SAPURA Malaysia - Annual Report 2005_sapuracrest

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Annual Report 20

05



Cover Rationale

Using the corporate logo as the focal point for this

concept – the complete logo is formed with all four

annual reports of the individual business units, reflecting

the unique contribution of these business units working

as one towards the corporate goals of Sapura. The

covers are presented in Sapura’s corporate colours, and

the images inlaid in each design capture the energy and

dynamism of the team at Sapura.

The logo segments are chosen to reflect “progress” for

Sapura Technology, “building up” for Sapura Industrial,

“finding new depths” for SapuraCrest Petroleum and

“the stairway to knowledge” for Sapura Resources.



Corporate Profile 2

Notice of Annual General Meeting 4

Statement Accompanying The Notice of the Annual General Meeting 6

Corporate Structure 8

Board of Directors 10

Corporate Information 15

Chairman’s Statement 18

Corporate Governance Statement 26

Statement on Internal Control 30

Audit Committee Report 33

Additional Compliance Information 39

Statement of Directors’ Responsibility in Respect of 41

the Audited Financial Statements

Financial Statements 43

30 Largest Shareholders 123

30 Largest Warrant Holders 125

Analysis of Shareholdings 127

Analysis of Warrant Holdings 129

Proxy Form

Corporate Representative Form

Request Form for Bahasa Malaysia Version of Annual Report 2005

Contents



2

SapuraCrest Petroleum Berhad (“SapuraCrest” or “Company”) was incorporated on 3 March

1979 as TH Loy Industries (M) Sdn Bhd, a private limited company. The Company was then in

the business of manufacturing consumer electronics and electrical goods.

The Company became a public company on 5 March 1992, renamed TH Loy Industries (M)

Berhad, and was officially listed on the Second Board of Bursa Malaysia on 15 October 1992. On

4 July 1995, following the sale of its manufacturing business, the Company changed its name to

Crest Petroleum Bhd to reflect its new image and major involvement in the oil and gas industry.

Upon completion of Sapura Technology Berhad’s (formerly known as Sapura Telecommunications

Berhad) acquisition of UEM Land Sdn Bhd’s controlling stake in the Company in the second

quarter of 2003, the Company’s name was changed to SapuraCrest Petroleum Berhad on 9 August

2004 to underscore the investment of the Sapura Group in the Company.

The SapuraCrest Group’s involvement in the oil and gas industry spans the areas of offshore

drilling, installation of pipelines and facilities, marine services and offshore and nearshore

marine engineering and maintenance activities for the oil and gas, marine and power utility

industries. This was further expanded with the recent acquisition of an 80% stake in Total

Marine Technology Pty Ltd (“TMT”), an Australian company based in Perth. With this acquisition,

the SapuraCrest Group is now involved in the design, manufacture and operation of Remote-

Operated Vehicles, a sector which is complimentary to its existing business divisions. With the

larger pool of resources, the Group provides a more complete range of services to upstream

and downstream oil and gas entities. The Group is currently one of the largest integrated oil

and gas service providers in Malaysia and with the acquisition of the stake in TMT and recent

foreign contract wins, is poised for further regional expansion.

Corporate Profile



3

Over the years our people have been defined by

a set of common qualities – Honourable,

Professional, Resourceful, Resilient and Agile –

qualities that collectively differentiate us from

our industry peers. They remind us of ourheritage. They challenge every one of us to

become the true ambassadors of Sapura.



4

Notice of Annual General Meeting

Agenda

1. To receive and adopt the Audited Financial Statements

of the Company for the financial year ended 31 January

2005 together with the Directors’ and Auditors’ reports

therein.

Ordinary Resolution 1

2. To approve the Directors’ fees for the financial year

ended 31 January 2005.


3. To re-elect the following Directors who retire pursuant

to Articles 95 and 96 of the Articles of Association of the

Company and being eligible, offers themselves for re-

election.

i Datuk Shahri l Shamsuddin


ii. Tan Sri Datuk Amar (Dr.) Hamid Bugo


4. To appoint Ernst & Young as Auditors of the Company

until the conclusion of the next Annual GeneralMeeting, and to authorise the Directors to fix their

remuneration.


As Special Business, to consider and if thought fit, to

pass the following resolution:

Authority for Directors to issue shares under

Section 132D of the Companies Act, 1965

5. That pursuant to Section 132D of the Companies Act,

1965, and subject to the Listing Requirements of Bursa

Malaysia, the Directors are empowered to issue shares

in the Company at any time and upon such terms and

conditions and for such purposes as the Directors may,

in their absolute discretion deemed fit, provided that

the aggregate number of shares issued pursuant to this

resolution does not exceed 10% of the issued and paid-

up share capital of the Company as at the date of such

issuance and that the Directors be and are also

empowered to obtain all necessary approvals from the

relevant authorities for the issuance and the listing of

and quotation for the additional shares so issued on the

Bursa Malaysia and that such authority shall continue to

be in force until the conclusion of the next Annual

General Meeting of the Company.


6. To transact any other business for which due notice

shall have been given.

BY ORDER OF THE BOARD

POH PHEI LING (MAICSA 7035146)

Company Secretary

Selangor Darul Ehsan

4 July 2005

NOTICE IS HEREBY GIVEN THAT the Twenty-Sixth Annual General Meeting of the Company will be

held at the Multi Purpose Hall, Ground Floor, Sapura @ Mines, No. 7 Jalan Tasik, The Mines Resort

City, 43300 Seri Kembangan, Selangor Darul Ehsan on Tuesday, 26 July 2005 at 10.00 a.m. for the

transaction of the following businesses:



Notice of Annual General Meeting 5

Notes

1. Proxy Forms

A member of the Company who is entitled to attend and

vote at this Meeting is entitled to appoint a proxy to

attend and vote on a show of hands or on a poll in his

stead. A proxy may but need not be a member of the

Company.

An instrument appointing a proxy shall be in writing

and in the case of an individual shall be signed by the

appointor or by his attorney; and in the case of a

corporate member, shall be either under its Common

Seal or signed by its attorney or an officer on behalf of

the corporation.

Where a member appoints more than one (1) proxy, the

appointment shall be invalid unless he specifies the

proportion of his shareholdings to be represented by

each proxy.

The instrument appointing a proxy must be deposited

with the Registrar of the Company, Mega Corporate

Services Sdn Bhd located at Level 15-2, Faber Imperial

Court, Jalan Sultan Ismail, 50250 Kuala Lumpur, not less

than forty-eight (48) hours before the time appointedfor holding the Meeting or any adjournment thereof.

2. Corporate Representative

As an alternative to the appointment of a proxy, a

corporate member may appoint its corporate

representative to attend this Meeting pursuant to

Sections 147(3) and (4) of the Companies Act, 1965. For

this purpose and pursuant to Section 147(5) of the

Companies Act, 1965, the corporate member shall

provide a certificate under its common seal as prima

facie evidence of appointment of the corporate

representative. The corporate member may forward its

own certificate or use the corporate representative

form provided for in the Annual Report of the Company

for the financial year ended 31 January 2005 and

submit it to the Registrar of the Company prior to the

commencement of the Twenty-Sixth Annual General

Meeting of the Company.

3. Directors’ Fees

The Directors’ fees for the financial year ended 31

January 2005 amounted to RM238,983.87.

