Turkey of the year: Protasco’s oil and gas misadventure

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turkeyoftheyearsCONSTRUCTION and road maintenance company Protasco Bhd’s ambitious plans to enter the then lucrative oil and gas industry did not turn out well. Instead, the move has culminated in a web of lawsuits between the company, its executive vice-chairman cum managing director, Datuk Seri Chong Ket Pen, and investors Tey Por Yee and Ooi Kock Aun.

It all started in late 2012 when Tey and Ooi, via Kingdom Seekers Venture Sdn Bhd, acquired a 27.11% stake in Protasco for RM96.51 million.

It is understood that Chong and the two investors had agreed that the duo would seek an opportunity for Protasco to enter the oil and gas industry. Protasco’s primary businesses are maintenance, construction, property development, engineering and consultancy services, education as well as trading and manufacturing.

Soon after the emergence of Tey and Ooi as substantial shareholders in December 2012, Protasco announced that it had entered into a sale and purchase agreement (SPA) with PT Anglo Slavic Utama (PT ASU) to acquire 76% interest in PT Anglo Slavic Indonesia (PT ASI) for US$55 million (RM180 million). Protasco paid a refundable deposit and part payment of RM50 million.

PT ASI is an investment holding company that operates 30 oil wells in the Kuala Simpang Timur (KST) field located in the Nanggroë Aceh Darussalam province in Indonesia. PT ASI has 49% interest in PT Firman Andalan Sakti, which holds a 70% stake in PT Hase Bumou Aceh (PT Haseba).

Pt Haseba has a production management partnership agreement (PMPA) with PT Pertamina (Persero), Indonesia’s state-owned oil and gas corporation, to develop and produce oil and gas in the KST field.

In January this year, Protasco secured a reduction in the purchase price of the stake in PT ASI because of material discoveries made after due diligence was done on the latter’s assets.

A second amended and restated SPA was drawn up for the company to acquire a 63% stake in PT ASI for US$22 million (RM72 million). This new sum was payable upon the execution of the second SPA and the RM50 million deposit paid under the first SPA was used to offset against the US$22 million.

Under the SPA, PT ASU was required to secure a 10-year extension for the PMPA with Pertamina. Unfortunately, PT ASU was unable to do so as Pertamina granted only a three-year extension. On July 28, the SPA lapsed as PT ASU was unable to fulfil the conditions.

From then on, things turned sour, along with the relationship between the two investors and Chong. The first wave of legal claims started in September when Protasco sued Tey and Ooi for breach of fiduciary and statutory duties. The company claimed a payment of US$27 million (RM88.41 million) in damages.

It is learnt that Protasco claims that Tey and Ooi had failed to disclose their indirect interest in the deal. The company also sued PT ASU for the refund of the US$22 million and damages arising from the breach of the contract.

Tey and Ooi, via Kingdom Seekers, counter-sued Chong by filing a derivative action against him and six others (including Protasco) for the recovery of RM10 million that had been allegedly siphoned off by the company’s senior management.

Tey claimed that he had evidence of a money trail that flowed through two layers of companies before a RM10 million cheque was drawn and paid to RS Maha Niaga Sdn Bhd, which is allegedly Chong’s private vehicle.

He also claimed that PT ASU had informed him that the RM10 million was Chong’s financial gain from two contracts — a deal with PT ASU and a bitumen and coal trading deal with an Indonesian company PT Goldchild Integeritas Abadi worth RM16 million.

Note that Protasco had given PT ASI a RM16 million advance as working capital to undertake exploration works to start up its assets so that the 10-year PMPA contract extension could be obtained.

In November, Protasco filed a legal suit against PT Goldchild and Ooi on the ground that Ooi had failed to disclose his interest in PT Goldchild. Protasco is claiming a refund of the deposit paid.

After Kingdom Seekers counter-sued Protasco, some shareholders called for an extraordinary general meeting (EGM) to remove Tey and Ooi as the company’s directors. Ooi was appointed a non-executive director in December 2012 while Tey, also a non-executive director, was appointed in March this year.

Tey then called for an EGM to remove Chong as a director of Protasco. During the EGM, Tey and Ooi were voted out. In a separate EGM, Tey’s move to remove Chong from the board failed.

On Dec 12, a bonus issue of free warrants and a private placement of new shares that would have raised up to RM82.5 million, mostly to fund property development and construction projects, land acquisition and business ventures, were called off exactly a year after they were proposed.

This article first appeared in The Edge Malaysia Weekly, on 22 - 28 December 2014.