Scomi Energy Services Bhd (formerly known as Scomi Marine … CMYK Scomi 23.08.13 1533_Scomi ARCover 22cm (w) x 28cm (h) R4 Annual Report_Cover3 1533-03/13 foon/jeann Scomi Energy

CMYK

Scomi

23.08.13

1533_Scomi ARCover

22cm (w) x 28cm (h)

R4

Annual Report_Cover3

1533-03/13

foon/jeann

Scomi Energy Services Bhd(formerly known as Scomi Marine Bhd)

Scomi Energy Services B

hd (397979-A

) An

nu

al Rep

ort 2013

Scomi Energy Services Bhd (397979-A) (formerly known as Scomi Marine Bhd)

Level 17, 1 First Avenue

Bandar Utama

47800 Petaling Jaya

Selangor Darul Ehsan

Malaysia

Telephone +603 7717 3000

Facsimile +603 7725 9028

www.scomienergy.com.my

AnnualReport2013

REALISING POTENTIAL,

CREATING VALUE

Scomi is all about realising potential. In this annual report, we seek to bring Scomi’s promise to life by using paper art, where a simple sheet of paper is re-imagined into complex three dimensional forms. Much like how Scomi leverages upon the simplest opportunity to create value, this demonstrates how creativity and vision can transform something as basic as paper into an object of beauty.

CONTENTS

Key Financial Indicators P02

Key Financial Highlights P03 Scomi Energy Services Corporate Structure P04

Corporate Statement P08

Corporate Information P09

Profile of Directors P10

Management Team P16

Chairman’s Statement P18

Management Review of Operations P24

Corporate Social Responsibility P32

Human Capital Development P35

Statement on Corporate Governance P39

Statement on Risk Management and Internal Control P49

Audit and Risk Management Committee Report P55

Additional Information P60

Statement on Directors’ Responsibility P62

Financial Statements P66

Analysis of Shareholdings P177

List of Properties P180

Corporate Directory P182

Notice of Annual General Meeting P184

Notice of Nomination P187

Form of Proxy P189

P/02 SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013KEY FINANCIAL INDICATORS

Key FinancialIndicators

15 months 12 months 2013 2011 RM’000 RM’000 Revenue 1,471,693 1,258,185 EBITDA 258,413 54,316 Depreciation (89,055) (97,236) Finance Costs (41,356) (42,892) Share of profit in associated companies 133 (2,978) Share of profit from joint-ventures 6,568 4,140 Profit before tax (“PBT”) 134,703 (84,650) Taxation (37,611) (35,383) Profit after tax (PAT) 97,092 (120,033) Non-controlling interest (6,996) 3,557 PAT after non-controlling interest 90,096 (116,476) Number of shares assumed in issue (‘000)# 2,341,630 2,341,632 Weighted average number of shares used to compute diluted earnings per share (‘000)# 2,341,630 2,341,632 Basic and diluted - Net EPS (sen) 3.85 (4.97)

NOTE

#

As the Group applies predecessor accounting, the number of shares as of the merger date less any treasury shares are to be reflected throughout the current and previous financial period for the purposes of calculating the basic and diluted earnings per share.

SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013P/03KEY FINANCIAL HIGHLIGHTS

Key FinancialHighlights

Profit / (Loss) before Tax (RM Million)

Profit / (Loss) after Tax after Minority Interests (RM Million)

Revenue (RM Million) Total Assets (RM Million) 15 months 2013

RM1,491.112 months 2011 : RM1,562.6

Earning per Share (basic)15 months 2013

3.85sen12 months 2011 : (4.97)sen

Net Tangible Assets(RM Million)15 months 2013

RM450.712 months 2011 : RM508.0

Shareholders’ Fund (RM Million)15 months 2013

RM564.712 months 2011 : RM616.7

Net Assets Per Share (Attributable to equity holders of the parent)15 months 2013

24.1sen12 months 2011 : 26.3sen

15 months2013

1,471.7

15 months2013

134.7

15 months2013 90.1

12 months2011

1,258.2

12 months2011

(84.7)

12 months2011

(116.5)

P/04 SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013

SINGAPORE

Rig Tenders OffshorePte Ltd

SINGAPORE

Rig TendersMarine Pte Ltd

SINGAPORE

CH Ship ManagementPte Ltd

SINGAPORE

Grundtvig Marine Pte Ltd

SINGAPORE

CH Logistics Pte Ltd

L ABUAN

Transenergy Shipping Pte Ltd

Scomi Energy Services Bhd1*

95%

50%

SCOMI ENERGY SERVICES CORPORATE STRUCTURE AS AT 31 JULY 2013

AUSTR ALIA

Scomi Oiltools Pty Ltd

THAIL AND

Scomi Oiltools (Thailand) Ltd4

NE THERL ANDS

KMC Oiltools BV

Scomi OiltoolsSdn Bhd

TEXAS, USA

Scomi Equipment Inc

SINGAPORE

Scomi Oiltools (S) Pte Ltd

INDONESIA

PT ScomiOiltools

INDONESIA

PT Inti Jatam Pura

RUSSIA

Scomi Oiltools (RUS) LLC

INDIA

KMC OiltoolsIndia Pte Ltd5

INDONESIA

PT Multi Jaya Persada

Trans Advantage Sdn Bhd

SINGAPORE

Scomi Marine Services Pte Ltd

Scomi KMC Sdn Bhd

FR ANCE

Scomi Anticor S.A.S3

SINGAPORE

Sea MasterPte Ltd

INDONESIA

PT Batuah Abadi Lines

BRUNEI

Scomi (B) Sdn Bhd

50%

70%

95%

51%

21.08% 4%

48%

L ABUAN

Marineco Limited

VIE TNAM

Southern Petroleum Transportation Joint Stock Company

Scomi Sosma Sdn BhdSINGAPORE

Goldship Pte Ltd

INDONESIA

PT Rig Tenders Indonesia Tbk2

King Bridge Enterprises Limited (BVI)

80.54%

49%

95%95%

SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013P/05

Gemini Sprint Sdn Bhd

Emerald LogisticsSdn Bhd

49%

51%

50%

KEY * Formerly known as Scomi Marine Bhd.1 Listed on the Bursa Malaysia Securities Berhad (Kuala Lumpur Stock Exchange).2 Listed on the Jakarta Stock Exchange.3 Includes 1 preferential share each held by 2 different individual.4 Includes 1 Class A share each held by Scomi Oiltools Ltd and Scomi Oiltools (Cayman) Ltd.5 Includes 1 share held by Somi Oiltools Ltd.

NOTES

• Except as otherwise expressly stated, all companies in this corporate structure are incorporated in Malaysia.• Except as otherwise expressly stated, all companies in this corporate structure are wholly owned by their respective holding companies.

SCOMI ENERGY SERVICES CORPORATE STRUCTURE AS AT 31 JULY 2013

BERMUDA Scomi Oilfield Limited

C AYMAN ISL ANDS

Scomi Oiltools Ltd

C AYMAN ISL ANDS

Scomi Oiltools (Cayman) Ltd

ENGL AND & WALES

Vibratherm Limited

KMCOB Capital Berhad

OMAN

Scomi OiltoolsOman LLC

C AYMAN ISL ANDS

Scomi Oiltools (Africa) Limited

NIGERIA

Wasco Oil Service Company Nigeria Limited

GABON

Oiltools Gabon SA

96%60%

Transforming a

simple commodity

into something

of global value.

A GLOBE

Using imagination, even a simple piece of paper has the

potential to become an object of greater value. In paper art,

Scomi sees its own credo to realise potential.


With a presence in 44 locations across 23 countries, the Scomi Energy Services group of companies is a global technology enterprise in the energy and logistics industries.

We are a global technology enterprise.Our global reach, capabilities and talent provide us with the necessary resources to develop and own new technology in all areas of our business.

We focus on Energy & Logistics. All of our businesses are focused on the Energy and/or Logistics sectors with the ability to compete globally. All of us in the Scomi family should remember that any new initiatives we undertake will focus on these areas of business.

We provide innovative solutions. We innovate to respond to an evolving environment. Our products and operations meet today’s needs while anticipating tomorrow’s. We are committed to developing competitive and innovative solutions to create efficiency, add value and grow with our customers to shape our future.

We aim to realise potential for our stakeholders.

Our customers: We will develop and offer customers innovative and competitive products and services that help them grow their business.

Our shareholders: We are committed to providing long-term superior returns to our shareholders.

Our people: We aim to provide our employees with developmental opportunities so they can succeed on personal and professional levels.

Our suppliers: We will treat our suppliers as our partners in the mutual interest of business growth.

Our society / environment: As a good corporate citizen, we will give back to the communities we operate in worldwide.