4. Statement Accompanying the Notice of the Annual

General Meeting

Details required in the Statement Accompanying the

Notice of the Annual General Meeting pursuant to

Paragraph 8.28 (2) of the Listing Requirements of Bursa

Malaysia are set out in page 6 of the Annual Report of the

Company for the financial year ended 31 January 2005.

5. Ordinary Resolution pursuant to Section 132D of

the Companies Act, 1965

The proposed Ordinary Resolution 6, if passed, would,

subject to the Listing Requirements of Bursa Malaysia,enable the Directors to issue up to a maximum of 10%

of the issued and paid-up share capital of the Company

at the date of such issuance for such purposes as the

Directors consider would be in the best interest of the

Company. This authority unless revoked or varied by

the Company at a general meeting will expire at the

conclusion of the next Annual General Meeting.



6

Directors who are standing for re-election

Datuk Shahril Shamsuddin

Tan Sri Datuk Amar (Dr.) Hamid Bugo

* Details of Datuk Shahril Shamsuddin and Tan Sri Datuk Amar (Dr.) Hamid Bugo are set out in the respective Directors’

Profile on pages 12 to 13 of this report. Details of their respective holdings of securities in the Company can be found on

pages 127 to 128

General Meetings held during the financial year ended 31 January 2005

Type of General Meeting Date of General Meeting Venue of General Meeting

Extraordinary General Meeting 19 February 2004 at 10.00 a.m Nirwana Ballroom 1, Lower Lobby

Mutiara Hotel Kuala Lumpur

Jalan Sultan Ismail

50250 Kuala Lumpur, Malaysia.

Annual General Meeting 27 July 2004 at 10.00 a.m. Multi Purpose Hall

Ground Floor, [email protected] Jalan Tasik,

The Mines Resort City

43300 Seri Kembangan

Selangor, Malaysia.

Extraordinary General Meeting 14 October 2004 at 10.00 a.m. Multi Purpose Hall

Ground Floor, Sapura@Mines

No.7 Jalan Tasik

The Mines Resort City

43300 Seri Kembangan

Selangor, Malaysia.

Board of Directors’ Meetings held during the financial year ended 31 January 2005

Details of the Board members’ attendance at the Board meetings of the Company held during the financial year ended 31

January 2005 are set out in pages 27 to 28 of this Annual Report.

Statement Accompanying the Notice of the Annual General MeetingPursuant to Paragraph 8.28 (2) of the Listing Requirements of Bursa Malaysia Securities Berhad



7

We will win the trust of our stakeholders and

customers by acting with honour, conducting

ourselves with principle, focusing on delivering

value and ensuring that we manage the

resources entrusted to us efficiently.

Honourable



8

63.5%

100% 100%

100%

70%

Teknik Lengkap

Sdn Bhd

TL Geotechnics

Sdn Bhd

TL Jaya

Sdn Bhd

TL Geohydrographics

Sdn Bhd

100%Petro-Plus

Sdn Bhd

100%Petcon (Malaysia)

Sdn Bhd

100%Sasaran Perdana

Sdn Bhd

36.5%Crest Marine

Engineering Sdn Bhd

100%Probadi

Sdn Bhd

100%Crest Hidayat

(L) Ltd

100%SapuraCrest

Dana SPV Pte Ltd

100%SapuraCrest

Deepwater Pte Ltd

40%

100%

51%

51%

51%

50%

100%

OilServe Marine

Sdn Bhd

100%

Sapura EnergySdn Bhd

TL Offshore

Sdn Bhd

Uzmal Oil Inc

Varia Perdana

Sdn Bhd

Tioman Drilling

Company

Sdn Bhd

TL Marine

Sdn Bhd

OilServe (L)

Berhad

In Members’

Voluntary

Liquidation

Corporate Structure



9

80%

50%

50%100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

94.44%

30%

36.24%

99.56%

100%

100%

100%

100%

100%

TL Geotechnics

(S) Pte Ltd

TL Geohydrographics

Pty Ltd

TL Geohydrographics

Pte Ltd

Total Marine Technology

Pty Ltd

Unitime Submarine

Ventures Sdn Bhd

BTL

Sdn Bhd

Crest Tender Rigs

Pte Ltd

Sarku Vessels

Pte Ltd

Malaysian Advanced

Refurbishment Services

Sdn Bhd

Sapura Diving

ServicesSdn Bhd

Sapura Retail

Solutions

Sdn Bhd

Sarku ResourcesSdn Bhd

Energy Unlimited

Sdn Bhd

Sapura Power

Services

Sdn Bhd

Sapura Petroleum

Technologies

Sdn Bhd

Norwegian Tender

Rig AS

Geowell

Sdn Bhd

Subang Properties

Sdn Bhd

SE Projects

Sdn Bhd

Sarku Engineering

Services

Sdn Bhd

Sarku Engineering

Services (Offshore)

Sdn Bhd

Sarku Sambang

Sdn Bhd

Sarku Semantan

Sdn Bhd

Sarku Samudera

Sdn Bhd

Sarku 2000

Sdn Bhd

Sarku Marine

Sdn Bhd

Sarku Utama

Sdn Bhd

In Members’ Voluntary

Liquidation



Boards of Directors10

Board of Directors



Dato’ Hamzah Bakar

Chairman

Non-Independent Non-Executive Director


Independent Non-Executive Director

Datuk Shahril bin Shamsuddin

Executive Vice-Chairman

Dato’ Fauziah Dato’ Ismail


Mohamed Rashdi Mohamed Ghazalli


Gee Siew Yoong


From left to right



12


Non-Independent Non-Executive Chairman

Dato’ Hamzah Bakar, aged 61, a Malaysian, was appointed

to the Board of SapuraCrest on 4 July 2003 as a nominee of

Sapura Technology Berhad (formerly Sapura

Telecommunications Berhad) (“STB”). He was then

appointed as Chairman of the Company on 25 July 2003. He

is also the Chairman of the Nomination, Remuneration and

Option Committees.

Dato’ Hamzah holds a Bachelor of Science (Hons) in

Economics from Queen’s University Belfast, Northern

Ireland and a Masters of Arts in Public Policy and

Administration, with Development Economics from the

University of Wisconsin, USA.

Dato’ Hamzah has served 20 years in various senior

management and board positions in Petroliam Nasional

Berhad (“Petronas”), including Senior Vice President for

Refining and Marketing, and Senior Vice President forCorporate Planning & Development. Prior to joining

Petronas, Dato’ Hamzah was attached to the Economic

Planning Unit (EPU), Prime Minister’s Department for 12 years.

Dato’ Hamzah has no family relationship with the other

Directors and/or with the major shareholders nor has he

any conflict of interests with the Company. He is however, a

nominee Director of STB, the holding company of

SapuraCrest. Dato’ Hamzah has no conviction for offences

within the past 10 years. Currently, Dato’ Hamzah is also on

the Board of CIMB Berhad, SCOMI Group Berhad and UEM

World Berhad.



Datuk Shahril Shamsuddin, aged 44, a Malaysian, was

appointed to the Board of SapuraCrest on 24 February 2003

as a Non Executive Director and was subsequently appointed

as the Executive Vice-Chairman of SapuraCrest on 25 July

2003. He is also a member of the Company’s Remuneration

and Option Committees.

Datuk Shahril holds a Bachelor of Science in IndustrialTechnology from California Polytechnic, USA and a Masters

of Science in Management of Technology from the

Massachusetts Institute of Technology (MIT Sloan).

