That's the plan.
Okay, Captain, when you say extend commercial life, you'll spend some CapEx to increase the useful life. How much is it in the ballpark? Maybe $25 million-$30 million?
No, it will not be. These assets are very good assets. It's a normal dry docking cycle of the asset. It is not a major CapEx investment.
Okay.
A normal dry docking of the vessel will be mid single digits.
Okay. It's very cheap then?
I'm not sure it's cheap, Raymond. It's a normal dry docking cost of our vessel.
Okay. When you say prospecting for a project for Delima Satu, is it still going to be carrying cargo or more or less a stationary sort of a new project?
Once the client concludes, which we hope quite soon, we will make a market announcement. It is for a platinum client. That much I can say.
Sorry, I didn't catch that.
It is for a platinum client within our. Hope we are able to conclude soon.
Okay. Sure. Maybe one question for Raja Azlan or Eslyn. There was a rise in LNG profits in the second quarter compared to first quarter. May I know what's driving that actually? Because typically it hovers around MYR 60 million+ and then this quarter it went up to MYR 70 million over.
Yeah. There was some vessels were able to fetch very good rates. It was mainly driven by the spot vessels.
Okay. All right. Sure. Okay.
Also, we also have another two new assets on water. The Seri Daya and Seri Damai.
Oh, I see. Okay. Sure. All right. Typically you give the spot term a breakdown for VL, Suez, and Afram separately. Do you have that with you this time around?
Yeah. As mentioned just now by Cap, it was about 88%-12%.
That's overall, right?
For second quarter that's for Aframax. For VLCC, it's about 20%-32%.
Sorry.
Overall it's 88% fleet.
Okay. For VL specifically, did you say it was 78%?
72% for term VL fleet and spot 28%.
Okay. Gurkiran, could I follow with Suez and Afram?
Suez is 97/3, and Afram is 89/11.
Okay. Sure. All right. One final question on the trade receivables. The aging of it is more than 90 days, and that comprises the largest bulk of the trade receivables. What's the cause of this?
That's because the amount relating to Shell for the amount relating to the GKL arbitration.
Oh, I see.
Yeah. Because they have unilaterally offset that amount. We're still fighting this out in court. We're talking about AUD 4 million-AUD 5 million still in the receivables.
All right. Thank you
Thank you, Raymond. I think we have time for another two more questions. Next we have Kong Ho Meng .
Hi. Just to follow up. In terms of the moving forward, assuming if the long-term charter rates for tankers decline a lot, would that affect your professional earnings? Basically, how much of your professional fleet will be up for renewal for long-term charters in the second half of this year? That's the first question. My second question is, I think you have around two FPSOs that had HSE incidents in the past year. What is the status of those two vessels?
Okay. Continue with
Yes, this will be prediction.
Are you talking about downtime on the assets, Ho Meng?
I think downtime because there was an HSE incident. I think the local one is the Bunga Kertas, and I think the more recent one was in Thailand. Benchamas.
Okay.
Yeah. Because of those two. Yeah.
First, let me take your petroleum question. As far as the petroleum is concerned, we are at the verge of coming out of, we go into the winter cycle. What the team normally does is that during the winter cycle is where you try to maximize the revenue in quarter, plus at the same time tie up for longer. Right? It's about arbitraging in the market. That happens on an annual basis. On an annual basis, you can talk total petroleum fleet, you can say about 10% of the assets goes through a renewal cycle. That's traditionally what happens, and then this would be continuity. As far as the offshore asset is concerned, the Bunga Kertas has already completed its charter duration and has been demobbed still.
Okay
In quarter two. That is done, and the team is looking at the prospects for that asset. As far as the Benchamas is concerned, very unhappy. We are very sad with the loss of the life of a crew member through our contracting partner on that asset in Q1 of this year. Investigations have been completed on the root cause, et cetera. The asset continues to have downtime. This is chartered out to Chevron Thailand.
What we are working with the client is in terms of how to speed up the reactivation of the assets, including putting in a substitute and temporary arrangements for that field to continue operation. It's progressing quite well in terms of the recovery aspect and also substitution of asset decisions, which is going on. Probably from one of our existing assets. This we are near finalization on that. Again, we are very disappointed with this. We are very disappointed of losing a team member on this asset. Our thoughts and prayers for the family. We have done our best for the crew member's family, and we are working together with Chevron Thailand in terms of how to speed up the reactivation of this.