CORPORATE STATEMENT

SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013P/09CORPORATE INFORMATION

Directors

Tan Sri Nik Mohamed bin Nik Yaacob (Chairman)Dato’ Meer Sadik bin Habib MohamedMok Yuen LokLiew WillipLee Chun FaiShah Hakim @ Shahzanim bin ZainLoong Chun Nee (Alternate to Shah Hakim @ Shahzanim bin Zain)

Audit and Risk Management Committee

Mok Yuen Lok (Chairman)Dato’ Meer Sadik bin Habib MohamedLee Chun Fai

Nomination and Remuneration CommitteeTan Sri Nik Mohamed bin Nik Yaacob (Chairman)Mok Yuen LokLiew Willip

Registered Office

Level 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, Malaysia

Administrative and Correspondence Address

Level 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaTel: +603 7717 3000Fax: +603 7725 9082Email: [email protected]: www.scomienergy.com.my

Registrar

Symphony Share Registrars Sdn BhdSymphony House, Block D13Pusat Dagangan Dana 1Selangor Darul Ehsan, MalaysiaTel: +603 7841 8000Fax: +603 7841 8151/8152

Company Secretary

Chong Mei Yan (MAICSA 7047707)Ong Wei Leng (MAICSA 7053539)

Auditors

PricewaterhouseCoopers (AF: 1146)Chartered AccountantsLevel 10, 1 SentralJalan Travers, Kuala Lumpur SentralPO Box 10192, 50706 Kuala LumpurMalaysia

Principal Bankers

CIMB Bank BerhadLot 27, 29, 31 Jalan 52/2Seksyen 5246200 Petaling JayaSelangor

Malayan Banking BerhadLot C.01, Concourse Level8, First Avenue, Bandar Utama47800 Petaling JayaSelangor

PT Bank Mandiri (Persero) TbkCabang Jakarta Tebet SupomoJl. Dr. Supomo SH No. 43 TebetJakarta Selatan 12810Indonesia Standard Chartered Bank8 Marina Boulevard #24-00 Marina Bay Financial Centre Tower 1Singapore 018981 Overseas-Chinese Banking Corporation Ltd65, Chulia Street, 10th FloorOCBC CentreSingapore 049513

Stock Exchange Listing

Main Market of Bursa MalaysiaSecurities BerhadStock Name: ScomiesStock Code: 7045

Currency

Ringgit Malaysia (RM)

Corporate Information


From left

Tan Sri Nik Mohamed bin Nik Yaacob Chairman, Independent Non-Executive Director(Appointed on 16 May 2013 & designated as Chairman on 31 May 2013)

Shah Hakim bin ZainChief Executive Officer, Non-Independent Executive Director

Tan Sri Asmat bin KamaludinChairman, Non-Independent Non-Executive Director(Resigned on 31 May 2013)

Vice Admiral Dato’ Haron bin Dato’ (Dr) Mohd Salleh (Rtd)Independent Non-Executive Director (Vacation from office on 16 May 2013)


From left

Mok Yuen LokIndependent Non-Executive Director

Liew WillipIndependent Non-Executive Director

Loong Chun NeeAlternate Director to En Shah Hakim Zain

Dato’ Meer Sadik bin Habib MohamedIndependent Non-Executive Director

Lee Chun Fai Non-Independent Non-Executive Director(Appointed on 17 May 2013)

P/12 SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013PROFILE OF DIRECTORS

Tan Sri Nik Mohamed bin Nik Yaacob Chairman, Independent Non-Executive Director

Tan Sri Nik, 64, a Malaysian, is the Chairman and Independent Non-Executive Director of the Company. He was appointed as a member of the Board on 16 May 2013 and was designated as the Chairman of the Board on 31 May 2013.

Tan Sri Nik holds a Diploma in Mechanical Engineering, a B.E. (Hons) Degree from Monash University and a Masters in Business Management from the Asian Institute of Management. He also completed the Advanced Management Programme at Harvard University in the United States.

He served as the Group Chief Executive of Sime Darby Berhad from 1993 until his retirement in June 2004. He was Sime Darby Berhad’s Director of Operations in Malaysia prior to his appointment as the Group Chief Executive in 1993. He also served on the Boards of many of the Sime Darby group companies during this time. He was also the Chairman of the Advisory Council of National Science Centre and Chairman of the Board of UITM and served as a member of the INSEAD East Asian Council, National Council for Scientific Research and Development, Co-ordinating Council for the Public-Private Sectors in the Agricultural Sector, National Coordinating Committee on emerging Multilateral Trade Issues and the Industrial Coordinating Council. He was a representative for Malaysia in the Apec Business Advisory Council and the Asia-Europe Business Forum.

The other Malaysian public companies in which he is a Director are Scomi Group Bhd, GuocoLand (Malaysia) Berhad, Bolton Berhad and SapuraKencana Petroleum Berhad. Tan Sri Nik Mohamed is also the Executive Director of Yayasan Kepimpinan Perdana (Perdana Leadership Foundation).

Tan Sri Nik is the Chairman of the Nomination and Remuneration Committee of the Board.

Shah Hakim @ Shahzanim bin ZainChief Executive Officer/Non-Independent Executive Director

Encik Shah Hakim, 48, a Malaysian, is the Chief Executive Officer/ Non-Independent Executive Director of the Company. He was appointed to the Board on 23 September 2005.

Encik Shah Hakim started his career as an auditor with Ernst & Young and was subsequently promoted as Consulting Manager, responsible for servicing large corporations. He went on to be appointed as Executive Director of a regional packaging manufacturer in 1992, with direct operational responsibility. He currently sits on the Board of Scomi Group Bhd, Scomi Engineering Bhd and KMCOB Capital Berhad.

Encik Shah Hakim was a member of the Options Committee1 of the Board. He attended 11 out of the 12 Board Meetings held in the financial period ended 31 March 2013.

Tan Sri Asmat bin KamaludinChairman, Non-Independent Non-Executive Director (Resigned on 31 May 2013)

Tan Sri Asmat, 69, a Malaysian, was a Non-Independent Non-Executive Director and the Chairman of the Company. He was appointed to the Board on 1 January 2010 and resigned on 31 May 2013.

Tan Sri Asmat holds a Bachelor of Arts (Hons) degree in Economics from the University of Malaya and a Diploma in European Economic Integration from the University of Amsterdam.

Tan Sri Asmat has vast experience in various capacities in the public service and his last position was as the Secretary-General of the Ministry of International Trade and Industry, a position he held from 1992 to 2001. He has served as Economic Counsellor for Malaysia in Brussels and worked with several international bodies such as ASEAN, the World Trade Organisation and the Asia-Pacific Economic Corporation, representing Malaysia in relevant negotiations and agreements. Tan Sri Asmat has also been actively involved in several national organisations such as Permodalan Nasional Bhd, Johor Corporation, the Small and Medium Scale Industries Corporation (SMIDEC) and the Malaysia External Trade Development Corporation (MATRADE) while in the Malaysian Government service. Tan Sri Asmat also served as Governor representing Malaysia on the governing Board of the Economic Research Institute for Asean and East Asia (ERIA).

The other Malaysian public companies in which Tan Sri Asmat is a Director are Scomi Group Bhd, UMW Holdings Berhad, YTL Cement Berhad, Permodalan Nasional Bhd, Panasonic Manufacturing Malaysia Berhad, Compugates Holdings Berhad, The Royal Bank of Scotland Berhad (formerly known as ABN AMRO Bank Berhad), UMW Oil & Gas Corporation Berhad and AirAsia X Berhad. He also serves on the Board of JACTIM Foundation.

Tan Sri Asmat is the brother in-law of Dato’ Haron bin Siraj who was an Independent Non-Executive Director of the Company and vacated office on 16 May 2013 pursuant to the Article 96.1 of the Articles of Association of the Company.

Tan Sri Asmat chaired the Nomination and Remuneration Committee of the Board. He attended 9 out of the 12 Board Meetings held in the financial period ended 31 March 2013.

SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013P/13PROFILE OF DIRECTORS

Vice Admiral Dato’ Haron bin Dato’ (Dr) Mohd Salleh (Rtd)Independent Non-Executive Director (Vacated office on 16 May 2013)

Vice Admiral Dato’ Haron bin Dato’ (Dr) Mohd Salleh (Rtd), 70, a Malaysian, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 23 September 2005 and vacated office on 16 May 2013 pursuant to the Article 96.1 of the Articles of Association of the Company.

Vice Admiral Dato’ Haron bin Dato’ (Dr) Mohd Salleh (Rtd) began his Basic Cadet Training at the Federation Military College Malaysia and continued his training as Naval Officer at the Britannia Royal Navy College, United Kingdom and the Royal Navy. He has held various senior positions in the Royal Malaysian Navy including Fleet Operations Commander in the rank of Rear Admiral, Deputy Chief of Navy and Assistant Chief of Staff of the Malaysian Armed Forces HQ and he was promoted to the rank of Vice Admiral Dato’ Haron bin Dato’ (Dr) Mohd Salleh (Rtd) on assuming the appointment of Chief of Staff, Malaysian Armed Forces HQ in 1994 before retiring from the Royal Malaysian Navy in December 1995.

The other Malaysian public company in which Vice Admiral Dato’ Haron bin Dato’ (Dr) Mohd Salleh (Rtd) is a Director is Yayasan Scomi.