After graduating from California Polytechnic, Datuk Shahril

served with Dynatel, California for a year. He then returned

to Malaysia in 1985 and embarked on his career with the

Sapura Group, which was founded by his father, Tan Sri Dato’

Seri Ir. Shamsuddin Abdul Kadir. He held the position of

Assistant Managing Director of the Sapura Group from 1985

to 1990, as well as holding the position of Group General

Manager of Uniphone Sdn Bhd from 1987 to 1990. Datuk

Shahril later became Group Managing Director of the

Sapura Group from 1990 to 1996 before assuming his

current position in the Group as President and Chief

Executive Officer in 1997.

Datuk Shahril does not have any family relationship with the

other Directors on the Board of the Company. However,

Datuk Shahril is deemed to have an indirect interest of

60.06% in the Company by virtue of his direct and indirect

interest in STB and Sapura Holdings Sdn Bhd group of

companies, which are deemed interested in SapuraCrest

pursuant to Section 6A of the Companies Act, 1965.

Presently, Datuk Shahril is also on the Board of STB, Sapura

Industrial Berhad (formerly Sapura Motors Berhad), Sapura

Resources Berhad (formerly Uniphone Telecommunications

Berhad), MIMOS Berhad, Universiti Malaysia Sarawak

(UNIMAS), Malaysian External Trade Development

Corporation (MATRADE), Multimedia Development

Corporation Sdn Bhd and Sapura Holdings Sdn Bhd. Datuk

Shahril is also a member of the Advisory Council of

International Center for Leadership in Finance (ICLIF) and a

member of the Board of Trustees of the Perdana Leadership

Foundation. He has had no conviction for offences within the

past 10 years.



Dato’ Fauziah Dato’ Ismail, aged 62, a Malaysian, was first

appointed to the Board of SapuraCrest on 22 October 2001

as a nominee of UEM Land Berhad (formerly Renong

Berhad and previously the holding company of

SapuraCrest) and has remained on the Board since then

save for a brief duration between 17 July 2003 to 24 July

2003. Dato’ Fauziah is also a member of the Company’s

Audit and Option Committees.

Dato’ Fauziah holds a Bachelor of Arts (Honours) from

University of Malaya, a postgraduate Diploma in

Development Administration from the London School of

Directors’ Profile



13Directors’ Profile

Economics & Political Sciences, and a Masters in PublicAdministrat ion from the University of Houston, USA. She

also attended a certificate course at Harvard Institute of

International Development (HIID) of Harvard University,

USA in Public Enterprise Management and Privatisation.

Dato’ Fauziah served in the Malaysian Administration and

Diplomatic Services from 1966 to her retirement in 1997, in

various positions and capacities. She served, amongst

others, in the Public Services Department, the Prime

Minister’s Department, and the Ministry of Rural

Development. In her job at the Implementatio n Unit of the

Prime Minister’s Department, she was involved in the

administration of the Petroleum Development Act in

developing Malaysia’s petroleum industry, including the

development of Bumiputera participation in the industry.

Dato’ Fauziah has no family relationship with the other

Directors and/or with the major shareholders and has no

conflict of interests with the Company. She has no

conviction for offences within the past 10 years. Currently,

Dato’ Fauziah is also on the Board of KAF-Seagroatt &

Campbell Berhad, CCK Consolidated Holdings Berhad and

UEM Builders Berhad (formerly known as Intria Berhad).



Tan Sri Datuk Amar (Dr.) Hamid Bugo, aged 59, a Malaysian,

was appointed to the Board of SapuraCrest on 25 July 2003.

He is also a member of the Company’s Nomination and

Audit Committees.

Tan Sri Hamid holds a Bachelor and a Masters of Art

(Economics) from Canterbury University, New Zealand, and

a Teaching Post-Graduate Diploma from Christchurch

Teachers’ College.

Tan Sri Hamid has served both in the private sector and the

public service in Sarawak. He has held various distinguished

positions in the public service, including being the first

general manager of the Land Custody and Development

Authority, Permanent Secretary of the Ministry of Resource

Planning, Sarawak and Administration Manager at Malaysia

LNG Sdn Bhd (a subsidiary of Petronas). He had also been

Chairman and Director of several statutory bodies at

federal and state levels. Prior to his retirement, Tan Sri

Hamid was State Secretary of Sarawak from 1992 to 2000.

Tan Sri Hamid does not have any family relationship withthe other Directors and / or with the major shareholders of

the Company nor has he any conflict or interests with the

Company. He also has had no conviction for offences within

the past 10 years. Currently, Tan Sri Hamid is also on theboard of Sarawak Concrete Industries Berhad, Tradewinds

Corporation Berhad (formerly Pernas International

Holdings Berhad), Permodalan Sarawak Berhad, Mighty

Strike Berhad and Tractors Malaysia Holdings Berhad.

Gee Siew Yoong


Ms Gee Siew Yoong, aged 55, a Malaysian, was appointed to

the Board of SapuraCrest on 4 December 2001. She is also

the Chairman of the Company’s Audit Committee.

Ms Gee is a member of the Malaysian Institute of Certified

Public Accountants and the Malaysian Institute of

Accountants. She started out her career with Price

Waterhouse in 1969. She left in 1981, her last position being

the Senior Audit Manager and Continuing Education

Manager. She then joined the Selangor Pewter Group as

Group Financial Controller during which period she was

seconded to the United States of America from 1983 to 1984

as Chief Executive Officer of Senaca Crystal Inc., a company

in the Selangor Pewter Group undergoing re-organisation

under Chapter XI of the U.S. Bankruptcy Code. Subsequently

from 1985 until 1987, she became the Personal Assistant tothe Executive Chairman of the Lipkland Group.

In 1987 Ms Gee was appointed by Bank Negara Malaysia as

the Executive Director and Chief Executive of Supreme

Finance (M) Berhad, a position she held until 1991. Ms Gee

later served with Land & General Berhad from 1993 to 1997

as Group Divisional Chief, Management Development

Services before joining Multi-Purpose Capital Holdings

Berhad from 1997 to 1999 as Executive Assistant to the

Chief Executive. During this period, Ms Gee was also a

Director of Multi-Purpose Bank Berhad, Multi-Purpose

Insurans Berhad and Executive Director of Multi-PurposeTrustee Berhad.

Ms Gee does not have any family relationship with the other

Directors and/or with the major shareholders of the

Company nor has she any conflict of interests with the

Company. She also has had no conviction for offences

within the past 10 years. Currently, Ms Gee is also on the

Board of Landmarks Berhad.



14

Mohamed Rashdi Mohamed GhazalliIndependent Non-Executive Director

Encik Mohamed Rashdi Mohamed Ghazalli, aged 48, a

Malaysian, was appointed to the Board of SapuraCrest on 14

November 2003. Encik Rashdi is also a member of the

Company’s Nomination Committee.

Encik Rashdi has over 25 years working experience in the IT

industry. He began his career in 1979 with Telecoms

Malaysia as a Systems Analyst and was involved in the

planning and implementati on of its computer systems. He

then joined the Sapura Holdings Group in 1983 as part of

the team to build and develop its IT business. In 1989, he

moved to Coopers & Lybrand as a Manager in the

Consultancy Division. He became a Partner of the Regional

Consultancy Practice in 1995 and was responsible for the

operations of its Kuala Lumpur office.

