Good evening, everyone, and welcome to MISC Berhad's second quarter financial year 2026 analyst briefing. I'm Faizan from Investor Relations and I'll be facilitating this evening's session.

Joining us today from MISC are Yang Berbahagia Datuk Zahid Osman, President and Group CEO; Encik Raja Azlan Shah Raja Azwa, Chief Strategy and Sustainability Officer; Encik Efendy Ali, Chief Financial Officer; and Encik Adam Fazil, Head Strategy and Investor Relations. Before we get underway, please take note of the disclaimer included in the presentation deck, particularly in relation to forward-looking statements and the risks and uncertainties that may cause actual outcomes to differ.

For the agenda this evening, we will begin with opening remarks from Datuk Zahid, followed by the group's financial performance and market outlook, before opening the floor to questions. Without further ado, Datuk Zahid, over to you.

Bismillahirrahmanirrahim.

Thanks, Faizan. Assalamualaikum, salam sejahtera, and a good evening, everyone.

Thank you for making the time to join us this evening for our Quarter 2 results. In this session, we will take you through an overview of our second quarter performance, some of the key development across our businesses, and thereafter, we are certainly open to questions that you have on our performance.

We have an exceptional quarter as a group in Q2 this year. Despite the challenging and uncertain market environment, I think as a group, we delivered a very strong operational and financial performance.

Revenue increased by 90% year-on-year, profit after tax more than double compared with the corresponding quarter last year. In terms of cash flow, our performance in this space has strengthened further, and it's about 60% year-on-year increase.

The earning uplift majority or mainly driven by the petroleum segment, which benefited from the elevated tanker rates during the quarter. This certainly has enabled us to capture the high rates with the in-charter to support the lightering activities.

At the same time, offshore and our heavy engineering businesses recorded higher revenue, supported by good project progress, while gas secured new long-term charter and also took delivery of new vessels during the quarter. Our strong operating performance also translated into a very robust cash generation during the quarter.

I'm sure Efendy later will take you through in detail our financial performance. Overall, our Quarter 2 results demonstrate the strength and agility of our diversified portfolio, that enabled MISC to capture market upside when conditions are favorable, while providing the required resilience across the different market cycles.

In support of the group continue cash generation for the quarter, the board has declared a second interim dividends of RM0.08 per share. Even though we are showing a very strong first half performance this year, I do want to highlight that it is important for us to be cognizant that our business environment is influenced by changing supply-demand dynamics and geopolitical development.

As such, we remain measured in our outlook for the second half of the year, recognizing that the strong contribution from petroleum in the second quarter may moderated from the current level. Next slide, please.

Beyond our financial performance, I think it's worthwhile to share with you, we continue to make tangible progress across the three strategic pillars of our delivering progress strategy, strengthening the group long-term earning visibilities and resilient. Under our resilient core, gas secured a long-term charter contract with PETRONAS Gas for a newbuild floating storage and regasification unit, or the FSRU.

This add to our contracted growth pipeline, and further strengthen MISC participation across the LNG value chain. We also received two new LNG carriers for long-term charter to SeaRiver during the quarter.

In heavy engineering, we signed a memorandum of understanding with Hanwha Power Systems to jointly pursue and develop newbuilding projects. The partnership brings together our MHB yard and construction capabilities with Hanwha engineering and technologies expertise to pursue future opportunities in this area.

Under our second strategic pillar, profitable new business, new energy business, we secured the second liquefied carbon dioxide carrier with Northern Lights joint venture, together with our partner, K Line. We will continue to build future-ready capabilities with our partner, while maintaining the capital discipline and long-term earning visibility when we pursue opportunity under the new energy space.

Under decarbonization, we continue progressing fleet renewal and operational efficiency initiative across our shipping portfolio. For the first half of 2026, I am pleased to share that our GHG emission intensity was 2% lower year-on-year.

The improvement is the result of the changes in our fleet composition following the disposal and lay-up of our older steam turbine LNG carriers. Going forward, we will continue to focus on fleet rejuvenation and improving operational efficiency, in line with our sustainable strategy to ensure that we can meet our decarbonization target that we have stated earlier.

On safety and operational excellence, I am pleased to share that our petroleum business, AET, received the Jones F. Devlin Safety Awards for 46 of our tanker.

This recognition reflects the continued commitment of our people to maintain safe and reliable operation across our fleet. In closing, we are having exceptional quarter as a group.

It's very strong first half of the year. It demonstrate the agility and resilient of the group, and our ability to perform and to deliver our promise through market uncertainties and increasingly unpredictable geopolitical environment.

Looking ahead in second half of the year, we will continue to pursue selective new energy opportunities, strengthening our resilient core business, and deploy capital selectively into strategic opportunities that will enhance the group portfolio and capabilities, driving long-term growth and shareholder value creation. I do want to stop here and allow Raja Azlan and Efendy to take you through in detail our financial performance and market environment in greater detail.

Over to you, Efendy.

Thank you, Datuk Zahid. Assalamualaikum and a very good evening, ladies and gentlemen.