Vice Admiral Dato’ Haron bin Dato’ (Dr) Mohd Salleh (Rtd), is the brother in-law to Tan Sri Asmat bin Kamaludin, who was the Chairman and Non-Independent Non-Executive Director of the Company during the financial period ended 31 March 2013. Tan Sri Asmat resigned on 31 May 2013.

Vice Admiral Dato’ Haron bin Dato’ (Dr) Mohd Salleh (Rtd) chaired the Options Committee1 of the Board and was also a member of the Audit and Risk Management Committee and the Nomination and Remuneration Committee. He attended all of the 12 Board Meetings held in the financial period ended 31 March 2013.

Mok Yuen LokIndependent Non-Executive Director

Mr Mok, 52, a Malaysian, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 29 March 2002.

Mr Mok graduated in 1981 with a Bachelor of Science from Heriot Watt University, Edinburgh, and joined Ernst & Whinney (now Ernst & Young) in 1982, where he trained and qualified as a Chartered Accountant. He co-founded Crowe Horwath in Malaysia in 1990 and is currently the Regional Executive Director of Crowe Horwath International for the Asia Pacific region, overseeing 27 countries. He is also Audit Committee Chairman of another public listed company.

Mr Mok is a member of the Young Presidents’ Organization, Malaysian Chapter, where he has served various Board positions. He has also been actively involved with Hospis Malaysia, a charitable organization which renders free palliative care to residents in the Klang Valley diagnosed with life-limiting conditions.

Other Malaysian public companies which he is a Director are Goodway Integrated Industries Bhd and Yayasan Habib.

Mr Mok chairs the Audit and Risk Management Committee, and is also a member of the Nomination and Remuneration Committee of the Board. He attended 10 out of the 12 Board Meetings held in the financial period ended 31 March 2013.

P/14 SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013PROFILE OF DIRECTORS

Loong Chun NeeAlternate Director to En Shah Hakim @ Shahzanim bin Zain

Madam Loong, 55, a Malaysian, was appointed as an Alternate Director to Encik Shah Hakim @ Shahzanim bin Zain on 27 February 2009.

She graduated with a Bachelor of Arts in Economics and Social Studies from the University of Manchester, United Kingdom.

Madam Loong was previously with the Renong Group of companies for a total of 11 years covering companies including Projek Lebuhraya Utara-Selatan Berhad (1988 – 1992) and United Engineers (Malaysia) Berhad (1993 – 1996) and HBN Management Sdn Bhd (Group Management Office) (1997 – 1999). She left the Renong Group in late 1999 to join Tan Sri Dato’ (Dr) Rozali Ismail as Financial Advisorfor Puncak Group of companies before being appointed as the Finance Director to the Board of Puncak Niaga Holdings Bhd in January 2005 (2000 – June 2005).

She then joined Scomi Group Bhd in July 2005 as Senior Vice President of Corporate Finance Division/Chief Financial Officer of Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd). Thereafter, she was transferred to Scomi Group Bhd as Group Chief Financial Officer in August 2006. In early 2008, she was re-designated as Chief Investment and Performance Officer. She also serves on the Board of Scomi Group of Companies. Madam Loong has vast experience in financial advisory matters specialising in the areas of corporate debt restructuring, corporate finance and project financing for privatisation projects.

Other Malaysian public companies in which she is a Director are Scomi Engineering Bhd and KMCOB Capital Berhad.

Madam Loong attended 11 out of the 12 Board Meetings held in the financial period ended 31 March 2013 by invitation.

Liew WillipIndependent Non-Executive Director

Mr Liew, 45 a Malaysian, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 21 February 2011.

Mr Liew is a commerce graduate of the University of Melbourne and a Chartered Financial Analyst. Upon graduation, Mr Liew worked with international accounting firm KPMG as an auditor. Subsequently, he joined a local stockbroking company as an investment analyst, and later, moved to the Kuala Lumpur office of an international investment bank, Barclays deZoete Wedd, where he was the senior equity analyst. In 1996, Mr Liew was hired to set up the Malaysian equity research operations of another international investment bank, NatWest Markets, where he was the Director and Head of Research.

In 1998, Mr Liew joined the national asset management company, Pengurusan Danaharta Nasional Berhad (“Danaharta”), where he was among the pioneer staff members. At Danaharta, Mr Liew was the Assistant General Manager/Head of Research unit (Corporate Services Division). After leaving Danaharta in 2000, Mr Liew co-founded an independent investment advisory company, and a consulting company that specializes in financial and investor communications. Mr Liew is currently the Managing Director of a company providing consulting services.

Mr Liew is a member of the Nomination and Remuneration Committee and was a member of the Options Committee1 of the Board. He attended all of the 12 Board Meetings held in the financial period ended 31 March 2013.

SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013P/15PROFILE OF DIRECTORS

Dato’ Meer Sadik bin Habib MohamedIndependent Non-Executive Director

Dato’ Meer Sadik, 50, a Malaysian, is an Independent Non-Executive Director of the Company. He was appointed to the Board on 19 November 1997.

Dato’ Meer Sadik graduated from Wichita State University, United States of America, with a Degree in Business Administration, and later qualified as a gemmologist from the Gemmological Institute of America. Dato’ Meer Sadik is currently the Managing Director of the Habib Group of Companies which today is involved in retailing, manufacturing and microfinancing.

Dato’ Meer Sadik is a Past President of the Young Entrepreneurs Organisation (YEO) and was the Governor of the Alice Smith School. Dato’ Meer Sadik has been serving as the Honorary Secretary of Malaysian Retailers Association in 2007.

The other Malaysian public company which he is a Director is Yayasan Habib, which was established in 2008 to undertake corporate social responsibility activities for the Habib Group.

Dato’ Meer Sadik is a member of the Audit and Risk Management Committee. He attended 11 out of the 12 Board Meetings held in the financial period ended 31 March 2013.

Lee Chun FaiNon-Independent Non-Executive Director

Mr Lee, 42, a Malaysian, was appointed to the Board as Non-Independent Non-Executive Director on 17 May 2013.

He graduated with a Bachelor of Accountancy (Hons) degree from University Utara Malaysia in 1995. He obtained a Master of Business Administration from Northwestern University and The Hong Kong University of Science & Technology in 2012.

Mr Lee started his career with a public accounting firm. In October 1995, he joined Road Builder (M) Holdings Bhd (“RBH Group”) and was the Head of Corporate Services Division of RBH Group prior to the acquisition of RBH Group by IJM Corporation Berhad (“IJM”) in 2007. He was the Deputy Chief Financial Officer for the IJM Group before being appointed as the Head of Corporate Strategy & Investment on 1 July 2012.

His directorships in other public companies include Scomi Engineering Bhd, Scomi Group Bhd (Alternate Director) and Road Builder (M) Holdings Bhd (Alternate Director).

Mr Lee is a member of the Audit and Risk Management Committee of the Board.

NOTES(1) Options Committee was dissolved on 4 December 2012.(2) Save as disclosed above, “the Directors” do not have: (i) any family relationship with any Director and/or substantial shareholder of the

Company; (ii) any conflict of interest with the Company; and (iii) any conviction for offences within the past 10 years (other than traffic offences,

if any).

P/16 SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013MANAGEMENT TEAM

Zubaidi HarunVice President – Business Development

Sharifah Norizan Shahabudin Chief Legal & Governance Officer

Wan Ruzlan Iskandar Wan SalaidinPresident – Oilfield Services, Market Units

Steve BrackerPresident – Oilfield Services, Product Line

Shah Hakim bin Zain Chief Executive Officer

Mukhnizam Mahmud Chief Financial Officer,President – Marine Services

SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013P/17MANAGEMENT TEAM

Jessie Chan Yuen LingHead – Support Services

Mike WalkerSenior Vice President – Oilfield Services

Awalludin NasirBusiness Unit Manager – Malaysia & Singapore

Khairil AnwarGeneral Manager – Production Enhancement

Vickneswaran VelooHead – Technical Services,Drilling Fluids

Dan FarrarVice President – Drilling Waste Management, Product Line

Ramesh Veetikat Ramachandran Group Financial Controller


Overview

The overall health of the global economy remained fragile in 2012, with Europe mired in its debt crisis and the United States only marginally stronger. China, on the other hand, pulled out of two years of decline and returned with an unexpected growth rate of 7.8%.

With its rising energy needs, China is increasingly looking for energy supplies to meet the demand.

Exploration and production activities of oil and gas industry are up throughout the eastern hemisphere, which, as this is our chosen marketplace, is excellent news for SESB.

Dear Stakeholders, In line with Scomi Group Bhd (“SGB”), our parent company, Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd) (“SESB” or “the Company”) and its group of companies (“the Group”) has changed its financial year end from 31 December to 31 March. I am pleased to present the audited results for the 15-month financial period ended 31 March 2013. It has been a period of intensely productive activity for Scomi Energy Services Bhd. Our new name reflects the merger of Scomi Group Bhd’s Energy Logistics and Oilfield Services divisions, resulting in an upstream drilling services company with a vastly strengthened financial standing.