With the merger of Coopers & Lybrand and PriceWaterhouse in 1998, Encik Rashdi joined the management

team of PwC Consulting with the task of looking after the

government and services industry. In November 2002 IBM

World Trade Corporation acquired the consulting business

and resources of PricewaterhouseCoopers. Encik Rashdi is

now a partner with IBM Business Consulting Services. As a

Management and IT Consultant, he has led assignments in

strategy development, performance improvement, IT

Planning and implementation with a focus on the

government, telecoms, transport and utility sectors.

Encik Rashdi has no family relationship with the other

Directors and/or with the major shareholders nor has he

any conflict of interests with the Company. He also has no

conviction for offences within the past 10 years. Currently,

Encik Rashdi holds no other directorship in other public

companies.

Directors’ Profile



15

Corporate Information


Chairman




Non-Independent Executive Director



Tan Sri Datuk Amar (Dr) Hamid Bugo


Gee Siew Yoong


Mohamed Rashdi Mohamed Ghazalli


Board of Directors

Audit Committee

Gee Siew YoongChairman


Dato’ Fauziah Dato’ IsmailIndependent Non-Executive Director

Tan Sri Datuk Amar (Dr) Hamid BugoIndependent Non-Executive Director

Remuneration Committee

Dato’ Hamzah BakarChairman


Datuk Shahril ShamsuddinExecutive Vice-Chairman

Non-Independent Executive Director

Tan Sri Datuk Amar (Dr.) Hamid BugoIndependent Non-Executive Director

Nomination Committee

Dato’ Hamzah BakarChairman


Mohamed Rashdi Mohamed GhazalliIndependent Non-Executive Director

Tan Sri Datuk Amar (Dr.) Hamid BugoIndependent Non-Executive Director

Director in Charge ofShareholders’ Communications

Gee Siew YoongIndependent Non-Executive Director

Auditors

Ernst & YoungChartered AccountantsLevel 23A, Menara MileniumJalan DamanlelaPusat Bandar Damansara50490 Kuala LumpurTel: 03-2087 7000Fax:03-2095 7043

Principal Bankers

Bumiputra-Commerce Bank BerhadAM Merchant Bank BerhadNordea Bank

Share Registrar

Mega Corporate Services Sdn BhdLevel 15-2, Faber Imperial CourtJalan Sultan Ismail50250 Kuala LumpurTel: 03-2691 4271Fax:03-2732 5388

Solicitors

Zul Rafique & PartnersFoley HoagKing & Spalding

Registered Office

Sapura @ MinesNo.7, Jalan TasikThe Mines Resort City43300 Seri KembanganSelangor Darul EhsanTel: 03-8659 8800Fax:03-8659 8811

Stock Exchange Listing

The Second Board of Bursa Malaysia

Poh Phei Ling (MAICSA 7035146)

Company Secretary



1616

We set high standards of

professional conduct in all our

interactions. As a Group, we will

strive to exceed expectations

through a commitment to quality

and constant improvement.

Professional



17





19

new shares of SapuraCrest at the conversion price ofRM1.4514 per SapuraCrest share.

The Bonds mark the Group's maiden venture into the USD

bond market and the proceeds from the issuance are

earmarked to be utilised for the construction cost of the

HLV, the acquisition cost of TMT and for general working

capital.

Employee Share Option Scheme

SapuraCrest recognises that our people form the foundation

of our company and is an asset that drives and ensures the

sustainability of the Company’s success. And it is in our

people that we find the commitment, passion and

resourcefulness to transform our ideas, goals and values

into reality. Hence, the Company continually spurs its

employees towards greater achievements by establishing

rewards and incentives in addition to training and skill

development. On this footing, SapuraCrest established and

launched an employees' share option scheme ("ESOS") on

the 8th of November 2004. In place for the next 5 years, up

to 10% of the issued and paid up share capital of the

Company may be utilised for the ESOS. A total of 13,522,600

options were offered to employees at the inauguration of

the ESOS.

Expanding Our Strength

In recent times, the most visible trend in the offshore oil and

gas industry has been the greater emphasis placed on the

development of deepwater fields. Global turnover for the

year 2004 in respect of marine installation and de-

commissioning activities amounted to USD4.806 billion, of

which 26.63% or USD1.28 billion was spent on deepwater

operations. Between 2004 to 2008, a total of 185 deepwater

fields are expected to be developed as compared to 81

fields over the period of 1999 to 2003. Further, it is

estimated that from the year 2015, 25% of offshore oil will

originate from deepwater fields.

This growing trend is evident in Malaysia as well. In recent

years there were a number of significant deepwater

discoveries such as the Kikeh, Gemusut, Kakap, Senangin,

Malikai and Belud fields. These deepwater discoveries are

estimated to have cumulative reserves in excess of 1 billion

barrels. The Kikeh field is expected to produce first oil by the

year 2007 with a project price tag of US$1.4 billion.

Against this landscape of change, the Group concentrated its

efforts in expanding its strengths and augmenting its

competencies to better prepare the Group for future

industry requirements and ensuring long term business

sustainability. We are cognisant of the need to establish and

fortify deepwater capabilities in order that we broaden our

future earnings base while consolidating our presentbusiness. This proactive approach forms the core rationale

underpinning the TMT acquisition and the HLV construction.

Total Marine Technology

On 26 January 2005, the Company announced the

acquisition of an 80% stake in TMT. Completed on 14 April

2005, it marks the Group's first foreign acquisition.

TMT is an Australian company based in Perth. It specialises

in the design, manufacture and operation of Remote-

Operated Vehicles ("ROVs") and has 9 ROVs in its asset base.

ROVs are robots which operate underwater and are

primarily used to support offshore oil and gas exploration,

drilling, development and production. Amongst its many

uses, ROVs are utilised for :-

(a) deepwater works at depths inaccessible by a human

diver;

(b) performance of heavy underwater works; and

(c) inspection works where a continuous recording of the

condition of an item is required, e.g. pipeline survey.

TMT has a novel and innovative design methodology. The

ROVs that it designs and manufactures are based on amodular concept allowing the ROVs to be effortlessly and

seamlessly configured to suit the requirements of specific jobs.

The acquisition of TMT is an attractive proposition as the

Group currently leases ROVs from third parties for the

Group's offshore oil & gas drilling, IPF and marine services

sectors. With the acquisition, we would have better control

of ROV-related costs and reduce reliance on third party

ROVs in the execution of our projects.

Additionally, the acquisition paves the way for the Group to

establish its foothold in the regional market given that TMToperates and has established a name among a number of

international clients in the oil and gas industry in the Asia

Pacific region.

I take this opportunity to welcome TMT and its staff to the

SapuraCrest family.

The construction of the HLV

The year saw the Company embarking on the construction

of the HLV. The HLV is being constructed by a consortium

comprising Huisman Special Lifting Equipment B.V. and

Sembawang Shipyard Pte Ltd.

Huisman is an established company with substantial

experience in the design, engineering and construction of

Chairman’s Statement



20

offshore construction vessels, particularly offshore liftingequipment while Sembawang is an established shipyard

with substantial experience in offshore conversion and ship

repair.

