MISC Berhad (MISC) Earnings Call Transcript & Summary

Very good evening, ladies and gentlemen. Thank you for joining MISC Berhad's First Quarter Financial Year 2026 Analyst Briefing. My name is Faizan from the Investor Relations team, and I will be your emcee for today's session. We are pleased to have with us today, Encik Zahid Osman, President and CEO; Encik Raja Azlan, Chief Strategy and Sustainability Officer; and Encik Afendy Ali, Chief Financial Officer; and then Encik [ Adam Faizan ], Head, Strategy and Investor Relations. Before we begin, may I kindly draw your attention to the disclaimer statement in the presentation deck. Today's presentation may contain forward-looking statements relating to the group's future plans, expectations and outlook. Actual results may differ due to risks, uncertainties and other factors beyond MISC's control. With that, I would now like to invite Encik Zahid Osman, our President and Group CEO, to deliver his opening remarks and share the key highlights for the quarter.

Thanks, Faizan. [Foreign Language] and a very good afternoon to everyone. Thank you for making time to join our analyst briefing this afternoon for our quarter 1 2026 results. I will take you through in terms of our performance and some of the development that took place within the quarter. And then we will take you the financial performance in detail, and then Raja Azlan will conclude on the market environment and outlook, and then we will have a Q&A session. Before I go to the highlights, I think it's -- let me just briefly mention to you about the status of our vessel that is affected by the current conflict in Middle East. I think in the recent Annual General Meeting, I highlighted that we still have vessels currently so far inside the Strait of Hormuz so far, just to let you know, two of our vessels, Mihzem, the LNG vessels as well as Eagle Verona, have simply exited the Strait of Hormuz, and they are either on the way to the discharge port or on the way to pick up another cargo outside the Strait of Hormuz. What's remained is only one more vessel, which is Eagle Veracruz, and we are making every effort to take the vessel out safely. I think throughout this period when the conflict started, our priorities remain unchanged. First is about protecting the safety and well-being of our people; and second, ensuring they are safe at home. I would like to encourage -- I would like to recognize our crew, both onshore and offshore, the one on board as well for their professionalism, discipline and resilience throughout this period. Very, very, very -- I'm very happy to note that the crew on board, they are certainly maintain their professionalism and dedication to ensure the safe operation of the vessels. And we -- from the office and the onshore team, we are doing everything possible to ensure that they get all the support that they need. So hopefully, we will be able to take the last vessel up from the Strait of Hormuz safely and she can move to her discharge port accordingly. So let's talk about our quarter 1 financial performance. We had a strong quarter. And certainly, we are making a good start to 2026. So despite the continued geopolitical development and market volatility, the group delivered a resilient operational and financial performance. Revenue increased by 15% year-on-year. Our profit after tax improved by 18% year-on-year and operating cash flow strengthened significantly, increased 78% year-on-year. This performance was mainly driven by stronger contribution from the Petroleum segment, supported by improved freight rates and higher earning days. I'm sure later on, Afendy will take you through on some of the details, especially by segment. So on the overall impact to the business with regards to the current conflict in Middle East or the closure or the restriction on the Strait of Hormuz, the impact is manageable. I think this is -- and we are able to still deliver this kind of performance in quarter 1 2026. It reflects the resilience of our business model. Our earnings exposure certainly -- exposure remains limited. All our profitability cash flow is supported by long-term charters with strong counterparties. Additional operating costs, including insurance, war premiums are generally recoverable from the contracts. Reflecting our confidence in the strength of the business and sustainability of our cash generation, the Board declared a first interim dividend of $0.08 per share, consistent as the same quarter in 2025. This reflects the sustainability of our cash generation