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Brightoil faces $161 million claim from China Petroleum Pipeline Engineering

04 Nov 2019

Hong Kong-listed oil, shipping and bunkering firm Brightoil Petroleum (Holdings) Limited on Friday (1 November) issued an update on its resumption progress and business operations for the third quarter (Q3) of 2019 ended 30 September.

Among Q3 2019 developments were a USD 160.57 million litigation at the Intermediate People's Court of Zhoushan City and sharing of the company’s future business direction, on top of the updates.

Litigation of Brightoil Petroleum Storage (Zhoushan) Co., Ltd. and Shenzhen Brightoil Group Co., Ltd.

Brightoil Petroleum Storage (Zhoushan) Co., Ltd., a subsidiary of Brightoil, and Shenzhen Brightoil Group Co., Ltd., a guarantor of the former’s construction contracts, have been named as defendants in a lawsuit at the Intermediate People's Court of Zhoushan City, Zhejiang Province on 16 August 2019.

China Petroleum Pipeline Engineering Co., Ltd. and China Petroleum Pipeline Engineering Co., Ltd., Third Engineering Branch are the plaintiffs of the lawsuit over disputes of construction contracts.

The plaintiffs are claiming for outstanding construction costs, interests, loss and legal costs under the termination of certain constructions contracts related the building and construction of the Zhoushan Waidiao Island Brightoil Storage and Transportation Base for an aggregate sum of approximately RMB1,130 million (USD 160.57 million).

“The Company has entrusted a Chinese law firm to represent the Company on the litigation and has obtained positive legal advice, especially in response to the unreasonable compensation request,” stated Brightoil.

“The Company will take all necessary actions to protect the Company’s rights and interests. At the same time, the Company and the Plaintiffs had already conducted several rounds of discussion in order to strive to reach a settlement of the legal action as soon as possible.”

Upstream business – the primary focus of business in the future

Brightoil, meanwhile, said its Caofeidian oilfield is expected to complete the annual production target 40 days ahead of schedule. From January to September, the crude oil output was 8.24 million barrels, or 81.1% of the annual plan.

At the same time, it notes the construction costs for the Caofeidian oilfield to be approximately RMB 2,423 million, which is approximately RMB 500 million below the approved budget of RMB 2923 million.

In Q3 2019, the daily natural gas production of the Dina 1 and Tuzi gas field was 3.14 million cubic meters. The preparatory work for Tuzi gas field booster station and Dina 1-4 new well has begun, and the booster station is expected to be completed in October 2020.

“The management expects that the upstream business will be the primary focus of the Company’s development in the future,” it states.

Resumption progress on HKSE

Brightoil noted it has switched its independent forensic accountant, replacing KPMG Services Pte. Ltd. with RSM Corporate Advisory (Hong Kong) Limited on 27 August 2019 “primarily due to geographic concerns”.

It has also appointed RSM Consulting (Hong Kong) Limited as its internal control adviser on 21 October 2019 to review the internal control policies and procedures.

The company’s auditor, PricewaterhouseCoopers, has meanwhile commenced audit work on the Group’s outstanding financial results. It is expected that the preliminary results will be available in December 2019.

Yu Ming Investment Management Limited, Brightoil’s appointed financial adviser in Q3 2019, has started on formulating a plan to satisfy the Resumption Conditions and resume trading in the company’s shares on the Hong Kong Stock Exchange.

International Trading and Bunkering

Brightoil noted of “no significant amount of revenue” generated by its International Trading and Bunkering Unit in Q3 2019 due to credited being tightened by banks.

Marine Transportation

Out of the fifteen vessels in the fleet, fourteen of the arrested vessels have been sold by auction to date:

Sales by the High Court of Singapore

Ship’s Name Sale Date Price
Brightoil 319 2 October SGD 6,155,000
Brightoil 326 SGD 5,955,000
Brightoil 329 SGD 6,182,000
Brightoil 639 9 October SGD 10,005,000
Brightoil 666 SGD 10,225,800
Brightoil 688 SGD 3,933,000

Sales by the High Court of Hong Kong

Ship’s Name Sale Date Price
Brightoil Galaxy 21 October USD 61,501,023.44
Brightoil League USD 22,357,788.20
Brightoil Legend USD 22,229,759.70
Brightoil Lucky USD 22,363,371.30

The Brightoil Gem, the last remaining VLCC that is under arrest in China, is scheduled to be auctioned by the Haikou Maritime Court on 19-20 November 2019.