The HLV is a specially designed vessel with a combined

capability of undertaking offshore heavy lift work of a load

of up to 3000 short tonnes and pipe laying capability of

between 3 to 5 kilometres per day. To be constructed at a

cost of approximately USD150 million, the Vessel is capable

of both deep and shallow water operations as it is equipped

with dynamic positioning technology.

With an expected delivery date in the final quarter of 2006,

the Vessel is anticipated to have an encouraging market

entry. With its very specific technical capabilities, possessed

by very few other vessels, various opportunities for work for

the Vessel are created, both geographically and technically.

As such, the Vessel is capable of and is intended to be

operating in South East Asia, India, Australia and China for

both deep and shallow water operations.

The wide geographical operability of the Vessel significantly

contributes to enhancing its utilisation rate as it would be

capable of continuing operations in geographical locations

not affected by unfavourable weather conditions prevailingat other locations at specific times of the year.

A key consideration driving the decision to construct the

HLV has been the Group’s frequent utilisation of an asset of

this nature. A good example of such utilisation is in the

Company’s current performance of the 2004-2006

Transportation and Installation of Offshore Facilities works

(“OIC Project”) for Petronas Carigali Sdn Bhd (“Petronas

Carigali”), Sabah Shell Petroleum Company Limited/Sarawak

Shell Bhd (“Sabah and Sarawak Shell”) and ExxonMobil

Exploration & Production Malaysia Inc (“EMEPMI”).

At present, such critical assets are leased from third parties.

A variety of risks presents itself from such contracting

practices. These include the risk of unavailability of a vessel

of the required capability, inability to deploy during the

required period and costs that may make our bids

uncompetitive.

We believe that in the long term, ownership of a vessel that

is capable of the performance contractually required under

contract with clients would be highly beneficial to the

Company. As stated earlier, we believe that future industry

trend would require our ability to deploy assets that is

capable of operating in deep waters. Thus, the ownership of

a vessel with such capabilities would position the Company

competitively in line with the direction of the industry.

The Vessel is intended to be utilised in the IPF division of the

Company. The IPF division is mainly involved in the

transportation and offshore installation of platforms and

pipelines via the Company’s subsidiary, TL Offshore Sdn Bhd.

Operational Highlights

Installation of Pipelines and Facilities

The IPF Division was kept busy throughout the year fulfilling

its contractual obligations under the OIC Project. Awarded in

March 2004 by Petronas Carigali, Sabah and Sarawak Shell

and EMEPMI, the OIC Project saw a year dominated by

activities comprising the erection of a total of 4 platforms and

the laying of 8 subsea pipelines measuring a length of 71kms.

As a direct result of the works under the OIC Project, the IPF

Division posted operating results of RM20.5 million on the

back of a turnover of RM414.1 million.

In the year under review, the IPF Division also notched its

first foreign contract win by securing a contract with Brunei

Shell Petroleum Company Sendirian Berhad ("BSB") for BSB's

Champion West Phase 3 and Egret Oil Acceleration Project.

The value of the contract is a significant USD38 million andinvolves, amongst others, the transportation and installation

of jackets, topsides, helideck, pipelines and submarine cables.

The award of the BSB contract represents the division’s

maiden success in securing offshore installation works in

international bidding and is a reflection of the Group's

continuing concerted efforts to diversify its client base with

a keen focus on the international market.

Marine Services

For the year under review, the Marine Services division

continued to strengthen its foothold in internationaloperations. The soil and survey division secured work in

Australia, Iran, Thailand and India. Opportunities arising

locally are nevertheless not overlooked and this is borne

out by successful extensions of soil investigation contracts

with Sabah and Sarawak Shell, EMEPMI and Murphy Oil.

The marine engineering sub-division comprising the Sarku

Group of Companies concluded various major contractual

obligations during the year under review. Major

underwater inspection and maintenance services were

successfully concluded for Sabah and Sarawak Shell and

Petronas Carigali.




21

The sub-division also concluded for Sabah and SarawakShell major maintenance, hook-up and commissioning and

construction works.

For the 12 months ended 31 January 2005, the Marine

Services division posted operating results of RM37.9 million

on a turnover of RM377.4 million.

Offshore Oil & Gas Drilling

4 Self–Erecting Tender Rigs (SETR) continue to form the

cornerstone of the offshore oil & gas drilling division. The

T3, T6 and Teknik Berkat SETRs continued their work for

Petronas Carigali across Malaysian waters as well as in

Myanmar. The latest addition to the fleet, the T9 took over

the work for EMEPMI previously performed by the now

decommissioned T2.

On 11 August 2004, T6 set a historical record by drilling the

longest well drilled in Malaysia. The well, situated at

Petronas Carigali’s Angsi-A field, measures a total length of

6,339 metres and was drilled over the course of just 44 days.

The offshore oil & gas drilling division notched operating

results of RM35.2 million on a turnover of RM192.4 million

for the year under review.

Operations and Maintenance

The division focused its attention during the year to

consolidating its operations. The industrial gas turbines sub-

division continued its repair work for EMEPMI with the

award of an additional 4 Rolls-Royce RB211 engines to add

to 3 engines awarded since 2003.

The heavy industrial turbines sub-division situated in an

advanced workshop in Bukit Raja, Klang was awarded ISO

Certification 9000-2000 in July 2004 and continue to

enhance its capabilities by seeking to develop component

repair capabilities into rotating machinery andsophisticated coating services.

During the year under review, the Asset Maintenance sub-

division successfully completed Carigali-Triton Operating

Company’s de-preservation works at the Malaysian-

Thailand Joint Development Area.

For the year under review, the division posted a turnover of

RM50.9 million while registering operating results of RM3.2

million.

SafetyThe Group continues to focus and emphasise on the

important area of Health, Safety and Environment. We

believe that the sustainability of our business is reliant on

an excellent HSE culture within our organisation and we are

determined to do all that is necessary to continually

improve in this area.

In the course of the year and as recognition to our

commitment to safety, we are proud to have received from

Petronas Carigali, a safety award for the safety record of our

SETR, the T6. Awarded on 10 December 2004, the accolade

lauds the T6’s 5 year absence of Lost Time Accidents (LTA).

Our combined HSE key performance indicators for 2004 is

set out below:-

Manhours worked Achieved Total

w ithout L ost Time R ecor dable Case

Incidents Frequency (TRCF)/

million manhours

Installation of

Pipelines and

Facilities 175,124 1.14Marine Services

•Soil & Survey

sub-division 5,612,539 0

•Marine

Engineering

sub-division 3,873,342 1.44

Offshore Oil &

Gas Drilling 987,250 2.34

Operations &

Maintenance 323,760 0

The Company recognises that safely performing any work is

a major component to its successful completion. We are

therefore fully committed to upholding the utmost safety

standards in our work places and work practices.

Human Resource Development and Training

Human resource development and training continues to be

a key HR agenda for the year under review. Following from

the acquisition of SESB, the Group's current workforce

numbers close to 700. This has presented the Group with the

services of a wider talent pool of skilled offshore marine,

technical and engineering staff.




22

The Group subscribes to and practises on-the-job trainingand in-house skill upgrading in its HR development

philosophy. Under this learning framework, senior

experienced personnel are paired with junior staff to

ensure that the latter receives on site hands-on job

guidance. This mentoring framework ensures that

knowledge and experience is institutionalised and

adequately disseminated within the Group. Formal training

courses on Project Management, Contract and Procurement

Administration and specialised technical courses and

seminars continue to be provided to staff throughout the

year to ensure exposure to work knowledge and new trends

in the industry.