business model and our continued confidence in the resilience of the business that enable reinvestment for growth and commitments towards delivering shareholders' return. Talking about shareholders' return, our total shareholder return, or TSR, remains strong. As at 9th May 2026, we delivered 17% TSR over the past 12 months. Go to next slide please. Building on the momentum established in 2025, we continued delivering measurable progress across the three strategic pillars under our MISC 2030 ambitions. So under our resilient core, we remain focused on strengthening earnings visibility, improving portfolio resilience through disciplined execution and expanding growth through contracted cash flow. During the quarter, under asset deliveries, 1 LNG carrier was successfully delivered to QatarEnergy under the consortium partnership arrangement. This certainly strengthened our long-term earnings visibility for our gas segment. Next is on our growth milestones. In gas, we secured long-term charter contract with PETRONAS LNG for 5 LNG carriers. And not too long ago, around April, we also received a letter of award from PETRONAS Gas for a new floating storage and regasification unit, or FSRU. In the offshore business, we entered into a long-term double charter and O&M arrangement with ExxonMobil for a new FSO in Papua New Guinea. In Heavy Engineering, our subsidiary, MHB, secured EPC contract with PTTEP for a marginal fuel development platform project. On existing contract, we have secured contract extension for FPSO Ruby II with PetroVietnam. And collectively, if you -- all the business success, new contract that we have secured during quarter 1 this year will strengthen the quality of our portfolio, improve earnings visibility and reinforce our future cash flow resilience. Under our new energy, we continue progressing our entry into selected emerging energy value chain with discipline and commercial focus. I think during the quarter, we secured a long-term charter for liquefied CO2 carrier for the Northern Light project together with our partner, K Line in the petroleum business, I mean, we secured a long-term charter for dual fuel ethanol electric energy storage system. These are measured steps and building future-ready capabilities while maintaining capital discipline and long-term earnings visibility. On decarbonization, I'm pleased to share that our greenhouse gas emission intensity was 8% lower year-on-year compared to the corresponding period last year. This reflects our continued focus to modernization, operational efficiency, improvement and discipline in our operational execution. So overall, I mean, the quarter reflects continued discipline in execution across the business. We strengthened our resilient core business to generate secure and recurring cash flow. We advanced selective future growth opportunities, and we continue to position MISC to remain competitive in a changing energy landscape. With our new sustainability strategy for 2020 to 2030 period, which is anchored on the 3 Is, impact, inclusion and integrity, we, in MISC, remain committed to delivering sustainable and responsible growth. Next slide. Our continued focus on operational excellence, industry leadership and disciplined execution continue to receive positive recognition during the quarter. I am pleased to share that MISC received the Industry Excellence Award under the transportation and logistics category and was also recognized under the Malaysian Top 20 overall Excellence Award. It is certainly an improvement from the previous year. In addition, the group received an exceptional award for Marine services at the Prime Minister Award 2024 and 2025 period, reflecting our continued commitment towards sustainability, operational excellence and responsible business practices. These recognitions reflect the dedication of our people and reinforce stakeholders' confidence in MISC's ability to deliver safe, reliable and sustainable performance. In closing, we entered 2026 with a strong momentum across the group. The strong quarter 1 performance delivered reflects a resilient execution despite continuing market uncertainty and geopolitical development. Our focus for 2026 remains clear: To strengthen our resilient core business; advancing selective new energy opportunities; and position the group for long-term sustainable growth and shareholder value creation. With that, I will now hand over to Afendy and Raja Azlan to take you through the financial performance and market environment in greater details. Thank you.