CHAIRMAN’S STATEMENT

Tan Sri Nik Mohamed Nik YaacobChairman


Consolidating the Oilfield Services and Marine Services divisions under one umbrella as Energy Services has created a business which offers a broad and coherent range of services to the oil, gas and coal industries. Our research and development assets include state-of-the art drilling waste management equipment, high-performance drilling fluids, top of the range production enhancement chemicals and extensive multi-drilling services capability which cover every phase from exploration to completion. We believe that within the next five years, the Energy Services division will become a key global service provider for the oil and gas sector.

In relation to the coal transport business that we are in, our marine logistics fleet continues to serve our coal clients. However, with the shrinking market share brought about by a decline in the coal market, our focus has shifted towards offshore support services, and we are adjusting the composition of our fleet accordingly.

All these initiatives are aimed at streamlining our range of services and products, and thus will enable us to target key markets effectively. As a result, the new SESB, although facing intense industry challenges, has continued to maintain its revenue level and delivered a turnaround pre-tax profit.

Financial Highlights SESB changed its financial year end from 31 December to 31 March, in line with the change effected at its parent company, Scomi Group Bhd (“SGB”). Consequently, the current financial period is for a period of 15 months compared to 12 months for FY2011.

SESB posted a revenue of RM1.47 billion for the financial period ended 31 March 2013 compared to RM1.26 billion in the 12 months ended 31 December 2011. On the back of this revenue, SESB recorded a Profit Before Tax (“PBT”) of RM134.7 million for the financial period as compared to a loss of RM84.65 million for the previous 12 months.

The key driver of SESB’s turnaround results was the improved operational performance of the Oilfield Services division which achieved a revenue of RM1.15 billion and a PBT of RM98.24 million for the financial period. This exceptional performance was a result of increased activity in Asia and West Africa, improved operational efficiencies and better cost management.

Additionally, there were no major provisions for vessel and goodwill impairment at our Marine Services division and it posted a revenue of RM318.3 million and a PBT of RM36.46 million for the 15 months ended 31 March 2013.

The performance of the Marine Services business was impacted by the generally weaker coal sector and specifically the expiry of a major coal transportation contract which reduced both revenue and profits. Nevertheless, the Marine Services business continues to be profitable with the ongoing contracts and better contribution from our offshore support segment.

It should be noted that SESB has only recently completed its corporate restructuring exercise and is now in a phase of consolidation to position itself for stronger growth. In view of this, the Board of Directors has decided not to declare a dividend for the financial period and to utilise the capital to drive growth for sustainable returns and hence improve shareholder value.

Corporate RestructuringOn 29 February 2012, we announced our plan to consolidate a major portion of Scomi Group Bhd’s (“SGB”) Oilfield Services and Marine Services businesses under the renamed entity, SESB. The corporate exercise, which concluded on 12 March 2013, involved the disposal by SGB to SESB of the:

• the share capital of Scomi Oilfield Limited and Scomi Sosma Sdn Bhd and;

• 48% of the issued and paid-up share capital of Scomi KMC Sdn Bhd

The exercise also involved both an internal restructuring of legal entities within the Oilfield Services (“OFS”) operations of SGB to transfer the OFS Eastern Hemisphere business to SESB, and a capital repayment of RM135.61 million to SESB shareholders.

At an Extraordinary General Meeting convened on 11 June 2012, SESB shareholders approved a capital repayment involving cash distribution amounting to RM135.61 million on the basis of RM0.185 for every existing ordinary SESB share held. As a result of the exercise, the par value of each SESB share was reduced from RM1.00 to RM0.45, and the share premium of the Company was reduced accordingly.

With the conclusion of the exercise the Group was renamed from Scomi Marine Bhd to Scomi Energy Services Bhd to better reflect the composition of the businesses of the Group.

The reorganisation has created a broader and more competitive energy services provider and hence SESB is now established as a comprehensive, integrated drilling support and marine services business. The newly streamlined Company is primed to succeed in the eastern energy markets with a strategic and profitable range of offerings, and solidly positioned the SESB group as a key player in the oil and gas sector. Moreover, as SESB is starting out with a manageable debt level and a notably stronger balance sheet, this robust financial foundation will assist us to raise capital for future business expansion.

We have also consolidated the coal transport segment of the Marine Services division. PT Rig Tenders Tbk (“PTRT”), an 80% owned subsidiary of SESB, acquired the entire equity interest in three firms owned by its parent company Scomi Marine Services Pte. Ltd., in a deal worth RM177 million. The three companies are CH Logistics Private Limited, CH Ship Management Private Limited and Grundtvig Marine Private Limited. The acquisition was completed on 12 April 2012, and consolidated the Indonesian marine businesses into PTRT which should ultimately improve its financial performance.



Board Of Directors

It is with regret that post the financial period under review, we bade farewell to two board members. On 31 May 2013, Tan Sri Asmat bin Kamaludin resigned as the Chairman of the Board of Directors of SESB. An experienced personality, he had ably helmed your company throughout his tenure. Further, Vice Admiral Dato’ Haron Bin Dato’(Dr) Mohd Salleh (Rtd) also retired from the Board upon attaining the age of 70, pursuant to the Articles of Association of the Company. We will certainly miss their experience and valuable contribution.

SESB has also welcomed two new members to the Board of Directors. I, myself, joined SESB on 16 May 2013 and was appointed as the Chairman on 31 May 2013. And Mr Lee Chun Fai, who represents IJM Corporation Berhad, joined the Board as a Non-Independent Non-Executive Director on 17 May 2013.

Prospects

Our outlook for the ensuing financial year is positive. The eastern hemisphere’s energy sector, an approximately USD6.0 billion market, is forecast to have robust growth in exploration and production. Regulatory shifts in Myanmar and Indonesia are anticipated to support further development of both countries’ vast energy resources. Thus, we are well-positioned to seize the opportunities to provide products and services for both onshore and offshore operations throughout our target markets.

We anticipate an improvement in the performance of SESB as during the course of the financial period, our Oilfield Services division recorded several major contract wins including landmark contracts in Qatar with Qatar Petroleum and in Indonesia with Total E&P Indonesie. Several other key contracts were also won in Turkmenistan and Malaysia. These contracts are anticipated to contribute positively towards the future financial position of SESB.

Our Marine Services strategy is to reduce our presence in coal logistics and shift the focus to offshore support, where higher charter rates, lower operating costs and stronger or more robust markets will bolster both the top and bottom line figures.

We will continue to practice stringent cost control measures both at the corporate and operational levels to strengthen our financial position. We aim to improve our cash flow position by reviewing the current bond at the Oilfield Services division as well as better management of inventory and days sales outstanding (“DSO”) days.

SESB ended this financial period with an order book of over RM5.1 billion. There are also several significant tenders in the pipeline for Oilfield Services division, though for the immediate future we will focus on contract execution and service quality enhancements.

For the Marine Services segment, we will continue to evaluate strategic investment opportunities in specialised offshore vessels, combining our expertise with Oilfield Services division’s experience to innovate solutions for our offshore clients.

Acknowledgements

The new SESB has made an excellent debut, emerging on solid foundations and moving forward with confidence. I sincerely appreciate the patience and encouragement of all stakeholders who saw us through this transition.

On behalf of the Board of Directors, I would like to express our profound gratitude to our customers, shareholders, business partners and bankers whose loyalty inspires us to meet their expectations. We are also thankful to the governments of all the countries in which we operate; we rely on their regulatory guidance to achieve sustainable success.

Finally, I offer my deepest gratitude to the people who are at the heart of SESB, which are the management and staff, whose talents and teamwork form the very essence of our business. Our success is the fruit of their collective efforts. My fellow Directors have, with prudence and courage, steered the Company through this transformation. And of course, I extend my most heartfelt appreciation for each and every shareholder who has continued to have confidence in the potential of our organisation. I thank you for your support.

Sincerely,

Tan Sri Nik Mohamed bin Nik YaacobChairman


Transforming an

ordinary item into

valuable energy.

A PIN WHEEL




Shah Hakim ZainChief

Executive Officer

SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013P/25MANAGEMENT REVIEW OF OPERATIONS

Dear Stakeholders, The first review of operations for the newly restructured Scomi Energy Services Bhd (formerly known as Scomi Marine Services)(“SESB” or “Company”) and its group of companies (the “Group”) is a milestone in the development of our business, and I am delighted to record that, for the 15-month financial period ended 31 March 2013, the combined revenue for the Marine Services and Oilfield Services (“OFS”) divisions jumped to RM1.47 billion, while Profit Before Tax (“PBT”) reached RM134.7 million.

This is an affirmation that, despite the challenges we faced during the year, we are moving in the right direction to improve our operational performance and financial standing.

Overview

2012 was a less cataclysmic year for the global economy, but there were still challenges. Growth in the USA and EU ranged from nil to nominal, and although these are no longer our target markets, globalisation has made for permeable borders, and a regional fiscal malaise still takes a worldwide toll. Trade between China and the West declined, but intra-regional trade in the East is on the rise. China’s 2012 GNP was near the top of the list at 7.5%, and although the country’s demand for consumer goods dropped, its demand for energy increased alongside that of India, the other giant developing economy. Oil prices remained

soft this past year, but steadily rising demand drove exploration and production activity, which in turn led to some record-setting contracts for SESB.