The Group will continue managing its talent from resources

acquired and developed through the existing internal talent

pool and from the continuous programme of structured and

formal staff development training.

Industry Outlook

Industry Growth

Demand for offshore oilfield services is variable in nature and

depends substantially on the condition of the oil and gas

industry and its willingness to spend capital on the exploration,

development and production of oil and natural gas.

Global offshore oil & gas production is forecasted to grow

from 39 million barrels of oil equivalent (“BOE”) per day in

2004 to 55 million BOE by 2015. From providing around

34% of global oil production and 28% of global gas

production in 2004, offshore oil and gas are forecasted to

reach 39% and 34 % respectively by 2015.

The full costs to explore, develop and operate offshore oil

and gas fields, presently some USD111 billion per year, is

forecasted to total USD1,440 billion over the next decade.

During this time it is estimated that 200 billion BOE will beproduced.

On the local front, Petronas has targeted domestic

production to grow at 3% per annum for at least the next

five years. Exploration & Production spending is expected to

climb at a compounded annual growth rate of 14% over the

same period. This means that annual capital expenditure

could rise from the RM 10 billion level in 2003 and 2004 to

nearly RM 20 billion by 2008.

Deep Water Emphasis

The continuing importance played by the deep water

(depths between 200m to 1,500m) and ultra-deep water

(depths in excess of 1,500m) fields continues to grow. It is

expected that nearly 25% of offshore oil will come from

deep water fields in 2015 compared with 10% in 2004. After

2010, almost all global offshore oil production growth will

be from deep water fields, compensating for declining

shallow water output.

The deep water sector has grown as a major segment of the

offshore market since projects in water depths over 1,000 ft

(300 metres) were undertaken in 1985. The market grew an

average of 65% per year in the first decade, evenly split

between Northwest Europe, Brazil, and the Gulf of Mexico. In

the second 10-year period, the development of West Africa

drove growth and is reflected by West African projects

making up 51% of the deep water market in 2005.

Beyond 2009-2010, the potential development of deep

water reserves in Mexico and stranded deep water gas

reserves in Asia, West Africa, and Russia all provide ample

opportunity for further growth in the sector.

In Malaysia, a third of the 600,000 square km explorationacreage is in deep water fields.

The first deep water field in Malaysia was discovered in

2002. This increased to 5 deep water fields discovered in

2004 with estimated cumulative reserves in excess of 1

billion barrels. Kikeh, one of the fields earlier discovered

will come on stream in 2007 with a project cost of USD1.4

billion. Petronas’ plans indicate that it will launch 6 new

deep water and ultra-deep water blocks offshore Sabah and

Sarawak in 2005.

The outlook for the oil and gas industry is very encouragingwith continued expenditure growth year on year. The growing

emphasis on deep water is clearly evident. The Group

constantly pays heed to the industry’s expected needs so that

opportunit ies may be taken up on a timely basis. The outlook

of the industry and its growing trends is also the key driver to

the Group’s enhancement of its deep water capabilities by the

acquisition of TMT and the construction of the HLV.




23

AppreciationOn behalf of the Board of Directors, I extend my deep

appreciation to all staff and the management team for their

continued hard work, dedication and commitment.

My sincere thanks to all our shareholders, clients, business

associates, financiers and government authorities and

agencies for their support and confidence shown towards us.

On behalf of the Board, I would also like to record our

gratitude and appreciation to Dato’ Zainal Abidin Ibrahim,

who resigned from the Board on 31 October 2004, for his

invaluable contributions. We wish him good health and

success in all his present and future undertakings.

In the course of the year which has been characterised and

dominated by a string of firsts, we have proven our ability and

desire to attain and bring to fruition our goals and targets

which we have set for ourselves while realising value for

shareholders. This motivates and galvanises us towards

greater achievements and lays the foundation and challenge

for a better performance in the current and future years.

Thank you.


Chairman

The sources for selected portions of the Chairman’s Statement are as

follows:

(i) The Petroleum Finance Company,

Oil & Gas Journal Online, December 2004

(ii) Business Times, 27 September 2004

(iii) The Edge, 27 December, 2004(iv) Rigzone, September 2004

(v) Offshore Shipping Online, December 2004

(vi) Deepwater Growth for 2005 specific to region,

Offshore Magazine, December 2004

(vii) Asian Oil & Gas, 1 August 2004




24



25

Resourceful

We are resourceful in developing

the best solutions for our customers

by constantly learning, collaborating

and sharing information to

make full use of our Group’s

capabilities – both inside and

outside of our business.





27

comprises Dato’ Hamzah Bakar as Chairman, together withTan Sri Datuk Amar (Dr.) Hamid Bugo and Encik Mohamed

Rashdi Mohamed Ghazalli as members of the Committee.

Although the actual decision as to who shall be appointed as

Director lies ultimately with the Board as a whole, the

Nomination Committee is responsible for proposing new

nominees to the Board, and to assess Directors on an on-

going basis. Based on the Committee’s recommendation,

the Board has agreed on a set of guiding principles to assist

the Board with regard to evaluating the Board’s mix of skills

and experience, as well as the assessment of the size of the

Board in relation to its effectiveness.

The Company’s Board Charter provides for newly appointed

Directors to receive the benefit of an induction programme

aimed at deepening their understanding of the Company.

All Non-Executive Directors appointed to the Board have

gone through such a programme. To enhance their

knowledge and as stipulated by the Listing Requirements,

the Directors have, throughout the year, also attended

various Continuing Education Programmes conducted by

various organisations.

The Code has recommended that all Directors submit

themselves for re-election at regular intervals, and at leastonce every three years. Article 95 of the Company’s Articles

of Association has incorporated this principle and provided

for the retirement of one-third of the Directors at every

Annual General Meeting (“AGM”). If the number involved is

not three or in multiples of three, then the number closest to

one-third shall retire from office. All retiring Directors are

eligible for re-election.

In addition to the above, Article 96 stipulates that the

Directors to retire shall be those who, being subject to

retirement by rotation, have been longest in office since

their last election or appointment.

In compliance with Articles 95 and 96 of the Articles of

Association, Datuk Shahril Shamsuddin and Tan Sri Datuk

Amar (Dr.) Hamid Bugo shall retire at the Twenty-Sixth AGM.

Being eligible, they have offered themselves for re-election.

Article 100 of the Articles of Association provides that any

additional Director appointed during the year shall hold

office until the next AGM of the Company. The Director

appointed, however, is eligible for re-election at the said

AGM. There were no Directors appointed during the year

under the review.

Board meetings were held by the Company on a regularbasis. During the financial year ended 31 January 2005, a

total of 8 Board meetings were held. Agenda items

discussed at the Board meetings included, among others,

reviews of the operational and financial performance,

major issues and activities, and opportunities relating to the

Company.

The Chairman is primarily responsible for organising the

flow of information at Board meetings. During the financial

year ended 31 January 2005, he was assisted by Senior

Management and the Company Secretary to set the Agenda

for each meeting and to ensure that relevant items were

placed on the Agenda for the Board’s information. To

further facilitate productive discussions at Board meetings,

notices of meetings and board papers were provided to the

Members in a timely manner.