Thank you, Encik Zahid. [Foreign Language], and good evening, ladies and gentlemen. Thank you for joining us today. Let me begin with the sharing of MISC Group performance for the first quarter of 2026. Overall, the group delivered a resilient first quarter anchored by strong contributions from the Petroleum segment with robust cash generation and a marked rebound in profitability from the preceding quarter. Our group revenue stood at USD 729 million, recording a growth of 15% year-on-year and 8% quarter-on-quarter, driven by stronger petroleum freight rates and higher earning days. Tanker rates surged in March following disruption to the Strait of Hormuz for [ 13 days ] notably for VLCC and the midsized tankers. This [indiscernible] strength was further amplified by the higher spot trading in [indiscernible] 2026, positioning the fleet to capture the favorable market condition. Group operating profit of USD 193 million remained stable year-on-year as the strong petroleum uplift was offset by softer gas contributions, operational shutdown of FPSO in the offshore segment and the absence of the gain on unwinding of interest rate swap recognized in quarter 1 2025. Against the preceding quarter, operating profit rose by 55% driven by the non-recurrence of one-off items in quarter 4 2025. Profit after tax recorded at USD 189 million, marking a strong rebound from USD 5 million in quarter 4 2025 and 18% higher year-on-year. The uplift was supported by the gain on disposal of vessels, partially offset by the absence of the gain on acquisition of FPSO [indiscernible] recognized in quarter 2025 with quarter-on-quarter recovery was anchored by the stronger operating profit, higher gains on vessel disposals and lower vessels repairments. Our group also delivered cash flow from operations of USD 310 million in quarter 1 2026, reflecting a strong USD 126 million uplift year-on-year from USD 171 million in quarter 1 2025. The growth was primarily by stronger collections in the Petroleum segment, reflecting the segment's robust revenue performance and the strength of its operational cash generation. Against the preceding quarter, the cash flow from operations moderated by USD 143 million from USD 453 million in quarter 4 2025, reflecting higher vessel operating costs in the Petroleum segment, in line with the spot trading to capture favorable market condition as well as the [indiscernible] insurance recovery received in quarter 4 2025 in our offshore segment relating to [indiscernible]. Overall, operating cash flow generation remains robust underpinned by disciplined [indiscernible] and resilient operating performances across our core segments. Next slide please. The group balance sheet remains stable and resilient, underpinned by prudent risk management and a strong liquidity profile. Total assets stood at USD 13.5 billion as at March by close to USD 400 million from December 2025, primarily driven by a stronger cash position. Our gross [ revenue ] went up to 0.4x from 0.37x in December 2025, reflecting higher drawdown of loans during the quarter, while the net gearing improved to 0.19x from 0.2x underpinned by our strong cash position and a testament of the group disciplined liquidity management. In terms of debt composition, our mix shifted modestly to 87% fixed and 30% floating as at March 2026 from 94% fixed and 6% floating in December '25 following higher drawdown of floating rate facilities during the quarter. Overall, our gearing ratios remain well within the threshold, liquidity remains healthy, and the group is well positioned to support ongoing capital commitments and other growth initiatives while preserving balance sheet strength. [indiscernible] on the previous slide, the group ended the quarter with cash and stable debt position, reinforcing our financial resilience and capacity to support strategic growth. The group cash balance strengthened to USD 1.8 billion as at March 2026, up from USD 1.5 billion as at December 2025. This close to USD 300 million uplift was supported by net cash generated from operations net drawdown of borrowings partially offset by capital expenditure payments during the quarter. Total borrowings stood at USD 3.4 billion as at March 2026, modestly higher by USD 229 million from USD 3.2 billion as at December 2025 as additional drawdowns were undertaken to support operational requirements [indiscernible] scheduled during the quarter. Overall, [indiscernible] structure remains disciplined and well positioned with our liquidity headroom comfortably reserved to fund ongoing capital commitment, sustain share returns and capital and capture strategic opportunities across our core business segment. So let me now walk you through the overview of each of the business segment, starting with gas. Gas recorded revenue