Got it. The investigation is already completed, that part is already concluded. Right. When you mentioned reactivation, it could potentially maybe lead to maybe small work orders to maybe upgrade certain things on the FPSO. Is that, yeah.
Yeah, it is in progress, Ho Meng.
Okay.
It is not completed. It's progress, discussions are near finalized with the client.
Okay. Just to double-check again on the petroleum side, right? When the renewal, most of your fleet on the long-term charters, the renewal is typically at the start of the year or it depends, it can be throughout the course of the year?
It's throughout, Ho Meng , of course, as from a commercial position, we try to negotiate at the height or near the height of the market, right? That's when you can arbitrage on your commercial numbers plus also signings at that point in time.
Okay. All right. Thanks. Thanks a lot.
Thank you, Ho Meng. Okay, we have time for just one more question. I'd like to invite Ben Shane to pose his question. Thank you.
Hi. Thanks. I want to ask something a bit more forward-looking. Saw Raymond maybe got a bit into it earlier about you bidding for more FPSO projects. I just want to understand, I seem to understand that the bidding environment favors you in this because competing FPSO players are quite full up in terms of their capacity. Is there opportunity here for you to bid and even win a project ahead of your Mero 3 monetization and sort of freeing up your balance sheet? Just want to understand if there's room for the news flow to come first, and you can sequence the project to come later. Sort of adding on to this as well, is there any progress on identifying investment partner for Mero 3 to monetize it? Yeah, just wanted to get an update there as well. Thanks.
Okay, Ben. As far as prospecting for FPSO bids, the team is evaluating and engaged in discussions at this stage. I believe I've mentioned in the share sessions that any new bids that we do, we do it on a partnership basis. Rather than everything on our balance sheet. Because we have to capital allocate accordingly and be very judicious in that capital allocation. That is also ongoing in terms of partnership seek or any new projects. I reiterate again, any new projects that we decide to put in a bid for, the construction phase of that asset must be after our Mero 3 starts the cash flow coming in. That will already give you an indication. Bids start earlier, prospecting starts earlier, et cetera.
If you're hearing any market news, et cetera, I'm not validating or negating, just saying this is what we pass along how we have to keep ourselves in the game. You are right in terms of it becoming a narrow sectors we can do those projects. Clients are also becoming a little bit more friendly in terms of the cash management of the projects which they are putting out for bids. Early payments, et cetera. As far as the Mero 3 is, yes, we have just completed an exercise in terms of evaluation of prospective partners. We hold true. There seems to be a decent interest in that asset, but also because the construction progress has more or less completed, the commissioning progress is ongoing.
There is interest in terms of partnering for this asset. We have signed confidentiality agreements, et cetera, so I will not be able to divulge in terms of from which geography or day, et cetera. It is progressing quite decently for that partnership seek. We hold true to what we say in terms of bringing in our partners for Mero 3 at the levels that we have advised our investors and analysts previously.
Hey, thanks a lot. Appreciate that.
Thank you, Ben.
Is there any more hands raised?
There's one more.
Maybe we take the one more.
Yes. Last one. All right, we'll take the really last one.
Okay.
Please state your name. It's from Ho Me ng.
Ho Meng, didn't realize that it's going to be you again.
Go ahead, Ho Meng.
Sorry, I've no questions to ask. Thank you.
Okay. Thank you. Right. This concludes today's conference call. On behalf of MISC Berhad, we would like to thank you for your participation. The PDF version of our presentation slides has been sent to the attendees of today's call and will be made available on our corporate website. To the sell-side analysts, kindly forward a copy of your published research report, please, to the MISC Investor Relations team for our reference. Thank you.
See you.
Yeah, sure.
I just want to say I extend my thanks to everyone for participating in this call and this exercise. I look forward to catching up in future investor and analyst briefing. Stay well, stay safe. We'll catch up. Thank you.
Thank you, everyone. Good evening.
Thank you.
Thank you