A Spears & Associates Inc (“Spears”) report predicted a 5-6% increase in drilling activity in the Far East in 2012, but at end of the year reported a 2% drop, primarily due to a 15% drop in Indonesia, where the rig count dropped from 55 to 45 in the course of the year as a result of legal battles over regulatory issues. Civil upheaval and political uncertainty in Egypt has resulted in a slowdown of drilling and exploration activities. However, moving forward for 2013 Spears is predicting international drilling activity to grow by 12% in Mid East and 6% in Far East. This bodes well for the new SESB entity as our focus is now on the Eastern Hemisphere.


Overall, our operational report for the past fifteen months is encouraging. Our product development has resulted in waste management equipment which is lighter, more durable and more effective. Drilling fluid systems for deepwater and high pressure high temperature are being enhanced and improved. Greener solutions using environmentally friendly chemicals and components are also currently being developed. Under the production enhancement business, we have continued our research and development for our flow assurance products and have successfully developed a liquid pour point depressant, which is a niche product segment. We are in the midst of changing the composition of the marine vessel fleet to profitably meet the region’s offshore needs. More stringent cost management has helped to mitigate business vagaries, and our decision to focus on the Eastern market is starting to show results.

The new SESB

Over the past 15 months, we have completed our reorganisation. SESB now contains two divisions: OFS, offering integrated drilling fluids, drilling waste management solutions, multiple drilling services and production enhancement technologies; and Marine Services, which provides marine transportation for the coal industry and offshore support vessels to the oil and gas sector.

Consolidating OFS Eastern Hemisphere, Scomi Sosma, Scomi KMC and Scomi Energy Services will facilitate better marketing,

improve cost management, provide stronger financial standing for greater flexibility in raising capital and thus increase the growth potential of a more diversified oil and gas business.

The restructuring adheres to Scomi’s strategy to focus into the eastern hemisphere where we have identified Asia, Western Africa, Russia and the Middle East as our most profitable spheres of operation. However, as an organisation, we are nimble enough to move into any region should the identified business prospect be positive for our organisation.

The merger of Marine Services and Oilfield Services divisions under SESB offers a powerful value proposition to both our existing and our potential clients, expands our range of services and products and hence our revenue potential.

Financial Performance

For the financial period, the OFS division gained steady momentum, achieving a PBT of RM98.24 million, spurred by revenue of RM1.15 billion. Both Thailand and Malaysia recorded a strong performance, while West Africa continued to benefit from a high level of activity.

Meanwhile, the Marine Services division posted a revenue of RM318.3 million and a PBT of RM36.46 million. For the coal segment, revenue was lower than during the 2011 financial year as a result of lower tonnage carried, owing to a general slowdown in the industry, expiry of a major coal contract that

MANAGEMENT REVIEW OF OPERATIONS


was replaced with a time charter contract with lower rates and smaller fleet. The bottom line was further affected by vessel impairment and doubtful debt provision.

Operations Review

Oilfield ServicesThis financial period returned very gratifying results for the OFS group. Tighter controls on costs, higher profit margins on recent contracts and the realignment of the corporate and capital structures effected by the merger, all contributed to improvements in revenue and profit.

Oil prices remained fairly soft in 2012, with the Brent crude oil index hovering around the USD100 per barrel mark, but the demand for energy continues to climb, especially in the world’s largest developing nations. Exploration and production are rising accordingly, and very markedly so in the eastern hemisphere. The operations in Gulf, Turkmenistan, Indonesia and Thailand are participating in more tenders, and rig counts are still going up in Malaysia, Indonesia and Thailand.

The oil and gas sector is one of the National Key Economic Areas (“NKEAs”) in Malaysia’s Economic Transformation Programme. The resulting increase in activity has been good news for Scomi, as we signed a RM2.1 billion contract with PETRONAS Carigali under which we will provide drilling products and engineering services for a term of five years. Petronas has also announced plans to develop marginal fields in Malaysia and this presents us with new opportunities to explore and move into.

In January 2013, we signed a RM380 million contract with Total E&P Indonesia for the provision of drilling fluids and completion services over a three-year period. This is our first collaboration with Total E&P Indonesie and is the largest single award that Scomi has won in Indonesia. Work has commenced on this project and we anticipate positive contribution in the next financial period.

Qatar and Turkmenistan operations also made significant contributions to our order book last year. A breakthrough drilling fluids contract with Qatar Petroleum, worth RM130 million over three years, will require Scomi to formulate solutions for challenging drilling environments onshore as well as providing drilling fluids services for an initial four rigs, with more rigs anticipated towards the end of the financial period. In Turkmenistan, one of our key focus countries, we sealed a RM98.5 million, two-year deal with Dragon Oil Ltd for drilling and completion fluids services. Further, the Turkmenistan operations were awarded a 3-year drilling fluids and drilling waste management contract by PETRONAS Carigali (Turkmenistan) Sdn Bhd, valued at RM155 million.

Our other markets such as the Gulf, Australia and Russia, which are all mainly drilling waste management markets have continued to improve their performance during the financial period due to the increased sales activity with our proprietary range of drilling waste management products.

Our Production Enhancement Technologies division, although a minority contributor towards the financial performance of SESB, has continued to maintain its market share through the provision of its products and solutions to the Asia market focused from Malaysia and to the rest of the world focused from our operations in France.

While our operational and in-country business development activities have been our focus, on a macro level we have also continued to participate in global energy conferences and exhibitions to build recognition of our brand ‘Scomi’ while using the opportunity to further enhance the presence of our products and services. Several of the prominent global events where we were represented were the prestigious 25th World Gas Conference in Malaysia, Neftegaz oil and gas exhibition in Russia, the 12th China International Petroleum & Petrochemical Technology & Equipment Exhibition (CIPPE) and the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC). Marine ServicesThis financial period was a mixed bag for the Marine Services division. The coal transport segment saw revenue drop, as a general contraction in the industry led to a decrease in business. Revenue dipped sharply in mid-2012 when a major coal contract in Indonesia expired. The loss was mitigated, however, by the signing of a replacement time charter contract albeit at a lower rate. Lower operating costs further cushioned the impact, as the fleet reduced bunker consumption, third-party re-charter and interest expenses.

Meanwhile, the hike in offshore exploration and production has boosted the demand for support vessels. In October 2012, an SESB subsidiary, PT Rig Tenders, signed a two-year, RM120 million contract with PT Pertamina Hulu Energi Offshore North West Java (“Pertamina”) to provide three vessels for offshore support services – a utility vessel, an anchor-handling tug, and an accommodation barge with a 288-man capacity.

With the ongoing strategic initiative to revitalise our fleet, it now stands at a count of 82 vessels in total and continues to enjoy an overall utilisation rate of over 80%.

Key Initiatives

The OFS division has made some remarkable advances in product development. We have progressed from the role of a distributor of drilling waste management products to designing and manufacturing our own extensive portfolio of waste management products.

Around the world, policies concerning drilling waste management (“DWM”) are tightening, with legislation trending toward zero discharge. The DWM business is expected to grow exponentially, and we estimate our addressable markets – Asia, the Middle East, Russia and West Africa – to be worth RM6.5 billion. With our extensive range of products, packaged solutions and services, we are well- poised to serve the needs of those markets.



We are in the vanguard of the microwave technology development for the treatment of oil-contaminated drill cuttings, and the prospects for this technology are starting to create waves both within the industry and amongst investment analysts. Scomi has innovated the use of microwave in waste management treatment and this process has numerous advantages over both existing microwave technologies and the standard method of thermomechanical cuttings cleaning. Our technology is anticipated to reduce power consumption by as much as 50%, address a wider range of waste products, increase the returns on investment, reduce downtime and maintenance costs, and comply with EU standards. Its reduced footprint and weight makes it a suitable option for offshore rigs, and we already anticipate several installations once the product is commercialised and introduced to the market.

Another recent innovation is the CIP, Clean-In-Place, automated tank cleaning system, which totally eliminates the need for human entry. When the product was initially introduced in 2011 to a client in Labuan, Malaysia, four offshore tanks were cleaned in 12 hours, with only 10% of the normal waste generated and no human entry. Using conventional systems, this job would have required 30 men moving in and out of the tanks over three to four days. This product has gained recognition and currently four of the CIP systems are operating in Malaysia and Thailand, and we expect that number to rise over the coming year.

All of our drilling waste management research and development is carried out at our Houston office working in partnership with reputable manufacturers and vendors.

Our Drilling Fluids (“DF”) technologies is also continuously enhanced and improved to meet the exigent needs of drilling exploration needs. All research and development is carried out at our dedicated facility, the Global Research and Technology Centre (“GRTC”) here in Malaysia. Researchers are exploring multifunctional formulations and products suited for extreme environmental conditions including deepwater, ultra-deepwater and high temperature high pressure wells. Further, in line with the focus on generating less waste or cleaner waste, several eco-friendly product components are being introduced to our product line so that our DF formulations have better performance capabilities, greater recyclable properties and waste generated would require less treatment prior to disposal.