of USD 99 million in quarter 1 '26, broadly comparable against the preceding quarter, but 31% lower than the first quarter of 2025. The year-on-year decline reflects the segment's ongoing fleet rejuvenation transition as we progressively fixing steam comparables in favor of modern and more efficient fleet anchored by long-term [ chapters ], which result in lower earning days arising from contract expiries, vessel disposals and layups. The movement was further shift by the absence of contract revenue from the FSU conversion following the project completion in quarter 3 2025, alongside lower charter rates. Not with standing this transition, this segment maintained 100% term-to-spot ratio, underscoring sustained earnings stability and the resilience of our long-term contracted income basis. Despite revenue being comparable quarter-on-quarter, operating profit rose to USD 54 million, supported by the non-recurrence of one-off factor in quarter 4 2025, [indiscernible] write-off and the onerous contract provision. [indiscernible] quarter 1 2025, operating profit was USD 14 million lower, reflecting reduced revenue contribution, partially cushioned by lower vessel operating costs and disposals, lower depreciation following 2025 impairment and the absence of FSU conversion cost. Profit after tax of USD 33 million marked a strong turnaround from loss after tax of USD 96 million in quarter 4 2025, mainly driven by lower vessel impairment by USD 70 million on which the preceding quarter impairment are largely related to Seri Balhaf and Seri Balqis. For [indiscernible] quarter 1 2025, profit after tax declined by [ 14 million ] in line with operating profit, partially offset by gain-on-vessel disposal which moderated the higher recognition of [indiscernible] in the current quarter. Now turning to the [indiscernible] for this quarter is the revenue of USD 382 million, marking a [ 36% and 18% ] increase against corresponding quarter and preceding quarter, respectively, anchored by the surge in tanker rates and higher earning base. This segment continuously delivered resilient performance while maintaining a spot ratio of approximately 65-35, providing earnings stability while positioning the fleet to capture upside from the favorable spot market conditions. Operating profit of USD 109 million was higher by 31% year-on-year and 16% quarter-on-quarter, [indiscernible] in tandem with stronger revenue, partially offset by higher vessel operating costs as the spot revenue rose and non-recurrence of gain on unwinding of interest rate swap recognized in quarter 1 2025. Profit after tax was further uplifted by the gain on vessel disposal which has benefited the current quarter and subsequently delivering an uplift of 3% against quarter 1 2025 and 59% against quarter 4 '25. Our offshore segment, the revenue for the first quarter of '26 stood at USD 107 million, down by 7% year-on-year and 9% quarter-on-quarter reflecting the non-recurrence of reimbursable revenue of FPSO [indiscernible] recognized in quarter 2025 and the absence of maintenance bonus recorded in quarter 4 2025. Operating profit of USD 49 million was 16% lower year-on-year primarily due to the operational shutdown of FPSO Kikeh, which I mentioned earlier since quarter 4 last year. However, against the preceding quarter, the operating profit was USD 6 million higher driven by the non-recurrence of [indiscernible] receivables in quarter 4 2025, partially offset by the absence of insurance recovery of FSO Benchamas 2. Profit after tax of USD 9 million was USD 28 million lower year-on-year, reflecting the low operating profit and the absence of the gain on acquisition of FPSO Kikeh in quarter 1 2025. Against quarter 4 2025, profit after tax was broadly in line with the high operating profit. Overall, FPSO Marechal Duque de Caxias remain key contributer to segment earnings underpinned by production above nameplate capacity, lower operational downtime and improved charter revenue. Our Heavy Engineering segment revenue of USD 132 million, increase of 30% a year driven by the advancements of activities partially offset by lower contributions from projects. Against quarter 4 2025, revenue moderated by [ 5%, ] reflecting lower marine subsegment activities, the tapering of projects approaching tail end. Operating profit was broadly comparable against quarter 1 2025, but 62% lower against quarter 4 2025, mainly due to the reduced contribution from Marine segment and favorable project closeout that uplifted in the preceding quarter. Profit after tax also moved in line with operating profit remaining broadly stable year-on-year and lower quarter-on-quarter. That concludes my sharing of the group financial performance. I will now hand the floor to Encik Raja Azlan for the presentation on market.