Let me begin with a walk-through of MISC's group financial performance for the second quarter of 2026. Overall, the group delivered an exceptional performance during the quarter, as mentioned by Datuk Zahid, with substantial growth in revenue, operating profit, and profit after tax, and cash generation.

The earnings uplift was anchored by the petroleum segment, which has benefited from the elevated petroleum tanker rates and strong operating performance. At the same time, our cash flows were further complemented by advance customers' receipts and higher project cash collection in the offshore segment.

While the quarter demonstrates the earnings capability of our diversified portfolio, it is important to distinguish that the strong performance was driven by exceptionally favorable tanker market conditions, resulting in earnings that were significantly above our normal operating levels. Although these results demonstrate the group's ability to capture upside opportunities while benefiting from the stability of our contracted businesses, the elevated tanker market environment is not expected to persist indefinitely and may moderate as we move into the second half of 2026.

Accordingly, the Quarter 2 2026 set of results should be viewed in the context of group's underlying business fundamentals and sustainable earnings profile, rather than as a new baseline for future performance. The group revenue for Quarter 2 2026 increased to USD 1.2 billion, representing growth of 90% year-on-year and 65% quarter-on-quarter.

The significant increase was primarily driven by stronger petroleum freight rates and higher earning days. Revenue was also supported by higher construction revenue recognition from offshore and heavy engineering projects.

The petroleum segment was the largest contributor to the increase, reflecting a stronger rates across the tanker portfolio, together with higher vessel utilization. The increase in offshore revenue was mainly attributable to construction progress on FPU [Kledang?]

and as well as FSO [Katubu?] pipeline system, which is to be located in Papua New Guinea.

While the heavy engineering benefited from the ongoing projects advancing into higher phases of construction. The group operating profit increased to USD 295 million, compared with USD 176 million in Quarter 2 2026 and USD 193 million in Quarter 1 2026.

The improvement was principally attributable to stronger petroleum margins, in line with the exceptional tanker market and higher earning days achieved during the quarter. This was partially moderated by lower contribution from the gas and offshore segment.

In gas, operating profit was impacted by softer revenue and higher depreciation, following the reassessment of the useful life of selected steam turbine vessels, resulting in an acceleration of depreciation expense during the quarter. In offshore, operating profit continued to be affected by the operational shutdown of FPSO Kikeh, while ongoing construction projects had yet to attain the minimum required progress threshold for meaningful profit recognition.

Profit after tax closed at USD 293 million, delivering more than twofold increase from USD 110 million in Quarter 2 2025 and grew by 55% from USD 189 million in Quarter 1 2026. The improvement was primarily attributable to the higher operating profit generated by petroleum, further supported by lower impairment losses and gains from vessel disposals during the quarter.

Moving to cash flow, the group generated cash flow from operation of USD 599 million in Quarter 2 2026. This represents an increase of 60% against Quarter 2 2025 and 93% against Quarter 1 2026.

The strong cash generation reflected higher collections from petroleum segment, in line with its robust operating performance during the quarter, complemented by advanced charter hire for FPU [Kledang?] and milestone-based project collections from offshore projects.

Overall, the Quarter 2 cash flow from operation reflected both solid underlying operational cash generation and timing of certain project-related receipts, including advance charter hire received during the quarter. While this receipt strengthened the group's cash flow performance, some of these items are one-off and timing-related in nature, hence, should not be regarded as recurring in the future.

Next slide. The group maintained a stable and resilient balance sheet as at June 2026, supported by a stronger equity position and healthy liquidity.

Total assets stood at approximately USD 13.4 billion, broadly stable compared with December 2025. Gross gearing improved to 0.36 times from 0.37 times in December 2025, supported by the increase in shareholders' equity, primarily driven by higher retained earnings arising from the group's improved financial performance.

Net gearing further strengthened further to 0.16 times, compared to 0.2 times at the end of 2025, December 2025, primarily reflecting the group's stronger cash position. The group's net debt composition remained predominantly fixed-rate, with approximately 90% fixed debt and 10% floating debt as at June 2026.

The shift in composition reflects the higher proportion of floating-rate facilities, while the overall debt profile remains prudently managed. Overall, our gearing remains prudent, providing sufficient financial capacity to fund the group's secured growth pipeline while maintaining a disciplined capital allocation.

On the cash and debt balances, the group ended the first half of 2026 with a healthy cash position and broadly stable debt. Cash balances stood at approximately USD 1.8 billion as at June 2026, compared with USD 1.5 billion as at December 2025.

The increase was anchored by higher net cash generated from operation during the first half of the year, partially offset by capital expenditure payments. Total debt remained broadly stable at approximately USD 3.2 billion, compared with the position at the end of December 2025.

The group's robust liquidity position provides the financial flexibility to support ongoing capital commitment, including fleet rejuvenation and the execution of secured growth projects. At the same time, we remain disciplined in managing our cash and debt profile, optimizing funding sources to enhance capital efficiency.

This positions the group well to pursue its growth agenda while preserving a strong balance sheet, prudent gearing, and adequately liquidity headroom. Next.