For our Production Enhancement Technologies, our laboratory in Peyrius, France, is concentrating on improving our range of products and chemicals including flow assurance, separation technology and integrity chemicals, to better suit the needs of the clients.

The Marine Services division is actively reconfiguring its fleet in light of the growing demand in the oil and gas sector and the steady drop in the coal transport business. A fleet revitalisation plan is in place that includes disposing of several tugs and barges and purchasing offshore support vessels that include anchor handling and supply tugs as well as accommodation barges.Pleased as we are with our product development and its

success in the marketplace, we also set high standards for the services that our support staff provide. To ramp up our service excellence, we invested heavily in building both technical expertise and soft skills. At GRTC we have an extensive training programme developed in-house by a team of dedicated trainers. These trainers research and develop training modules catered specifically to provide the technical and management skills required by our engineers to deliver quality service. It is compulsory for every drilling fluid engineer to attend an 8-week Comprehensive Drilling Fluids school and to be certified prior to commencing work on a client’s rig. The GRTC Training Calendar covers a wide range of subjects both at intermediate and advanced levels for drilling fluids, drilling waste management, solids control, drilling fluid technologies, comprehensive engineering software, well control and managing drilling operations. In tandem with their technical skills development, we also emphasize on soft skills training which will assist our employees vastly in delivering the expected service quality. Scomi Group Bhd’s training unit, Group Learning and Development (“GLaD”) travel around the globe to various locations to conduct training programmes that include customer service, teamwork, time management and finance. Each employee has a Learning and Development KPI that requires them to attend a minimum of 40 hours of training per year. The aim of this initiative is to teach, train and coach the over 2,000 employees of SESB to realise their greatest potential.

Outlook

Financial analysts are predicting lower volatility in the global economy next year, which is most welcome after four years of tumultuous market behaviour. The Brent crude oil index is expected to hold steady around the USD100 per barrel mark, a drop of about 10% from 2012, resulting primarily from increasing oil production from non-OPEC countries. Although energy prices are slightly depressed, the demand is on a steady upward trend, most notably in the largest developing nations, China and India.

Japan’s decision to turn away from nuclear power following the Fukushima earthquake is spurring liquid natural gas development in Southeast Asia and the Middle East. In fact, the market for gas continues to make strides worldwide, growing at five times the rate of global oil demand, and we believe that the greater demand will spur heightened energy exploration and production regardless of the dip in oil prices.

Scomi’s markets in the eastern hemisphere show great promise for the coming year. Last year, the EU voted to lift most of the sanctions it had imposed against Myanmar. This has opened the door to a great deal of new foreign investment, and the Burmese government opened 30 blocks for tender in April 2013, 19 of which are deepwater.

The Chinese government has announced subsidies for shale gas projects and will further encourage this development by waiving tax on imports of shale-gas exploration equipment. Indonesia has vowed to reduce red tape in order to improve



investment opportunities and to encourage exploration and production. Indonesia has the second highest gas reserves in the Asia Pacific after Australia.

Operators in Malaysia have discovered approximately 1.4 billion barrels of oil equivalent (“BBOE”), which accounts for 72% of total discoveries in the region. We are projecting for our combined operations in Malaysia, Indonesia and Thailand to be the key contributors to our annual revenue for the next several years.

We have also actively participated in many tenders in Southeast Asia, India and Turkmenistan, a few of which we are currently anticipating award details within this calendar year. For the immediate future, we shall minimise our contract bidding efforts as we place increased emphasis on execution and service quality.

Lower coal prices and lower demand for commodities in general have made the coal transport business less attractive to the Marine Services division. We will nonetheless continue to serve our major customers where we have term contracts, but with a smaller fleet. For the offshore segment, the numbers of wells to be drilled and new platforms to be installed are all set to rise in the region. The demand for offshore support vessels is predicted to exceed the supply, and this should lead to a high utilisation rate for our fleet and a hike in daily charter rates. We continue to look for investment opportunities in selected offshore vessels which is expected to improve profitability.

With the restructuring complete, SESB is now an upstream drilling and marine services business. This consolidation of all our oil and gas businesses under one entity also allows our valuable investors to participate in a more diversified oil & gas business with greater growth potential. We believe we are now better structured to respond to market needs, innovate

solutions and cement our foothold in the eastern hemisphere. Through this we will also be able to create value and realise potential for all our stakeholders, especially our shareholders who have patiently supported SESB through its growth period.Lower coal prices and lower demand for commodities in general have made the coal transport business less attractive to the Marine Services Division. We will nonetheless continue to serve our major customers where we have term contracts, but with a smaller fleet. For the offshore segment, the number of wells to be drilled and new platforms to be installed are all set to rise. The demand for offshore support vessels is predicted to exceed the supply, and this should lead to a high utilisation rate for our fleet and a hike in daily charter rates. We continue to look for strategic investment opportunities in specialised offshore vessels that will structure the fleet for optimal profitability.

With the restructuring complete, SESB is now an upstream drilling and marine services business. This consolidation of all our oil and gas businesses under one entity also allows our valuable investors to participate in a more diversified oil & gas business with greater growth potential. We believe we are now better structured to respond to market needs, innovate solutions and cement our foothold in the eastern hemisphere. Through this we will also be able to create value and realise potential for all our stakeholders, especially our shareholders who have patiently supported SESB through its growth period.

Sincerely,

Shah Hakim ZainChief Executive Officer


Transforming basic

material into

enduring worth.

A DIAMOND




P/32 SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013CORPORATE SOCIAL RESPONSIBILITY

Aristotle believed that the whole is greater than the sum of the parts. At Scomi Energy Services Bhd (“SESB” or the “Company”) and its group of companies (the “Group”), we too believe in combining our processes, our people and our brand, to reach out to all our stakeholders and those that we come in contact with.

SESB is committed to making a positive and meaningful impact in the communities where we are present. We believe that the Group does not operate in isolation and as such, we are proactive and resolute in our stand that our business objectives and decisions take into account sustainability for continued growth in the environments that we are in.

We continue to focus on our social, environmental and economic impacts in creating value for our business, our shareholders as well as our other stakeholders. On this premise, we have made corporate social responsibility (”CSR“) a cornerstone for our efforts. Our CSR activities have progressed more holistically, evolving from individual acts of philanthropy to becoming a mindset that influences decision-making and business strategy.

The Marketplace

We remain committed to operating responsibly and upholding best business practices while adhering to the highest ethical

standards in our business approach and dealings with all our customers, vendors, the Government and other stakeholders in general.

Communication is an integral element in ensuring timely information of the company reaches its key stakeholders. Hence throughout the financial period, SESB played host to numerous media communicators, investment analysts and fund managers to provide them with the latest information of the Group. We also ensured timely announcements to Bursa Malaysia on material activities and events, distribution of quarterly “Letter to Shareholders” to the investment communities on the Group financial performance, and also media releases on key developments of our business. News on SESB’s business as well as our operations globally is disseminated through the newsletter, FOCUS, produced by our parent company Scomi Group Bhd. This newsletter is shared with customers, partners, suppliers, employees and other stakeholders. Meanwhile, comprehensive information on the Group is easily accessible via our website and this includes our Annual Reports, Circulars to Shareholders, media releases and media coverage.

SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013P/33CORPORATE SOCIAL RESPONSIBILITY

In creating value for our customers, we ensured that all our products adhere to regulatory requirements and quality standards. Further, to add value for our customers, we have also extended to our customers several technical training modules on Drilling Fluids Technologies, Drilling Waste Management and Drilling Operations. The modules cater not only for technical personnel but also non-technical personnel who come in contact with the services that we provide. Through this training we are able to enhance their knowledge of our products and services as well as building cognizance of the latest technology, products and services that we provide.

To further enhance our presence and to create awareness of our brand and products, the Group as a whole participated in numerous energy and transportation exhibitions, conferences and forums in Malaysia, China, the Gulf and Russia.

The Workplace

We credit the success of our business to the contribution and steadfast commitment of our people, being our most valuable asset. As SESB has expanded, it has always nurtured a working environment which attracts, develops, motivates and retains the best talents. Employees were consistently being challenged to push their performance levels, be driven to deliver results and continue to outdo themselves.

We are committed to creating a working culture that values and rewards performance while cultivating and reinforcing a sense of belonging to the Group. Based on performance delivery, employees were rewarded with bonus increments. To bring out the best in our employees, we introduced various

initiatives such as projects involvement and stretch assignments of increasing responsibility and complexity. At the same time, we provide our employees with training and professional development opportunities to ensure they are equipped with the relevant knowledge and skills for career progression. We have made it a requirement for all executives to attend a minimum of 40 hours of training a year, while non-executives need to fulfill at least 20 training hours annually.