Thank you for walking us through financial performance. I will now take us through the market environment. In early March, as you know, the escalation of the Middle East war led to a closure instructions of the Strait of Hormuz. This is a critical global chokepoint, carrying about 20% for oil and gas supply. A large portion of these volumes are headed into Asia, 80% of the flows from the region are Asia-bound, particularly to China and Japan as well as South Korea. When the Strait was closed, this led to an immediate supply shock with oil and gas prices spiking sharply. Key Asian buyers moved quickly to secure cargoes and drew down strategic reserves, replaced -- they also replaced the disruptive volumes with oil from the U.S., Russia and West Africa and LNG from the U.S. and Australia. Currently now, we are seeing oil and gas flows resume and rerouting taking place, which has helped the immediate pressure. Overall, the market has moved from an initial shock phase to a more manageable but still uncertain environment. On the LNG front, global demand growth in 2026 is expected to be muted due to the elevated LNG prices driven by the supply disruptions amid the geopolitical tensions in the Middle East. At the same time, global energy supply growth is also expected to slow with several large-scale projects, including the QatarEnergy North Field expansion having been deferred to next year. Although near-term supply growth will be constrained by the ongoing geopolitical disruptions, global liquefaction capacity is still projected to expand at an estimated 11% CAGR through to 2031. And this growth will be primarily supported by new capacity additions mainly from the U.S.A. alongside emerging exporters such as Canada and [indiscernible]. However, prevailing uncertainties could continue to impact project development time lines. The supply and demand conditions are expected to improve from 2027 onwards. LNG trade is expected to regain momentum with LNG prices likely to ease from 2028 to 2029. Shifting towards the LNG carrier market. Fleet expansion, vessel replacement and evolving regulatory requirements continue to shape industry dynamics. In the first quarter of 2026, the LNGC market is supported by a healthy order book to fleet ratio, which is rising slightly to 41%. In 2025, it was about 40% following a recovery in new orders. New orders in 2026 is expected to be concentrated on modern and fuel-efficient LNG carriers as owners continue to future-proof their fleets in ongoing regulatory uncertainty. Vessel deliveries are expected to remain high through 2025 to 2031 with the global LNGC fleet projected to grow at a CAGR of 7%. At the same time, we see scrapping of older steam turbine LNGCs has accelerated as these vessels have become structurally uncompetitive due to poor fuel efficiency and increasing stringent emission requirements, which have significantly impacted charter demand. While the disruptions in the Strait of Hormuz could result in delivery slippage, it is not expected to have any material near-term impact on LNGC fleet development. For MISC, there's currently no material impact on project execution or delivery time lines across our project portfolio. All new build LNGCs scheduled for delivery in 2026 remain on track, and we will continue to actively engage shipyards and stakeholders to monitor the progress and mitigate any emerging risks. Next slide, please. Moving on to LNG charter LNGC charter rates. Spot rates increased sharply in March 2026, particularly for modern vessels driven by the heightened geopolitical tensions in the Middle East. The spot charter rates moderated in April 2026 with the long-term charter rates strengthening towards the month end. Shifts in the LNG trade flows, particularly increased Atlantic to Asia shipments helped to offset the loss of ton-mile demand arising from the disruptions in the Strait of Hormuz while providing underlying support to charter rates. Looking ahead, LNGC charter rates are expected to remain elevated in 2026 compared with pre-Middle East conflict levels, particularly for modern vessels. In contrast, steam turbine vessels are expected to continue facing challenges as the industry continues its shift toward more efficient and lower emission vessels. Against this backdrop, we remain focused in executing our resilient core strategy by rejuvenating our fleet with modern fuel-efficient vessels secured with long-term charters. By 2030, our gas segment is expected to deliver an additional 19 new modern and efficient vessels, which will lift the proportion of next-generation vessels in our fleet to approximately 80% from the current 45% level. Turning to the petroleum shipping. Strong vessel ordering activity combined with limited scrapping continues to support fleet growth outlook for 2026. In the first quarter of 2026, the crude tanker order book expanded further driven by robust new orders. This led the order book to fleet ratio to 23%, up from 18% in 2025. Fleet additions have started accelerating with 27 vessels delivered in the first quarter of '26 compared with 33 vessels delivered in the entirety of 2025. A further 63 vessels are scheduled for delivery over the remainder of 2026. Demolition activity remained low in the first quarter of 2026 with just three vessels scrapped. A further 12 vessels are expected to be scrapped over the remainder of the year. Looking further ahead, approximately 600 new crude tankers are expected to be delivered between 2026 and 2031 with approximately 450 demolitions. Deliveries are expected to accelerate and peak in 2027, '28 as the bulk of the Suezmax and VLCC orders placed over the past 2 to 3 years enter the fleet. Global oil markets are expected to remain volatile in 2026. Demand is projected to soften, particularly in Asia as high prices and supply shortages weigh on outlook. At the same time, global supply is also forecasted to decline, driven by a sharp drop in Middle Eastern production. Amid heightened geopolitical tensions in the Middle East, petroleum shipping spot charter rates surged in March 2026, while rates have eased gradually. They remain elevated year-on-year, supported by long-haul U.S. to Asia trade flows. The crude tanker market is expected to remain broadly stable throughout the year, supported by sustained ton-mile demand arising from shifting global oil trade flows. However, market uncertainty remains elevated with charter rate trajectories dependent on the duration and evolution of the disruption of the Strait of Hormuz. Our Petroleum Products segment continues to demonstrate resilience, supported by a solid base of secured and recurring income complemented by proactive fleet deployment to maximize profitability. In parallel, we are rejuvenating our petroleum fleet with five dual fuel new builds in the pipeline to be delivered by 2028, 2029. Moving to offshore. Upstream capital spending is expected to grow steadily, reaching $218 billion by 2030, surpassing the levels seen in the [ mid-200s. ] This reflects a positive industry outlook underpinned by rising energy demand and continued investments in offshore development. The demand for floating production systems, particularly for FPSOs, is expected to remain strong. Around 12 FPSOs projects are expected to be awarded in 2026. The estimated total CapEx for FPSO units between 2026 and 2030 is close to $80 billion, of which approximately 90% of the new projects are concentrated in Latin America, Asia Pac as well as Africa. MISC is well positioned to capitalize on this FPSO up cycle in these targeted regions while managing affordability and risk through strategic partnerships as well as balanced contract structures with LNO, BOT or EPC and O&M. With that, I end my presentation, and thank you. And back to you, Faizan.