Let me now walk you through the performance of each of our core business segments, starting with gas. Gas recorded revenue of USD 104 million in Quarter 2 2026, representing a modest improvement against the preceding quarter, although remaining lower against Quarter 2 2025.

The quarter-on-quarter improvement was mainly supported by the delivery of Seri Dian and Seri Dayang, while revenue was lower against corresponding quarter due to the absence of construction revenue from an FSU conversion project, following its project completion in Quarter 3 2025. Lower earning days following vessel disposals and lay-up and lower charter rates.

The year-on-year decline reflect the segment's ongoing fleet rejuvenation transition, as we progressively phase out aging steam turbine vessels in favor of modern and more efficient fleet anchored by long-term charters, while resulting in lower earning days arising from contract expiries, vessel disposals, and lay-up. Notwithstanding this, this segment maintained a 100% term-to-spot ratio, underscoring sustained earnings stability and the resilience of its long-term contracted income base, while the ongoing fleet rejuvenation program continues to progressively reposition the portfolio towards newer and more efficient vessel, which is expected to strengthen the efficiency and the long-term earnings resilient of the portfolio in the future.

Operating profit stood at USD 35 million, lower against both the corresponding and preceding quarters. The decline was primarily attributable to higher depreciation, following the reassessment of the useful life of selected steam turbine vessels, resulting in an acceleration of depreciation expense during the quarter, as I mentioned earlier.

Profit after tax of USD 17 million was lower quarter-on-quarter, in line with the lower operating profit and absence of vessels disposal gains in the current quarter. Against the corresponding quarter, PAT was marginally higher, mainly due to lower impairment losses, negating the softer operating performance in Quarter 2 2026.

For the petroleum segment, petroleum segment delivered an exceptional Quarter 2 2026 performance and remained the group's largest earnings contributor. Revenue increased to USD 562 million from USD 299 million in Quarter 2 2025 and USD 382 million in Quarter 1 2026, driven by higher tanker rates and earning days.

The growth was further supported by the accelerated recognition of deferred income arising from a contractual arrangement, which provided a one-off uplift during the quarter. Operating profit increased to USD 21- 215 million, representing a more than twofold improvement year-on-year and an almost twofold increase from the preceding quarter.

The increase was broadly in line with the strong growth in revenue and reflects improved earnings margins. However, the benefit from the one-off revenue uplift was partially offset by the corresponding acceleration of depreciation expense arising from the same contractual arrangement.

PAT increased to USD 232 million, compared with USD 55 million in Quarter 2 2025 and USD 129 million in the preceding quarter. The improvement was primarily driven by stronger operating performance, while the year-on-year increase also benefited from a gain on the disposal of vessel during the quarter.

Approximately 70% of petroleum fleet remained on term charter during Quarter 2 2026, providing a stable contracted earnings base, while the remaining market exposure enabled the segment to capture favorable spot market opportunities. As highlighted earlier, the strong Quarter 2 2026 performance should be viewed in the context of the exceptionally favorable tanker market environment and certain nonrecurring items that contributed during the quarter.

Accordingly, the results are not indicative of a sustainable quarterly earnings run rate. Our offshore revenue increased significantly to USD 262 million, compared with USD 106 million in Quarter 2 2025 and USD 107 million in Quarter 1 2026, driven by the advancement of FPU [Kledang?]

and FSO projects. The operating profit stood at USD 45 million, compared with USD 53 million in Quarter 2 2025 and USD 49 million in Quarter 1 2026.

The year-on-year decline primarily reflected the lower contribution from FPSO Kikeh, following its continuous operational shutdown, while the quarter-on-quarter movement was impacted by higher project-related predevelopment costs incurred to support future growth opportunities. Consequently, profit after tax was lower by USD 17 million, compared to USD 30 million in Quarter 2 2025 and USD 19 million in Quarter 1 2026.

Overall, the offshore segment continues to be anchored by a portfolio of long-term contracted offshore assets, complemented by the ongoing execution of its secured projects, providing a balanced mix of operating and project-related activities across the business. Finally, for our marine and heavy engineering, recorded revenue of USD 247 million, more than twofold against both the corresponding and preceding quarters.

The increase was supported by higher project activities and incremental construction progress across several ongoing projects. Operating profit improved to USD 17 million, compared with USD 3 million in Quarter 2 2025 and USD 5 million in Quarter 1 2026.

The improvement was driven by higher contributions from key ongoing projects and finalization of post-sail-away projects. PAT correspondingly increased to USD 15 million, compared to USD 2 million in Quarter 2 2025 and USD 4 million in Quarter 1 2026.

Overall, the stronger performance reflects steady execution and progression of projects across the segment's order book, translating into higher construction activities and improved earnings contribution during the quarter. To conclude, Quarter 2 2026 was an exceptional quarter for MISC, underscoring the strength of our diversified portfolio and our ability to capture opportunities across different market cycles.

While we remain mindful that certain favorable conditions may not persist at the same level going forward, our focus remains unchanged: on disciplined execution, prudent capital management, and sustainable long-term value creation. At the same time, we continue to benefit from the stability provided by our portfolio of long-term contracted assets and projects, which forms the foundation of the group's resilient across varying market environment.