Details of attendance at meetings held for financial year

ended 31 January 2005 are as follows:

Maximum

possible

Name of Meetings meetings to

Directors attended attend %


Non Independent

Non-Executive Chairman 7 8 87.5


Executive Vice-Chairman 7 8 87.5


Independent Non-Executive

Director 7 8 87.5

Ms Gee Siew YoongIndependent Non-Executive

Director 8 8 100.0

Tan Sri Datuk Amar (Dr.)

Hamid Bugo


Director 8 8 100.0

Encik Mohamed Rashdi

Mohamed Ghazalli


Director 7 8 87.5

Corporate Governance Statement







30

Statement on Internal Control

In accordance with Part One of the Malaysian Code on

Corporate Governance (“the Code”), and as embodied in the

Company’s Board Charter, the Board acknowledges its

responsibility for the Company’s system of internal cont rol to

safeguard shareholders’ investment and Company’s assets.

It should be noted that the system of internal control is

designed to manage rather than eliminate risks of failure in

achieving business objectives, and that they can only

provide reasonable and not absolute assurance against

material misstatement or loss or the occurrence of

unforeseeable circumstances.

Limits of Authority

The year under review saw the introduction of a new

authority manual to replace the Discretionary Authority

Limits (“DAL”). The new authority manual, called the Limits

of Authority (“LoA”), was formulated following changes to

the shareholding and management structure of the Group

and also the acquisition of the Sapura Energy Sdn BhdGroup of Companies in December 2003.

As the changes had brought about new members to the

Group and new positions such as the Executive Vice-

Chairman, the LoA was introduced as a replacement to the

DAL. The LoA has been formulated to address the changing

business landscape while at the same time seeking to

preserve the essence of the provisions of the DAL to ensure

continuity and acceptable levels of control and risk

management.

The LoA is applicable throughout the SapuraCrest Group

and as the DAL, deals with the authority limits on areas of

corporate, operational, financial, human resource and

project matters. The LoA prescribes limits of authority and

prohibits unfettered power within the various levels of

management and company group members.

The LoA, as had the DAL, may be reviewed by the Board

upon the recommendation of Management, to ensure its

provisions are effective in managing risks and is practical

for implementation.

Finance and Administrative Services Manual

The activities of the finance, human resource and

administrative functions of the SapuraCrest Group are

centralised at the holding company level, and are governed

by the Finance and Administrative Services Manual

(“FASM”), which contains standardised policies &

procedures of administration.

The FASM which was initially developed in 1998, has been

adopted to streamline practices of the above activities within

the Group. It covers areas, which include expenditure,

revenue, fixed assets, claims and advances, and stock control.

Approved Vendor & Tender Administration Procedure

Since September 1998, a Tender Administration Procedure

has been in place, laying down guidelines for the award of

contracts for the supply of general goods and services.

During the year under review, an Approved Vendor &Tender Administration Procedure (“TAP”) was introduced

with the aim of enhancing the essential provisions of the

Tender Administration Procedures while simplifying its

application and procedures.

The new governing TAP, as its predecessor Tender

Administration Procedures, continues to act as the primary

manual governing the award of sub-contracts, supply

contracts and general services in the SapuraCrest Group of

Companies and in addition also establishes the maintenance

of an approved vendor list. It governs by its procedural

guidelines which deal, amongst others, with the

establishment of a Tender Committee, the tender bidding

process, the evaluation of bids and the subsequent award to

successful bidders.

Internal Audit Department

The Internal Audit Department monitors the compliance of

the measures mentioned above on a regular basis. The

department also assists from time to time, in reviewing the

adequacy and integrity of these measures and compliance

with applicable laws, rules and guidelines. In addition the







33

Terms of Reference

The Terms of Reference of the Audit Committee (“Terms of

Reference”) outlines and incorporates the roles and

responsibilities of the Audit Committee (“Committee”) as

prescribed under the Listing Requirements (“Listing

Requirements”) of the Bursa Malaysia Securities Berhad

(“Bursa Malaysia”) and the Malaysian Code on Corporate

Governance (“the Code”).

1.0 Objectives Of The Committee

1.1 The Committee shall assist the Board of Directors (“Board”)

of SapuraCrest Petroleum Berhad (“SapuraCrest” or

“Company”):

1.1.1 In complying with specified accounting

standards and required disclosure as

administered by Bursa Malaysia, relevant

accounting standards bodies, and any other laws

and regulations as amended from time to time;

1.1.2 In presenting a balanced and understandable

assessment of the Company’s positions and

prospects;

1.1.3 In establishing a formal and transparent

arrangement for maintaining an appropriate

relationship with the Company’s auditors; and

1.1.4 In maintaining a sound system of internal

control to safeguard shareholders’ investment

and the Company’s assets.

2.0 Powers Of The Committee

2.1 In carrying out its duties and responsibilities, the

Committee shall have the following rights:

2.1.1 Have explicit authority to investigate any

matter within the Terms of Reference;

2.1.2 Have access to the resources which are

required to perform its duties;

2.1.3 Have full, free and unrestricted access to anyinformation, records, properties and personnel

of SapuraCrest Group;

2.1.4 Have direct communication channels with the

external auditors and persons carrying out the

internal audit function;

2.1.5 Be able to obtain independent professional or

other advice and to invite outsiders with

relevant experience to attend the Committee’s

meetings, if required, and to brief the

Committee thereof;

2.1.6 Be able to convene meetings with external

auditors, and excluding the attendance of the

executive members of the Committee,

whenever deemed necessary;

2.1.7 Upon the request of the external auditor, the

Chairman of the Committee shall convene a

meeting of the Committee to consider any

matter the external auditor believes should be

brought to the attention of the directors or

shareholders; and

2.1.8 Promptly report to the Bursa Malaysia where a

matter reported by the Committee to the Board

has not been satisfactorily resolved resulting in

a breach of the Listing Requirements.

2.2 The attendance of any particular Committee meeting by

other Directors and employees of the SapuraCrest

Group shall be at the Committee’s invitation and

discretion, and specific to that relevant meeting only.

3.0 Composition Of The Committee

3.1 The Committee is to be appointed by the Board from

among their numbers, which shall comprise the

following:

3.1.1 A minimum of three (3) members;

3.1.2 A majority of the Committee members shall be

Independent Directors;

3.1.3 At least one (1) Member of the Committee must

be a member of the Malaysian Institute of

Accountants (“MIA”) or a person who fulfils therequirements as stated in para 15.10(1)(c)(ii)

of the Listing Requirements;

Audit Committee Report



34

3.1.4 The Members of the Committee shall elect aChairman from among themselves who shall

be an Independent Director;

3.1.5 All Members of the Committee shall hold office

only for so long as they serve as directors of the

Company;

3.1.6 No alternate director shall be appointed as a

Member of the Committee; and

3.1.7 In the event of any vacancy resulting in non-

compliance of the minimum of three (3)

Members, the Board shall upon the

recommendation of the Nomination

Committee, appoint such number of directors

within three (3) months of the event to fill up

such vacancies.