Thank you, Zahid, Afendy and Raja Azlan. We will now move into the question and answer session. [Operator Instructions] We will now take the first question. First, we have a question from Hazmy.

Hazmy from CLSA. I think just a couple of questions from my side. I'll start off just on the Petroleum segment. May I know how much of the war driven really in terms of the tanker rates was recognized during the quarter? Because I was aware that because during the presentation also, you mentioned a big jump of it was reflected in March. So I'm just curious how much of that spike was realized by your spot exposure to the tanker rates. And I just wanted to think how should we think about momentum going into second quarter, whether this first quarter results will be just a one-off kind of strength or it will be stronger compared to first quarter for the second quarter?

Just one question or you have a second question?

Yes. I think just go into the LNG as well. My question is on the LNG side. So for the LNG one, I saw in your industry newsletter also during March that even the spot rates for steam jumped quite huge from, I think, USD 3,000 to USD 41,000. Did MISC manage to capture that rate? And also, in terms of the new delivery of vessels from QatarEnergy this year, sort of progress? And when can we expect sort of earnings contribution? That's all for me for now.

Okay. Thanks, Hazmy. Let me just try to answer your first part of the question, which is related to petroleum. I think if you recall, the market for petroleum in terms of charter rates has been quite bullish since end of last year, just to reflect the sentiment at that time with regards to -- and then when the conflict happened in the Strait of Hormuz of, I think those sentiment continue for a variety of reasons with regards to the charters is trying to secure tonnage to ensure adequate supply so that they can pick up negative allocation. So I think for petroleum, I think if you recall even from last year, we have seen this elevated charter rates because of the market situation. So that's the first part. And for us, having that ability because we do have some of our petroleum tankers are exposed to the spot market, I think that allow us to capture some of the upside. I think that's the first part. On the LNG side, I don't think we have gained anything from the elevated LNG tankers because majority of our LNG is on term charters. And the one that is not on term charters, they are currently being laid up because they are not competitive or not efficient in the spot market. I think that's how we see both segment of the business, petroleum and LNG.

There was you had a question on the delivery of the vessels. We have seven deliveries slated for this year, another four in 2027. And then in terms of the five additional vessels that was signed with PETRONAS, those will be delivered in 2029, 2030.

I think just a clarification on the first part of the question. Just trying to understand in terms of timing of the spot sort of like exposure that MISC has. So just to clarify the spike for the crude tanker rates, has it already been reflected fully? Or will we see sort of, like, the benefit of the elevated spike rates into second quarter as well?

I think based on what we have seen in terms of the market projection, we do anticipate the current heightened rates will continue at least for the second quarter. But then it will be moderated for the second half of the year. This is mainly because, I think, all the players, the traders have factored in the impact of the current situation into the charter rates or even the oil price. And what we expect or at least what people are -- I mean, the news has reported, the deal between the U.S. and the Iran certainly provide a lot of incumbents in the market because the indication is that we are close to an agreement.

Next, we have a question from Raymond.

My name is Raymond from CGS International. So I have a couple of numbers questions for Afendy. In terms of the Bossa report, I can see that there are proceeds from disposal of vessels amounting to MYR 515 million and gain on disposal of vessels amounting to MYR 155 million. Afendy, is it possible that you split for me these two numbers by LNG and by the Petroleum segment, please? And I'd also like to ask about the impairment of MYR 56 million. Is that entirely due to the LNG segment and which ships on the LNG segment? Okay. That's it.

Thanks for the question. While Afendy is trying to speak the first part of the question, maybe you can answer the impairment first?

Yes. I think your question is on the impairment is $40 million. It's mainly the [indiscernible] Raymond, right? And then for the profit on the disposal is mainly relating to the disposal of the [indiscernible] which is quarter 1 this year. The [indiscernible] gain on disposal of our three LNG vessels, but primarily the gain on disposal is in respect of the Eagle Varna disposal.

Okay. You're talking about Eagle Vancouver, is it?

Eagle Varna.

Eagle Varna. Okay. So I think the trade press must have reported it wrongly then. Okay. It's Eagle Varna rather than Eagle Vancouver. And it was reported in the trade press that was sold for USD 86.5 million. Would that be roughly accurate?

Yes, approximately, yes [indiscernible]. Correct.

Okay. And how about those three LNG vessels that you scrapped was reported, it was scrapped the Puteri Zamrud Satu, Puteri Firus Satu and Puteri Mutiara Satu?

Correct.

Okay. Okay. Was it scrapped for around $11 million each? Okay. So the remainder of the disposal proceeds will be attributed to the -- so the Eagle Varna was disposed for USD 86.5 million. So can I take it that the remainder of the proceeds from disposal actually comes from the scrapping of the three LNG vessels?