Together with our healthy financial position and disciplined approach to growth, this provides us with the flexibility to navigate evolving market conditions while continuing to deliver value to our stakeholders. With that, I conclude my briefing of the group's financial performance for the quarter.

Thank you for your attention. I will now hand the floor to Raja Azlan.

Thank you, Efendy. With full walk through the financial performance, let me now turn to the operating environment and the key market developments across our segments.

While the near-term market conditions remain uneven and continue to be influenced by geopolitical developments, the underlying long-term fundamentals across our core businesses remain supportive. Let me begin with the global energy market.

Despite disruptions to cargo movements through the Straits of Hormuz during the quarter, global LNG trade remained resilient. The market demonstrated its ability to adapt, supported by supply diversification and improving production across key producing regions.

New liquefaction volumes from North America, together with higher plant utilization rates and the gradual ramp-up of projects in the United States, Canada, and Africa, helped partly offset supply shortfalls from the Middle East. While near-term supply growth may remain constrained by ongoing geopolitical uncertainties and project execution risks, the long-term outlook remains attractive.

Global liquefaction capacity is projected to expand at an estimated 10% CAGR through to 2031, driven by substantial capacity additions across major LNG-producing regions. On the demand side, Europe and Asia continue to be the primary growth engines for LNG consumption.

Demand remains supported by energy security considerations and the role of LNG in supporting energy transition objectives across many markets. Looking ahead, as supply and demand conditions expected to improve from 2027 onwards, LNG trade volumes are expected to regain stronger momentum.

The increase in available supply should help rebalance the market, with the LNG prices likely to moderate during the 2028 to 2029 period, supporting broader market growth and trade activity. With those positive supply and demand fundamentals in mind, let me turn to developments in the LNGC carrier market and the fleet that will support this growth.

Fleet rejuvenation and expansion continue to drive growth in the LNGC market. The industry has moved beyond simply replacing older steam turbine vessels, and is now increasingly focused on replacing less efficient tonnage with modern, fuel-efficient LNGC carriers.

This trend is being driven by tightening environmental regulations, evolving customer requirements, and the need for greater operational efficiency. Against this backdrop, the LNGC carrier market order book remains elevated.

As of the second quarter 2026, the order book-to-fleet ratio stood at 39%. The composition of the order book reflects the industry's shift towards more efficient tonnage, with around 80% of the vessels currently on order, which are equipped with modern propulsion technologies, demonstrating the industry's clear preference for more efficient and environmentally-compliant vessels.

In addition, speculative ordering activity remains limited, with most newbuild vessels tied to specific LNG projects and supported by underlying commercial demand. Vessel deliveries are expected to remain elevated through to 202- 31, with the global LNGC fleet projected to grow at a CAGR of 7%.

However, growth in fleet capacity is being partly offset by accelerated retirement of older steam turbine vessels, which are becoming increasingly less competitive from both commercial and environmental perspectives. Turning to the recent geopolitical developments, while disruptions in the Straits of Hormuz may create some delivery scheduling challenges, we do not expect any material impact on the long-term development of the LNGC carrier fleet.

More specifically for MISC, we have not seen any material impact on project execution or vessel delivery schedules across our portfolio. All LNGC carrier newbuildings scheduled for delivery in 2026 remain on track, and we continue to engage closely with the shipyards, the charterers, and other key stakeholders to monitor developments proactively and mitigate any emerging risks.

Moving on to LNGC charter rates, the long-term LNGC supply growth outlook continues to support a healthy outlook for long-term chartering, particularly for modern vessels. As for spot charterers, continued high vessel deliveries coupled with uncertainties in the Straits of Hormuz are expected to keep spot charter rates volatile in the near term.

Geopolitical tensions continue to affect the supply-demand fundamentals of LNGC shipping rates. If the strait fully reopens, LNG exports could gradually recover.

Looking ahead, modern LNGC charter rates to remain supported throughout 2026, driven by strong demand for fuel-efficient and environmental-friendly vessels. Against this backdrop, we remain focused on rejuvenating our fleet with modern, fuel-efficient vessels, secured with long-term charters, reinforcing the quality, resilience, and visibility of our earnings.

By 2030, our gas segment is expected to deliver an additional 19 new vessels, which will lift the proportion of modern and efficient vessels in our fleet to approximately 75%, from currently at 50%. This fleet transformation positions us well to meet evolving customer requirements, enhance operating efficiency, and strengthen our competitiveness in an increasingly modernized LNG shipping market.

Next slide, please. Moving on to petroleum shipping, in the second quarter 2026, the crude tanker order book expanded further, driven by robust new orders and shipowners looking to replace aging tonnage and modernize fleets ahead of tighter environmental regulations.

This lifted the order book-to-fleet ratio to 29.5%, up from 18% in 2025. Fleet additions have started accelerating, with 49 vessels delivered in the first half of 2026.

A further 43 vessels are scheduled for delivery in the second half of 2026. Deliveries are expected to accelerate and peak in 2028-2029, as the bulk of the Suezmax and the VLCC orders placed over the past two to three years enter the fleet.