To foster and enhance unity, the Group has also put in place a number of programmes that stamps our unique identity and brand as ‘Scomi’. These programmes have had immense participation by our employees. We seek to create a sense of belonging and ownership by interacting with our employees and maintaining effective and clear communication with them. Details of our Group Learning and Development and human capital development activities are set out in page 35 to 37.

The Environment

In the current global economy, there is increased pressure for companies to operate in a manner which is sustainable while promoting environmental conservation. As an environmentally concerned global technology enterprise, we are committed to providing innovative solutions whether in the energy services or transport solutions industries, with the lowest environmental footprint.

Scomi employees across the globe are committed to “greening the earth” and have organised a number of programmes and initiatives to minimise wastage of resources and mitigate negative environmental effects. We have also endeavoured to


leverage on technology and intellectual capital to create clean and green solutions aimed at environmental sustainability while obtaining optimum customer satisfaction.

Our commitment towards the environment is reflected in our product portfolio. Our Drilling Fluids are constantly engineered to provide optimised performance and enhance recyclability properties. The systems are engineered to prevent loss of fluids and damage to the surfaces during drilling. They also ensure efficient waste carrying properties as well as adsorbtion properties that allow the drilling waste to be easily cleaned for disposal. Our Drilling Waste Management solutions handle drilling waste solids control, containment and handling, treatment and disposal ensure that all waste generated are effectively separated, contained and treated prior to disposal, for minimal impact to the environment. These are achieved through research and development for innovative products and also the creation of efficient solutions to meet individual waste management challenges.

Certification

SESB ensures where possible all its business units, subsidiaries and joint venture partners are certified to either ISO 9001-2000, ISO 14001 or 18001 depending on Process requirements and or Risk identification reviews.

The Community

As a caring corporate organisation, SESB believes that it has a responsibility to give back and support communities across the 26 countries in which we operate. With the understanding that corporate responsibility is integral for success and essential for holistic growth, we strive to ensure our CSR programmes make a positive difference to the community. This has been our guiding principle since our establishment and signifies efforts to raise standards of living and enriching communities over the years.

In Malaysia we have continued to support the activities of, Yayasan Scomi. Yayasan Scomi, established by our parent company Scomi Group Bhd in 2005 is a non-profit foundation dedicated to developing communities through education and living assistance. Yayasan Scomi organises CSR activities with participation of Scomi employees, to support the underserved public irrespective of race, religion or creed. Over the years, it has provided educational assistance and scholarships for needy students along with rural school and motivational programmes as well as helped the less fortunate in terms of the provision of food and other basic living necessities.

Yayasan Scomi organised several key community engagement and relief programmes including its annual blood donation drive which was co-organised with University Malaya Medical Centre at Scomi’s Global headquarters. It also continued its support for 10 under-priviledged families it has adopted in Malaysia, extending financial support to them to uplift their living conditions.

Todate Yayasan Scomi has provided scholarships to over thirty students, special education needs continuous training and equipment to three schools and helped more than six hundred individuals through their underprivileged assistance initiatives.

Yayasan Scomi also initiated a partnership with Mercy Malaysia, an internationally renowned Malaysian NGO for the deployment of Scomi’s staff as Mercy Malaysia’s volunteers in its community programmes. This partnership will enable Scomi staff to pledge their support and sign up as volunteers to participate in the various community programmes driven by Mercy Malaysia.

Above and beyond the corporate driven activities, each business unit is empowered to organise its own CSR activities. This can be as simple as creating a moment of joy for the underprivileged by interacting with them or as altruistic as home or education improvement for a deserving family or community. We believe the quantum is not of import rather the quality of the helping hand is. Hence with all our global hands reaching out together the sum of the parts becomes greater once again.

CORPORATE SOCIAL RESPONSIBILITY


People at the Heart

At the core of any organisation is its people. They are the heart, the source of energy that energises the organisation’s processes to fruition; and they are the soul, the values that exemplify the culture of an organisation.

Thus at Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd) (“SESB” or the “Company”) and its group of companies (the “Group”) there is a concerted focus on the development of our people as they are the key engine in driving innovatio n and creating value for all our stakeholders. All SESB’s initiatives for human capital development follow the strategic initiatives of its parent company Scomi Group Bhd (“SGB” or “Scomi”) and its group of companies.

SESB provides a platform for the growth of talent. We are a global multicultural organisation that provides different exposures to our people. Priding ourselves on being part of a lean organisation, our people can easily make a difference by creating a legacy and leaving a footprint. Further with every member in the team being encouraged to contribute and to have their voice heard through informal and open communication, it naturally extrapolates into building bonds with colleagues and cultivating relationships. Hence we have heard the rallying call of being Team Scomi.

For this team, Scomi’s value proposition is “You provide the Talent, we provide Career Development”. To set them on that path various, seemingly divergent, development channels have been specifically created to nurture the talents. However, all these individualistic channels have one common underlying theme. They are all built upon the Scomi Brand Values of New Ideas, Working Together, Goal Oriented and Customer Responsible. The values in turn support our Brand Vision of Realising Potential.

Learning & Development

To bring all of these intentions together to form a cohesive and coherent learning and development path, SGB has a dedicated Group Learning and Development (“GLaD”) team that conducts training programmes for staff across all the global business units of Scomi. GLaD is responsible for addressing the identified skills and knowledge gaps, and for managing Scomi’s comprehensive talent development programmes. Hence SESB also follows the training programmes and initiatives organised by GLaD. During the financial period, GLaD carried out its strategic objectives comprising the following initiatives:

Work @ Scomi & Induction ProgrammeThis two-day training is mandatory for all new employees, introducing them to the Scomi business, culture and brand. It offers the recruits an insight into what Scomi stands for, what it expects from its employees and, conversely, what employees can expect from the company.

Core Values, Functional Skills and Managerial Skills ProgrammesThese programmes which encompass Scomi’s core values as well as functional and managerial skills were held in several of our global locations including Kuala Lumpur, Labuan, Kemaman, Jakarta, Bangkok, Dubai, Perth, Turkmenbashy and Ashgabat. The intention was to reach out to employees and to make it easier for global employees to attend our in-house training.

HUMAN CAPITAL DEVELOPMENT


The Executive Management ProgrammeThis programme brings together mid-level management from our global operations, and is geared towards enhancing their leadership skills while allowing them to meet and network with their global counterparts. In 2012, the Executive Management Programme was held in Kuala Lumpur and Dubai.

The Management Leadership Development ProgrammeThis aims to develop future leaders for the Group, hence the high-level training focuses on effective management and leadership skills. In 2012, the programme was held in Kuala Lumpur.

The Management Trainee ProgrammeAimed at fresh graduates who are recruited into Scomi, this 18-month programme exposes the new recruits to all facets of the Group’s operations be it technical or management skills. During this time, the trainees are attached to different departments to enable them to pick up relevant skills that will set them on the right track for further development in Scomi.

Mentoring & Coaching ProgrammeOne-to-one mentoring and coaching is offered to managers who have demonstrated leadership potential, to help them deal with challenges and issues as they move up the leadership ladder. It is geared towards ensuring a secure leadership pipeline and forms part of SESB’s succession plan.

Global Executive Learning (GEL)This is a two-day learning programme for senior management and is normally held in conjunction with our annual Global Executive Meeting, a conference for senior management from Scomi’s global operations. These sessions use out-of-the box learning methods to reiterate key leadership messages to the senior management. For the programme in 2012 “Stallions Strengths”, the senior management group had to work with horses, which are known as highly sensitive sentient beings that cannot be forced into action. Thus the team through this exercise and using the Values in Action methodology were able to identify strengths and areas for improvement in nurturing teams.

Aside from its training programmes, GLaD also helms various strategic employee development initiatives within the organisation. Building the methodologies and the frameworks, GLaD works hand-in-hand with the business division’s Human Resource and Technical Training departments to implement the plans.

Technical Training

While the managerial and soft skills training and development moves in one stream, there is the other stream of technical training that is also focused upon. For Drilling Fluids, our trainings are mainly conducted at our Global Research and Technology Centre (“GRTC”), where we have an extensive training calendar that includes a compulsory Drilling Fluids School for drilling fluids engineers, technical and non-technical

drilling fluids operations, drilling operations, wellbore control, drilling engineering software, managing drilling operations and others. On several occasions, our trainers have travelled to a client’s location on special request to conduct these similar trainings. During the financial period, our GRTC training department conducted over 17 training sessions and a total of 13,130 training hours. Our Drilling Waste Management trainings are conducted at our research and engineering centre in Houston, while on-the-job trainings are conducted at the individual business units.

As part of our technical expertise development, we ensure that in every location that we operate in, the local employees are given equal opportunity to grow and develop their technical skills. Hence intensive on-the-job trainings are conducted to allow them to upskill themselves.

Our training and development programmes have created global diversity within our organisation with different nationalities working across the globe united under the one brand of Scomi and as part of Team Scomi.

Performance Management

To inculcate a high performance culture, SESB uses Performance Assessment & Capability Enhancement (“PACE”), a performance management tool, to assess its employees on three leadership capabilities, namely People Leadership, Personal Leadership and Business Leadership. PACE was conceptualised to evaluate an individual’s performance and also to highlight areas of improvement for personal development.