You're right.

Okay. Sure. So then one more question for Encik Zahid on the direction of the tanker freight rates. So the tanker freight rates did extremely well in the immediate aftermath of the U.S. attack on Iran. And then subsequently, it has corrected significantly. And I think the rate -- the spot rates as it stands as of end of last week is actually quite similar to the levels that we saw in January last year -- sorry, in January this year. So the pre-war situation has sort of reverted, and the gains that we saw from the spike in the spot rates have evaporated so far. So now that the -- if the Strait of Hormuz is going to be reopened, I'd like to ask Encik Zahid whether he expects that the tanker rates will recover only because of the flow of oil coming out from the Middle East that could generate more demand for tanker shipping?

Raymond, I think our expectation at the moment, and that's what we have in our project going forward. I think the market expected the deal to be done between the U.S. and Iran. And because of that, the Strait of Hormuz will be reopened. The question is that is there any condition going to be attached to the reopening of the Strait of Hormuz. We do not know. So I think that's number one. The second item worth to note is that, at the moment, the market has factored in all this about this additional flow of petroleum will come from that part of the world. And because of that, we do anticipate that in addition to higher demand or more demand for tankers, there will be more supply coming into the market from the tanker. So I think on balance, we do anticipate the rates will moderate and come down to close to before the COVID period, at least that's what we believe now.

Okay. So it has already come down to the level pre-war. So maybe -- so basically, you expect the rates to remain roughly at the same level or roughly on average, roughly at the current level for the rest of the year?

Yes, that is correct. But one of the things that I think worth to note is that the lightering business, the STS business in the Gulf of Mexico, I think is relatively still very attractive because of a lot of suppliers is looking for alternative supply from the Middle East. So there's a lot of production coming out from the U.S. And because of that, there's a lot of demand for the SPS services [indiscernible] for us as well.

Yes. So this reverse lightering, which we also do in addition to the normal lightering, right?

That's correct.

Next, we have a question from Jeremie.

Just I have three questions, if you don't mind. So the first one is regarding your downtime on FPSO Kikeh. Was it scheduled or was it unplanned downtime? So that's the first. And second is, I think, yesterday, PETRONAS, I think, there was a news regarding your FSO Sepat and there was [indiscernible]. Can you give us a bit more color to this and maybe tell us about how it happened? And was it a third-party service provider? And maybe the third one is for -- I think you guys are embarking on three heavy CapEx up cycle. So you guys are building FSO PNG LNG, FPSO Kelidang and FSRU for gas. So I think my question is does MISC still have the appetite to bid for new large floating projects or you guys will be focused on the execution and delivery of the existing ones? That is all for me.

Okay. Thanks, Jeremie, for the question. Let me try to take them one by one. On the Kikeh downtime, this is related to the issue that we had since last year where we had an unexpected incident in the Palbok. Because of that, the whole facility is currently down, and we are doing the safety checks as well as integrity enhancement to the facility. So it has been down since around October last year. And we do expect based on the current plan that the whole upgrade or the rectification will take place in the second half of this year. That's on Kikeh. On FPSO Sepat, I mean it's not our FPSO. The FPSO belong to PETRONAS and is a third-party operated FPSO. So very difficult for us to comment on that one. We've also seen the unfortunate incident to the news and we certainly feel very sad to the victim as well as to the family. On CapEx, okay, this is a very interesting question is we are currently having a very heavy growth so called activities FPSO as well as shipping and including FSRU. We still have appetite to grow, and -- but our appetite will certainly take into account our affordability and our capacity to raise money through the financing. So we are going to be selective, especially on the new energy opportunities, the one that is within our focus areas, we certainly want to look at it. For example, liquefied CO2 carrier, we have won one, and we certainly want to grow in this aspect.

Yes. Okay. Because I was asking because I think just now you showed a slide that you guys are expecting an FPSO up cycle. So I was thinking maybe you guys will be embarking on that journey basically to [indiscernible]

Yes, we have certainly been interested for further growth in FPSO, but we've also been mindful that we currently already have quite a number of FPSO in our execution stage. So we're going to be selective. That's what I'm saying.

Okay. Maybe one final one, just a follow-up. I think a long time ago, you guys were guiding for a partial stake sale of your Mero-3. Is this still happening or you guys have rushed this holding aside?