Demolition activity remained low in the first half, with just three vessels scrapped. Scrapping is expected to accelerate in 2028-2030 as stricter regulations and efficiency standards weaken incentives to retain older vessels.

The crude tanker market remains highly sensitive to geopolitical developments, and volatility is likely to persist given the ongoing uncertainty in the Middle East. Average rates across all crude tanker segments eased in the second quarter of this year from the peak seen in the first quarter, but remained at elevated levels.

Looking ahead, the crude tanker market is expected to remain broadly positive for the remainder of the year, although rates are expected to remain volatile and may moderate from the exceptional levels seen earlier in the year. The market should continue to benefit from sustained ton-mile demand, driven by shifting global oil trade flows and the rebuilding of inventories following drawdowns earlier in the year.

In particular, longer-haul exports from the Americas should continue to offset lower Middle Eastern volume, supporting ton-mile demand and tanker rates. At MISC, we continue to strengthen the competitiveness of our fleet through ongoing rejuvenation.

We currently have 10 dual-fuel newbuilds in the pipeline, with deliveries scheduled between 2027 to 2030. These investments will improve fleet efficiency and resilience, while positioning us to capture opportunities arising from changing trade flows and the industry's transition towards lower-carbon operations.

Moving into the offshore sector, the outlook for the offshore industry continues to be positive, supported by increasing investments in offshore energy developments to meet long-term global energy demand. Reflecting this positive outlook, offshore capex is projected to increase steadily over the coming years, reaching approximately 200 billion by 2030.

As operators commit to new developments, the market is also evolving with a growing preference for mid-sized projects that offer greater capital efficiency. This is driving increased interest in FPSO conversions and redeployment opportunities.

Against this backdrop, the floating production system market, particularly the FPSO segment, is expected to remain robust. The estimated total capital expenditure for FPSO units between '26 to 2030 is around 77 billion.

Industry forecasts indicate that 11 FPSO projects are expected to be awarded in 2026. As of the first half, there were six FPSO contracts which were awarded, matching the total number of awards recorded across both '24 and 2025.

This provides a strong indication that the investment cycle is gaining traction. Over the 2026 to 2030 period, FPSO awards are projected to average nine projects annually.

This provides strong visibility to future project opportunities. MISC will continue to pursue opportunities to meet our risk-return requirements, while leveraging strategic partnerships and flexible commercial structures to manage affordability, execution risks, and capital deployment.

With that, I end my presentation. Thank you very much, and back to you, Faizan.

Thank you, Encik Raja Azlan. Thank you, Encik Efendy.

We will now move into the question-and-answer session. If you would like to ask a question, please use the raise hand function.

When I call on you, please briefly introduce yourself by stating your name and organization before proceeding with your question. Now, to give as many participants as possible an opportunity to come in, we will start with up to two questions per participant.

If you have any further questions, simply raise your hand again, and we will circle back where time permits. Okay.

Now let's get started. Our first question is from Hazmi of CLSA.

Go ahead. Please go ahead, Hazmi.

Hi, everyone. Thanks.

Congrats on the results. Hazmi from CLSA.

Two questions to start. I think first one just on the earnings, especially on the petroleum side.

I understand that you mentioned for the second half of the year, in the coming quarters it won't be as high, elevated as the peak of the second quarter. Probably can you help us to think how should we sort of think for this second half of the year, even with the easing going to the third quarter, will it go back to the first quarter kind of level?

Or would it be higher or lower? Driving from that, probably can share some colors the breakdown in terms of the tanker rates on average during second quarter and what you are seeing right now?

Sort of if you can share in terms of that deferred income that you mentioned the one-off uplift, what was the quantum for that? That my first question on the petroleum segment.

Probably the second question, I think I wanted to ask about the results more, but I think since with two question first, I think the second one probably on the recent news with regards to MISC and Yinson, if you can provide some more colors there. Thank you.

Yeah.

Thanks, Hazmi, yeah. I think I'll take the first questions on the petroleum earnings.

Yep. In my sharing earlier, I provide some context in terms of the performance for for Q2.

As we have seen, the tanker rates in Quarter 2 was exceptional. As you can appreciate, we're already in at the end of August, I have the benefit of looking at actual July numbers, right, which obviously will will fall into the quarter Quarter 3 results later, right?

If you if the specifically on on on on the the the tanker rates, what we are seeing is there's a there's a significant drop in the rates in July, compared to what we have actually utilized in in April and May, generally, right? What we are look what we are seeing is the July tanker rates approximately the same or be or perhaps slightly above the the rates that we are seeing at the pre-war level, which is which is in in in January and February this year.

I think that's that's where the context that I I wanted to to caution all of you that that you have an expectation to see a similar result in Quarter 3, benchmarking against what we have what we have achieved in Quarter 2. Yep, so that's that's my my response to your to your earnings.

The other one is on the the one-off earnings. That is in relation to our contract on the marine well containments company.