Through PACE, employees are engaged in a discussion to explore their strengths and agree on improvement areas while also mapping out a career plan that will allow them to realise their potential. Using PACE, the management is also able to identify employees with high potential and these individuals are presented with opportunities to advance and fast-track their careers.

Competency MappingHaving a talented and resourceful team is critical for our business continuity and hence we have placed great focus on talent management. To ensure our talents have a progressive growth path, an extensive competency mapping programme for the technical line has been completed. This allows each individual to clearly map their experiences against requirements and hence, clearly chart a career path for themselves. Through this we believe we will develop an engaged team that will translate into continued growth results for us.

Succession PlanningSESB’s succession plan involves nurturing and developing employees from within the organisation. Our efforts are always forward-looking, taking into account the future needs based on strategic plans, goals, objectives, priority programmes and projects.



We have in place, a succession plan to manage gaps that may arise when individuals in key positions leave or are promoted to ensure smooth transition and continuity at the workplace. Our plans mostly involve a combination of training and development programmes organised for existing staff as well as new recruits.

Career Planning DiscussionsThe Group Chief Executive Officer together with the Chief of Staff and Chief Learning Officer conduct sessions with selected employees to discuss their individual development plans and their career goals. Developmental interventions in terms of experience, exposure and training needs are then planned so that the company can provide the employee with every opportunity to ensure that those career goals are met.

Safety at Work

SESB continues to place great emphasis on the importance of maintaining best practices in Quality, Health, Safety and Environment (“QHSE”) at all levels in our workplaces. All our business units throughout the Group have QHSE teams whose main focus is to communicate our QHSE policies and safeguard our stakeholders including personnel, contractors and suppliers.

To cultivate the right attitude towards QHSE, the QHSE teams across all our locations globally organise a number of QHSE-related programmes including safety briefings, toolbox talks specific to operations, fire safety briefings and demonstrations and various campaigns communicated internally. Above all, Management has also taken a step further to ensure employees practise good QHSE standards by including QHSE requirements into performance appraisals.

Our drive to maintain best practices in QHSE has earned us commendations from many clients in various parts of the world including Australia, Indonesia, Malaysia and the United Arab Emirates. They have acknowledged our employees with certificates and awards for exemplary portrayal of QHSE standards.

Team Scomi

With all these initiatives slowly but surely being built brick by brick into the structure of SESB, we wish to evolve as part of Team Scomi into being a diverse group of individuals who are qualified yet street-smart, disciplined yet flexible and adaptable, goal oriented yet unconventional and team players yet self-starters.


Liquid Mud Plant at Kemaman Supply Base,

Malaysia

SCOMI ENERGY SERVICES BHD ANNUAL REPORT 2013P/39STATEMENT ON CORPORATE GOVERNANCE

A Statement on Corporate Governance communicates to the stakeholders the philosophy, policies, practices and culture of an organisation in pursuit of its objectives and goals.

Towards this purpose, the Board of Directors (“the Board”) of Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd) (“the Company”) sets out below the various principles and practices that were adopted with regards to the governance framework of the Company and its subsidiaries (“the Group”). In developing its governance framework, the Board was guided by the principles and best practices on structure and processes codified by the Malaysian Code on Corporate Governance 2012 (“the Code”).

Introduction

The Board remains committed to ensuring and continuously raising the level of corporate governance throughout the Group in the interests of the stakeholders. The goal is always to ensure that the Group remains at the forefront of good corporate governance and is recognised as such. As such, the Board remains committed to its responsibility towards governing, guiding and monitoring the direction of the Group within the eventual objective of creating and enhancing long term value aligned to the shareholders’ interests, while taking into account the interests of other stakeholders.

This Statement sets out the practices and processes that the Group has implemented with respect to each of the principles of corporate governance in its particular circumstances and the extent of compliance with the recommendations set out in the Code and the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) for the financial period ended 31 March 2013.

The Board of Directors

The Board The success of the Board in fulfilling its oversight responsibility depends on its size, composition and leadership qualities. The Board consists of the Chairman and six (6) Directors, including an Alternate Director, of whom four (4) are independent as defined by the MMLR. The Independent Directors make up more than 50% of the composition of the Board. Hence, the composition of the Board fulfils the prescribed requirement for one-third (1/3) of the composition of the Board to be Independent Directors. The appointment of Independent Directors is to ensure that the Board includes Directors who can effectively exercise their best judgment objectively for the exclusive benefit of the Company and the Group. The composition of the Board reflects a diversity of backgrounds, skills, experience and competencies in the areas of strategic planning, marketing, corporate governance, risk management, business operations and finance and accounting that enables the Board to function effectively in leading and directing the Group. Given the calibre and integrity of its members and the objectivity and independent judgment brought by the Independent Directors, the Board is of the opinion that its current size and composition contribute to an effective Board.

The Board’s role is to govern and set the strategic direction of the Company, whilst the Management manages the Company and the Group in accordance with the strategic direction and delegations of the Board. The responsibility of the Board is to oversee the activities of the Management in carrying out these delegated duties.


Whilst the Board has not established a Board Charter formalising a schedule of matters requiring the Board’s attention and deliberation at Board meetings and intends to do so in the forthcoming year, the Company is led and controlled by an effective Board where it assumes, amongst others, the following principal responsibilities in discharging its stewardship role and fiduciary and leadership functions:

• reviewing and adopting a strategic plan for the Company and the Group, and subsequently monitoring the implementation of the strategic plan by the Management to ensure sustainable growth of the Company and the Group;

• overseeing the conduct of the Company and the Group’s business;

• evaluating principal risks of the Company and the Group and ensuring the implementation of appropriate risk management and internal control systems to manage these risks;

• reviewing the adequacy and the integrity of the Company and the Group’s risk management and internal control systems;

• succession planning of the Company;• providing input and overseeing the development and

implementation of the investor relations and shareholder communications policy for the Company and the Group; and

• reviewing the adequacy and the integrity of the management information and internal controls system of the Company and the Group.

The Board meets at least a minimum of six (6) times a year, with special meetings convened as and when necessary. The Board is responsible for setting the corporate goals of the Group and business plan, which are implemented by the Management and monitored by the Board. Timely and periodic review of the Group’s performance and implementation of the business plan by the Management are conducted by the Board to assess the progress made towards achieving the overall goals of the Group.

The Board is of the opinion that its current composition and size is adequate to meet the requirements of the Group’s business objectives, and the Independent Non-Executive Directors bring added objectivity to the Board in its decision making.

The responsibilities of the Chairman of the Board and the Chief Executive Officer of the Company are clearly divided to ensure a balance of power and authority. The Chairman is responsible for ensuring the Board’s overall effectiveness with the Chief Executive Officer focusing on branding/marketing, strategy development and human resource development. The Chief Executive Officer has the general responsibility of managing operational and business aspects, organisational effectiveness and implementation of directives, strategies and decisions.

The Board’s approving authority is delegated to the Management through a clear and formally defined Delegated Authority Limits (DAL), which is the primary instrument that governs and manages the business decision-making process in the Group. Whilst the objective of the DAL is to empower Management, the key principle adhered to in its formulation is to ensure that a system of internal controls, and checks and balances are incorporated therein. The DAL is implemented in accordance with the Group’s policies and procedures and in compliance with the applicable statutory and regulatory requirements. The DAL is continuously reviewed and updated to ensure relevance to the Group’s operations.

In discharging its duties and responsibilities, the Board is guided by the Code of Conduct of the Group which provides the framework to ensure that the Group conducts itself in compliance with laws and ethical values. The Board and all employees of the Company and the Group are committed to adhering to best practices in corporate governance and observing the highest standards of integrity and behaviour in all activities conducted by the Company and the Group, including the interaction with its customers, suppliers, shareholders, employees and business partners, and within the community and environment in which the Company and the Group operate. The Board ensures that compliance is monitored through a Confirmation of Compliance declaration process where all employees of the Group of grades 15 and above are required to confirm their receipt and understanding of the Code of Conduct and further required to certify their continued compliance with the Code of Conduct on an annual basis. The Code of Conduct is available on the Company’s Corporate website at www.scomigroup.com.my.

The Group is also committed to openness, probity and accountability. An important aspect of accountability and transparency is the existence of a mechanism to enable employees of the Group to voice their concerns in a responsible and effective manner. It is a fundamental term of every contract of employment that an employee will faithfully serve his employer and not disclose confidential information about the employer’s affairs. Nevertheless, where an individual discovers information which he believes shows serious malpractice or wrongdoing within the organisation, there should be internal mechanisms to enable him to safely report, in good faith, any suspected breaches of the law or company procedure that has come to his notice.

STATEMENT ON CORPORATE GOVERNANCE

Documents

Scomi Energy Services Bhd (formerly known as Scomi Marine … CMYK Scomi 23.08.13 1533_Scomi ARCover 22cm (w) x 28cm (h) R4 Annual Report_Cover3 1533-03/13 foon/jeann Scomi Energy