4.0 Duties And Responsibilities

4.1 The duties and responsibilities of the Committee are as

follows:

4.1.1 Nominate and recommend the external

auditor for appointment, to consider theadequacy of experience, resources, audit fee

and any issue regarding resignation or

dismissal of the external auditor;

4.1.2 Review with the external auditor the nature

and scope of the audit before the audit

commences and report the same to the Board;

4.1.3 Ensure co-ordination when more than one

audit firm is involved in the audit;

4.1.4 Review with the external auditor his auditreport and report the same to the Board;

4.1.5 Review with the external auditor his evaluation

of the system of internal controls and report

the same to the Board;

4.1.6 Review the assistance given by the employees

of the SapuraCrest Group to the external

auditor and report the same to the Board;

4.1.7 To do the following where an internal audit

function exists:

(a) Review and report the same to the Board

on the adequacy of the scope, functions

and resources of the internal audit

functions, and that it has the necessaryauthority to carry out its work;

(b) Review and report the same to the Board on

the internal audit programme, processes,

the results of the internal audit programme,

processes or investigation undertaken and

whether or not appropriate action is taken

on the recommendations of the internal

audit function;

(c) Where necessary, ensure that appropriate

action is taken on the recommendations of

the internal audit functions;

(d) Review any appraisal or assessment of the

performance of members of the internal

audit function;

(e) Approve any appointment or termination

of senior staff members of the internal

audit function; and

(f) Inform itself of resignations of internal

audit staff members and provide the

resigning staff member an opportunity tosubmit his reasons for resigning.

4.1.8 Prior to the approval of the Board, review the

quarterly and year end financial statements

and report the same to the Board, focusing

particularly on:

(a) Any changes in accounting policies and

practices;

(b) Significant adjustments arising from the audit;

(c) The going concern assumption; and

(d) Compliance with accounting standards

and other statutory requirements.

4.1.9 Review any related party transactions and

conflict of interest situation that may arise

within the SapuraCrest Group including any

transaction, procedure or course of conduct

that raises questions of management integrity

and report the same to the Board;

4.1.10 Review any letter of resignation from the

external auditor and report the same to the

Board;

Audit Committee Report











39

Material Contracts

Save as disclosed below, there have been no material

contracts involving Directors’ and Major Shareholders’

interests, either still subsisting at the end of the financial

year 31 January 2005 or, if not then subsisting, entered into

since the end of the previous financial year:

(1) The following Technical Services Agreements were

entered into between Tioman Drilling Company SdnBhd (Tioman Drilling), a 51% subsidiary of SapuraCrest

held through SapuraCrest’s wholly-owned subsidiary,

Probadi Sdn Bhd (“Probadi”) with Smedvig Asia Limited

(“Smedvig Asia”):

(a) Technical Services Agreement dated 15 January

1991 for the rig, T3;

(b) Technical Services Agreement dated 15 January

1991 for the rig, T6;

(c) Technical Services Agreement dated 28 March

1994 for the rig, T2 (ceased as of 9 July 2004);

(d) Technical Services Agreement dated 18 December

2003 for the rig, Teknik Berkat; and

(e) Technical Services Agreement dated 31 March

2004 for the rig, T9.

Smedvig Asia is a major shareholder of Tioman Drilling

and the services to be provided by Smedvig Asia to

Tioman Drilling under the Technical Services

Agreements encompasses the provision of engineering

services, rig maintenance and rig material services to

the respective rigs. The consideration payable to

Smedvig Asia is at the specified daily rate of

USD2,022.00 (RM7,683.60) per rig and is adjustable in

accordance with the Average Hourly Earnings Index for

the Oil and Gas Field Services published by the United

States Department of Labour Bureau of Labour Statistics

in the “Employment and Earnings Bulletin”.

(2) On 18 December 2003 Crest Tender Rigs Pte Ltd (“CTR”), a

Labuan incorporated wholly-owned subsidiary of Varia

Perdana Sdn Bhd (“Varia Perdana”) and Smedvig Rig AS

entered into a memorandum of agreement for the

acquisition by CTR of a drilling rig, the T-9 from SmedvigRig AS for USD70 million. Smedvig Asia, a related company

to Smedvig Rig AS, is a major shareholder of Varia Perdana.

The acquisition was completed on 18 May 2004.

Imposition of Sanctions and/or Penalties

During the financial year ended 31 January 2005, no

sanctions and/or penalties were imposed on the Company

and its subsidiaries, Directors or management by the

relevant regulatory bodies.

Non-Audit Fees

The amount of non-audit fees paid to the external auditors

of the Company and its subsidiaries for the financial year

ended 31 January 2005 was RM234,134.00.

Utilisation of Proceeds raised from the issue of

Convertible Bonds (“CB”)

On 15 December 2005, the Company via its wholly-owned

subsidiary, SapuraCrest Dana SPV Pte Ltd, issued USD80

Million CB at a nominal value of USD50,000.00 each for the

purposes of capital expenditure, investment and working

capital.

The registered holders of the CB will have the option at any

time during the conversion period i.e, a period from and

including 25 January 2005 up to and including 5 December

2009 to convert the CB into new ordinary shares of RM0.20

each (“Share”) in the Company.

The conversion price for the CB shall be RM1.4514 per

share, which will be subject to adjustment for, among other

things, subdivision, consolidation or reclassification of

Shares, capitalisation, capital distribution, bonus issues,

rights issues and certain other events.

The CB bears interest at the rate of 2.5% per annum which is

payable semi-annually in arrears on 15 June and 15

December in each year commencing 15 December 2004.

As at 31 May 2005, the status of utilisation of the CB

proceeds are as follows:

RM'000

Gross proceeds (USD80 million) 304,000

CB issue expenses (8,472)

Vessel construction (46,108)

Acquisition of a subsidiary company (32,820)

Repayment of borrowings (19,000)

Working capital (27,572)

170,028

Additional Compliance InformationPursuant to Paragraph 9.25 of the Listing Requirements of Bursa Malaysia



40

Share Buybacks

The Company did not undertake any share buybacks during

the financial year ended 31 January 2005.

Options, Warrants or Convertible Securities

Employee Share Option Scheme

The SapuraCrest Group Employee Share Option Scheme

2004 (“ESOS”) is governed by the by-laws approved by the

shareholders at the Extraordinary General Meeting held on

19 February 2005. The actual date of offer was made on 8

November 2004 with a total of 13,522,600 ordinary shares

of RM0.20 each pursuant to the ESOS was offered to the

eligible employees. The amount of ESOS effectively

accepted as at the closing date was 13,158,800, whereby a

total of 93,400 of ESOS was exercised as at 31 January 2005.

Warrants

On 19 April 2004, the Company issued 14,195 new ordinary

shares of RM1.00 each in the Company pursuant to the

exercise of warrants at an exercise price of RM3.51 per

share. The share premium arising from the exercise of

warrants of RM35,629.00 has been credited to the sharepremium account.

Redeemable Cumulative Convertible Preference Shares

No Redeemable Cumulative Convertible Preference Shares were

exercised during the financial year ended 31 January 2005.

American Depository Receipt (“ADR”) or GlobalDepository Receipt (“GDR”)

The Company did not sponsor any ADR or GDR during the

financial year ended 31 January 2005.

Results Variation

There was no material variation between the audited results

for the financial year ended 31 January 2005 and the

unaudited results previously announced.

Profit Guarantee

The Company gave no profit guarantee during the financial

year ended 31 January 2005.

List of Properties and Revaluation Policy on Landed

Properties

The Company does not own any landed properties.

Accordingly, it has not adopted a policy on revaluation of

landed properties during the financial year ended 31

January 2005.

Additional Compliance Information





Documents

SAPURA Malaysia - Annual Report 2005_sapuracrest