That we have two vessels contracted there, one vessel has been has been agreed to be terminated and we have been compensated for that. What as a result of that termination, we have essentially a deferred income of about $80 million, which has now been flushed into the Quarter Quarter 2 results, right?

Similarly, we have a depreciation, accelerated depreciation in in respect of that, and approximately the the positive P&L impact for this one-off transaction is about $23 million positive to our petroleum segment. Okay?

Hazmi, that's on the question with regards to the petroleum expected performance for second half. I think when you also ask about the recent news about MISC and Yinson, is there any comment?

I think we generally do not comment on any market speculation. If there is anything material, MISC, we will make the announcement in a timely manner.

I think it's premature for us to say anything at this stage.

Thank you, Datuk.

Thanks, Efendy.

Next, we have a question from Raymond, CGS. Go ahead, Raymond, with your question.

Yes, hi. Evening, everyone.

I'm just going to ask a couple of boring questions, and it's in relation to your fleet, right? I think that the vessel disposal proceeds and the gain on vessel disposal in the second quarter, if I could just guess, it would relate to the Eagle Vancouver, and the newspapers reported that you have sold your Seri Bakti and Seri Bahar, but can I just double check that the disposal proceeds will be booked actually in the third quarter for the two LNG vessels?

That's on the sale side. On the acquisition side, I think there was a report that you had ordered two VLCCs from Hanwha, and I can see that in your order book data.

I think TradeWinds reported that you may order up to six VLCCs. Could I just check that these two VLCCs, that's it?

Or is it going to go up further to six VLCCs later on? There was also a report that you ordered one shuttle tanker from Dalian Shipbuilding for 2028 delivery, just to check who is this going to be chartered to?

These are my four Well, this is my first question relating to your fleet. Thanks.

Maybe I'll just stop here first, and ask the second one later.

Thanks, Raymond. My answer to your first question on the fleet disposal, yes, I can confirm Eagle Vancouver was disposed in Quarter 2.

Similarly, the two LNG vessels, Bahar, Bakti, were also disposed in Quarter 2. The proceeds were captured in Quarter 2.

Sure. Okay.

Was there any gain on Seri Bakti, Seri Bahar, or was the gain only on the Vancouver?

The gain was only on Vancouver. Yeah.

Okay. Can I just double check about the shuttle tanker, who is it going to be chartered to?

Also the VLCC orders from Hanwha?

I think for the VLCCs, currently we committed two vessels with Hanwha, and currently the final charter is under discussion at this stage.

You're going to find a long-term charterer for these two VLCCs, yeah?

Yes, that is correct. There is a mismatch with regards to when we can close the deal on the customer side, and the need for us to sign the shipbuilding contract with the yard.

At the moment, the yard is very hot with regards to demand and slots. That's the mismatch.

The intention is to secure long-term charter for these two new vessels.

Okay. TradeWinds reported that you may order up to six VLCCs from Hanwha.

Is that coming through later on, or just stopping at two?

It's only two.

Okay. Sure.

How about the shuttle tanker, who are you going to be chartering it out to?

No, I think we certainly have committed to the shuttle tankers, but currently we are not able to share who's the customer going to be. It's backed by the long-term charter, lah, where the customer not do not want to announce anything on their side.

Okay. Sure.

Just want to ask about a bit about the offshore side. I think the FPSO [Cendor?]

was reported by Upstream that Medco is going to buy it over, are we expecting a sale of the [Cendor?] in the third quarter?

There's another FSRU project in Yan, Kedah, wanted to check whether you are going to be part of this.

I think for [Cendor?] , currently is under a long-term charter to Petrofac.

I think that is coming to the end of that charter. I think any speculation what's going to happen to that vessel, I think, we will announce it when the time comes, Raymond.

Mhm.

The second question is with regards to the FSRU project announced in Kedah. Is it Yan, Kedah, is it?

That's right.

Okay. I think that, as far as we also seen the news on that one, that is currently being promoted by Gas Malaysia, lah.

We are not involved.

Sure. How about the FPSO Excalibur?

There was a news that you might buy something and redeploy to Limbayong.

I think the customer, the owner has announced it. I think we signed the deal, and I think it's coming to Malaysia and with the intention is to deploy that into apa tu, offshore Sabah,

lah,

under long-term charter.

You'll announce the details later on when it's finalized, right?

Absolutely. Absolutely.

Okay. [Laughter] Sure.

That's it for me. Just boring questions.

Thanks.

Boring question is fine, Raymond. No worries.

Thank you, Raymond. We have a question from Hon Meng.

Go ahead, Hon Meng.

Hi. Yeah.

Hi, can you hear me? Yeah.

Just want to check for your gas side, I think previously when you do your impairments in the previous years, that was mainly to match the steam turbine vessels with the market values at the time, right? This time around, you are doing an accelerated early depreciation is that a different impairment method you're using now versus the previously?

Yeah.

Okay. Thanks, Hon Meng.

I'll take that. I think what we have been doing in the last, I would say, a couple of years, right?

We have definitely seen the significant drop in market value of our steam vessels, which has impacted the profitability of the company. Obviously, I think in numerous session, we have highlighted that these steam vessels, once they are coming out of charter, chances are to get new contracts for them will be quite challenging, given number one, they are on older technology, plus number two, they're on a smaller parcel size.

