Ranhill to slowly exit oil and gas

From the Business Times:

Ranhill Bhd (5030)is expected to slowly phase itself out from the oil and gas (O&G) sector, as its heavy investments in the sector particularly in Indonesia and Sudan hasn't borne much success, said an industry source.

Business Times understands that Ranhill is currently in the process of farming out its O&G concessions in the Philippines and Indonesia.

"It is a business decision. Ranhill has farmed out some of the concessions and will complete the rest over the next few months," the source said.

Ranhill's ill-timed ventures in the O&G sector resulted in the company suffering a net loss of RM690.5 million for the year ended June 30 2008, versus a net profit of RM116.8 million previously.

Ranhill, buried under RM4.02 billion of debts as at June 30 2008, however, is expecting a short in the arm within the next two months time, said the source, as it will be getting RM900 million from sale of its water assets in Johor.
In March, Ranhill's indirect unit, SAJ Holdings Bhd, which holds a licence to supply water in Johor, hived off the water assets to Pengurusan Aset Air Bhd (PAAB), the water asset management arm of the Finance Ministry Inc.

Under the deal, the government was to pay RM4.03 billion for the assets and RM3.18 billion in liabilities held by SAJ Holdings.

SAJ is one of Ranhill's most valuable assets as it holds a 30-year concession starting from March 1 2000 to supply water to 861,700 users in Johor, but the sale is expected to result in a net gain for the group.

Meanwhile, the source said that Ranhill's biggest stakeholder Tan Sri Hamdan Mohamed has aborted plans to take the group private due to global uncertainties.

For the nine months ended March 31 2009, Ranhill posted a lower net profit of RM6.02 million versus RM28.87 million in the same period a year ago.

A failure, but at least they move on. It's very tough for a company to suddenly go into a new industry and find success. They don't have the infrastructure, savvy, and clients that companies already in the field take years to grow. Investors should take caution. A mess up like this doesn't speak well for the board and management which will most probably be kept in place.