All proceeds from auction sales are expected to be used to settle the debts of Brightoil Singapore (S’pore) Pte. Ltd. BOPS and Brightoil after repayment of the vessel-related debts and liabilities, stated the company.

Potential debt restructuring and winding-up petitions

The Brightoil Petroleum (S’pore) Pte. Ltd. moratorium has now been extended until 30 January 2020; the next hearing date has not yet been fixed but is expected to take place in mid-January 2020.

On top of a settlement reached with Petco Trading Labuan Company Ltd and Brightoil on 7 August 2019, the company has also entered into settlement agreements with other key creditors and obtained commitment letters from several creditors showing support for its debt restructuring efforts.

Intended sale of Zhoushan Oil Storage and Terminal Facilities

Talks with “potential investors” for the intended sale of Brightoil’s assets at Zhoushan are still on-going in Q3 2019, notes Brightoil.

A chronologically organised list of articles concerning Brightoil’s potential debt reorganization is below:

Related: Brightoil bunker tankers “688”, “666”, “639” sold to new owners
RelatedBrightoil bunker tanker trio “329”, “326”, “319” bought by Singapore firms
RelatedBrightoil bunker tankers “688”, “666”, “639” undergo Singapore court auction
RelatedSingapore: Brightoil bunker tanker trio “329”, “326”, “319” up for sale
RelatedVLCC “Brightoil Gem” held under auction by Haikou Maritime Court
RelatedSingapore: Brightoil bunker tanker trio “329”, “326”, “319” up for sale
RelatedHong Kong: Brightoil reaches settlement with Petco Trading Labuan
RelatedBrightoil: Third quarter update on business ops and resumption process
RelatedBrightoil provides updates on winding up petitions at SG, HK courts
RelatedBrightoil: Independent non-executive Directors leave over audit review
RelatedBrightoil issues update on winding-up petition and sale of vessels
RelatedDr Sit Kwong Lam returns to Brightoil as Strategic Adviser
RelatedBrightoil Petroleum announces new Chairman and acting CEO
RelatedBrightoil former Chairman undertook $1.4 billion in personal guarantees
RelatedOfficial: Dr Sit Kwong Lam leaves Brightoil Petroleum Holdings
RelatedHong Kong High Court issues bankruptcy order against Brightoil Chairman
RelatedBrightoil aggregate debt has reached approximately $1.9 billion, it updates
RelatedBrightoil creditor claims amount to US $250 million, potential debt reorganisation
RelatedBrightoil to defend against winding up petition at Hong Kong court
RelatedSingapore: Brightoil to apply for six-month moratorium order at High Court
RelatedBrightoil oilfield project secures USD $700 million CNOOC funding
RelatedBrightoil: Plans to sell Zhoushan oil storage terminal, 15 vessels
RelatedShell to offload crude oil cargo from arrested “Brightoil Lion” tanker
RelatedBrightoil VLCC and Aframax tanker arrested at Singapore port
RelatedSingapore: Players to get fuel oil cargoes back from Brightoil bunker tankers
RelatedSingapore: Petrolimex v Brightoil case progresses to Pre Trial Conference
RelatedSingapore: Brightoil bunker creditor list growing with new firms
RelatedSingapore: Petrolimex owed over USD $30 million by Brightoil
RelatedBrightoil signals return to the shipping sector, starts reorganisation of debt
RelatedSingapore: Brightoil bunker tanker fleet placed under Sheriff’s arrest
RelatedSingapore: Toyota Tsusho Corporation seeking $21 million from Brightoil
RelatedQatar National Bank seeks USD $21.59 million debt from Brightoil

Photo credit: Brightoil
Published: 4 November, 2019

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