I think over the last 12 months, we have also shared with you that some of these vessels, we have actually laid them up in order to manage the cost. I think what we have done in this quarter is for the six vessels that's currently still have a contract, but they do not have a contract up until 25 years of the life of those vessels.

It ranges between up to 19 to 23 years of life when the current contract expires. When we look at the trending of the steam vessels, chances are they will not be able to sustain the value of those vessels at the end of those contract years expired, and chances are we'll probably have to impact them at some point.

What we have done is we have taken a more conservative approach, which is to depreciate these six vessels over the life of the economic life, based on the contract that they have, which is up to 19 between 19 to 23 years.

19 to 23. These six are the ones that are going to expire in probably one or two years' time, right, because I remember you have a batch of steam turbine vessels that you have one batch that's already expired previously, and another batch is incoming maybe next year also?

Yeah.

Are those the batch that you decided to do the accelerated depreciation? Yeah.

Yes, yes. You're right.

Okay. Does it imply that, operationally, that the expiries are going to be earlier than say, next year, and that's why you need to do the accelerated depreciation?

No, it doesn't mean that. The contract will stay as it is.

It's just that when we revisit, our what we have seen in the past for all our steam vessels, they struggle to redeploy in the spot market, lah. We have revisited and decided to accelerate the depreciation until the end of the contract period rather than at the end of the 25 years.

Okay. Just jump quickly to offshore.

When you have the construction revenue, is that related to the 700 million revenue from contract with customers, as per your A10 in the Bursa pack?

Give me 1 second, eh? Yes, yeah,

yes,

yes. The answer is yes, Hon Meng.

All the 700 is the conversion project-related, lah. Okay.

Then for petroleum side, okay, you have amortization of deferred income net off by and then you say that after netting off the accelerated cost of depreciation, the net earnings to you is

$23 million? $23 million, 23, 2-3.

Oh, 23, 2-3, and it's all incurred in the second 2-3, sorry. Okay, 23.

All incurred in the second quarter, or is there more to come, yeah?

All happened in Quarter 2.

Okay. What is this regarding, sorry, I only heard two vessels, but I can't catch the details.

Yeah. We have a contract for the Marine Well Containment Company.

This is in the Gulf of Mexico, right? This contract, we had this, I think, about 10 years ago.

It's as a result of, if you remember, there was a Macondo event, you know? What happened is these two Aframaxes is over-designed.

They are paying for that over-design. In the event of oil spill, they are on standby to basically contain those oil spill, right?

What the company has done is they have basically paid for some capex upfront, right? Obviously we need to defer the income of that over a period of 20-year contract.

Obviously, I think we still have about, I think, about slightly less than 10 years. They have decided to terminate that contract, hence we are flushing all the deferred income and the corresponding unamortized cost into the P&L in this quarter.

Is it easy for you to re-charter those vessels out, or? Oh

yeah, of course. We are using it for normal operation as of today.

We're not allowed to go far, because that vessel is supposed to be on standby in case there's an oil spill, right?

Okay. Then just one more quick question from me.

You mentioned in your offshore side that you have higher pre-operating costs for future projects. Does it mean that to bid for FPSO projects nowadays, the bidding costs are higher now compared to last time?

Yeah. Those are the costs that we know when we need to bid, we have to incur those costs.

Obviously, those are what that we need to expense off in our P&L.

Is it material, the difference of this cost versus, say, last year?

Compared to last year, let me come back to you on that one.

Got

it.

Thank you.

We'll come back to you on that, Hon Meng. In the meantime, let's go to Raymond.

Raymond, go ahead. Raymond?

Yes, hi. It's me again.

I wanted to ask a question about the tax exemption for Malaysian shipping, which will be valid until the end of this year only. In your analysis, if the exemption is no longer extended, what will be the impact on MISC's bottom line?

I don't have the analysis to share with you, but conceptually, Raymond, these ships that will be impacted will be the Malaysian-flagged ships. At the moment, we don't have that many Malaysian-flagged ships in our portfolio.

Most of them are traditionally the LNG vessels that were contracted with PETRONAS,

right?

Obviously, you've seen a lot of the PETRONAS contracts have expired. What's left, I think, it's only that six that we mentioned earlier in respect of the accelerated depreciation, right?

Of course, the new ones will come in, but that will come much, much later. Yeah.

Okay. If you reflag them

Sorry, but if I can add, Raymond, we have been working with Ministry of Transport, as well as Ministry of Finance on this. We are fairly confident that we will get, at the very minimum, we will get an extension.

We have been getting that extension since 2012, right? Obviously, we are working with MOT to make sure that we'll get a perpetual tax exemption for our international shipping businesses, right, because that's where a lot of this jurisdiction offering to the shipping companies.

I think, this is a position that we are advocating together with MASSA, the Malaysian Shipowners' Association, on this tax exemption. I think, the current proposal is with the ministry, we hope that they will grant the approval for full exemption, and in replace with some tonnage tax.

I think that's what they're working on. In terms of mitigation, I think, we certainly can reflag the vessel if the fiscal environment in Malaysia is no longer conducive for our shipping business, lah.

Certainly, that option is available for us to undertake.

Will you need approval from your charterers to reflag?

Certainly, we do need to get their approval.

Okay. Will PETRONAS LNG agree?

I think now we are talking about on speculative basis, lah, Raymond. I think, let's just focus on that, the approval to get a further exemption or extension on this tax has been put together by the industry players, and currently sitting with the ministry for approval.

Okay. If the tonnage tax comes in, then do you have an indication of what the negative impact will be?

I think if you look at other countries, example is Singapore, if you look at their tonnage tax is about $10,000 per vessel per year. I think that is the kind of level that we are advocating,

lah. It's minimal.

Raymond,

if I can add, Raymond, the country is trying to make Malaysia flourish as a maritime nation. It will try to boost the tonnage.

It has already been discussed for some time now to use this or to resolve this tax issue in order to encourage new tonnage to come in, lah. Because of this issue, we can see that a lot of tonnage has gone to our neighbor.

Now our tonnage is less than 10% of our neighbor's tonnage. The government is under the leadership of the Minister of Transport, is trying to do something about it.

We have worked very close with the ministry to educate them as to what these Hong Kong, Singapore, and other jurisdictions do with their tonnage tax, and they are open to it, lah. They're considering it.

Thanks so much for the color. One final question from me is about [Kledang?]

. I understand MMHE will do the integration of the hull and the topsides, and they will also convert the oil tanker into the FPSO [Kledang's?]

hull. MMHE has I suppose a pretty uneven track record, how confident are you that they'll be able to execute this project well?

I think we are confident that MMHE will be able to deliver this conversion project. I think that is the confidence that we have of our subsidiaries.

What we have done this time around, we also have a strong project management team from our side in the yard to support the work,

lah. Thank you.

I think we have time for just one more question.

Let me address on Hon Meng Hon Meng question just now. What we incurred is about $3 million until half year of this year for the bidding cost for the offshore segment.

Thank you. Is it okay if I ask more?

Go ahead,

Hon Meng. Aimi, Aimi there's a question.

Sorry,

there's

a question from Aimi. 'Is accelerated depreciation of the six steam turbine vessels all been accounted for in Q2?'

I think that's been answered. Maybe yes or no answer.

It has been accounted for in Quarter 2 results, correct. The second question is with regard to FPSO Kikeh rectification work, has it only been done in second half?

I think, the work is currently being undertaken on a number of front. We do expect that to complete the work by end of this year, lah.

I think that's the current target. Aimi.

Thank you, Datuk. Hon Meng, you had a question?

Yeah. Just want to ask, any potentially one-off costs related to the Hormuz that has not been yet?

What was the question again?

Are there any additional exceptional costs that is related to the Hormuz incident that maybe are not explained yet, but it's already incurred?

No, we don't expect any, because, first of all, we no longer have any vessels going through the Strait of Hormuz at the moment. However, because of this geopolitical issues, the price of bunkers, the price of it is higher certainly before the conflict, lah.

Indirectly, that is the one that impacting us in our normal operation.

Like the extra insurance cost, war insurance costs, and all that?

No, since we're not taking the vessel inside the Strait of Hormuz,

there's

no need for us to purchase this additional insurance, lah, the war insurance, and so on.

Got it. Then maybe related to Raymond's question earlier for [Kledang?]

and the other FSO, you have a joint venture with MMHE. How does that work?

You recognize the construction revenue or would this eventually fall as a JV income? How does that work?

For [Kledang?] and FSO, that is our offshore business contract, right?

All the revenue and the cost is captured under offshore business segment.

Yep. Eventually, what would the JV recognize?

The JV is more of a project management, they don't take the risks of the project itself.

Oh, project management only? Oh, I see, I see.

Okay.

The asset, just to emphasize, the asset belongs to our offshore business segment.

Okay. Maybe just one last housekeeping question.

In your fleet, your total fleet page, right, your fleet information, used to have the same number of 39 vessels in the gas side, but you mentioned that Bakti and Bahar is already sold, just wondering whether is it supposed to reflect two lesser LNGC there?

We have also add another two, Hon Meng. We got the Dian and Dayang, so that's minus two plus two.

Oh. Okay.

We got Dian and Dayang delivered in May and June, if I'm not mistaken, certainly in Quarter 2.

Got it. All right.

Then the joint venture side, right, the JV income that increased, is it mainly the ramp-up of the Qatar vessels?

I believe so, yes.

Qatar vessels. Okay.

Got it. That's all from me.

Thank you.

That brings us to the end of this evening's briefing. Thank you, everyone who joined and for the questions and the discussion today.

The presentation deck has been circulated to attendees, and will also be made available on the MISC corporate website. As always, we would appreciate it if our sell-side analysts would share your published research with the Investor Relations teams once available.

On behalf of MISC, thank you again for your time and continued interest in the group. Have a good evening.

Thank you, everyone. Have a good evening.

Bye-bye.