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* Company name : PERISAI PETROLEUM TEKNOLOGI BHD * Stock name : PERISAI * Stock code : 0047 * Contact person : CHANDRASEGARAN * Designation : CHARTERED SECRETARY * Contact number : 03-26924271 E-mail address : [email protected]

Type : Reply to query

Subject : PERISAI PETROLEUM TEKNOLOGI BHD ("PERISAI" OR THE "COMPANY")

PROPOSED ACQUISITION BY PERISAI OF THE ENTIRE ISSUED AND PAID-UP SHARE CAPITAL OF GARUDA ENERGY (L) INC (“Target Company”) FOR A TOTAL PURCHASE CONSIDERATION OF USD70,000,000 TO BE SATISFIED BY WAY OF CASH AND THE ISSUANCE OF NEW ORDINARY SHARES OF PERISAI ("PROPOSED ACQUISITION")

Contents:-

We refer to our announcement dated 29 March 2011 ("Announcement") and to the query letter from Bursa Malaysia Securities Berhad (“Bursa”) dated 1st April 2011 requesting for additional information in relation to the Proposed Acquisition.

On behalf of the Board, we wish to state our response following the numbered paragraphs of Bursa’s letter dated 1st April 2011:-

1) The original costs of investment by the Vendor in the Target Company was approximately USD5 million pursuant to a Share Sale Agreement dated 10 May 2010.

1 2) The 5-day Weighted Average Market Price before signing the Term Sheet was RM0.74 per share.

3) The directors of Gryphon Energy (Asia Pacific) Sdn Bhd are Nagendran C. Nadarajah and Mahendran Suppiah. The shareholders of Gryphon Energy (Asia Pacific) Sdn Bhd are Ionel Valeriu Grozescu who holds 50% and Mahendran Suppiah who holds 50%.

4) INFORMATION PURSUANT TO APPENDIX 10A OF THE MAIN MARKET LISTING REQUIREMENTS.

4(i) RISK FACTORS

The risk factors of the Proposed Acquisition are as follows:

4.i.1 Business and Industry Risks

The Target Company is subject to general business risks in the oil and gas sector. The Rubicone (the jackup rig) owned by the Target Company is to be chartered on a bareboat basis to the Gryphon Energy (M) Sdn Bhd (“GEM” or “Charterer”) once the conversion to a MOPU is complete. In cases where a MOPU is chartered on a bareboat basis, the bulk of the inherent risks associated with the MOPU are borne by the Charterer and not by the Owner. Whilst Target Company shall endeavour to practice prudent financial management and carry out continuous reviews on its procedures to manage its risks, there is no assurance that any changes to the above factors, which are beyond Target Company ’s control, will not materially affect its business.

The Target Company’s business is also subject to the inherent risks in the oil and gas industry. The local oil and gas industry in Malaysia is currently a net exporter, and is susceptible to the fluctuation in crude oil prices and demand for petroleum products. As oil prices are dictated by global market forces, the economic climate in the foreign markets and the development in the local economy are important factors in determining the growth prospects of the industry. During a weak global economy, world oil consumption is curtailed as economic activities around the world decelerate. This accordingly affects demand for services provided by upstream oil and gas services companies. However, the above risk has been mitigated in view that charter rates for the Target Company shall be fixed in the charter contracts for the duration of the 2+1+1 years.

2 4.i.2 Competition

The bareboat charter of MOPU business is a competitive industry, with other players operating in the Malaysian market. Competitive factors include price and quality of services as well as the quality and availability of MOPUs.

The Target Company may face competition from increases in the supply of MOPU or other similar solutions in the market by its competitors. There is no assurance that increased competition will not materially affect its business. However, the risk of competition is mitigated by the bareboat charter of the MOPU to GEM.

4.i.3 Political and Economic Risks

The Target Company’s business, prospects, financial conditions and level of profitability may be affected by the development of the economic, political and regulatory environment in Malaysia which is principally where the Target Company will operate. Any adverse development in political situation, economic uncertainties or changes in the regulatory environment could materially and adversely affect the financial performance of the Target Company.

Although the Target Company will endeavour to continue to practice efficient operating procedures and prudent financial management and review its business development strategies in respect to the ever- changing political and economic conditions in Malaysia and the other countries where it operate, there can be no assurance that adverse political and economic developments, which are beyond the Target Company’s control, will not materially affect its performance or the industry as a whole.

4.i.4 Inherent Risks Associated with MOPU

The MOPU which is owned by the Target Company will be on a bareboat charter to GEM as stated above. In cases where a MOPU is chartered on a bareboat basis, the bulk of the inherent risks associated with the MOPU will be borne by the Charterers and not by the Owners. Hence the Target Company is largely not exposed to the inherent risk of damage and/or loss of its MOPU as a result of collisions, interruptions to operations caused by adverse weather conditions and mechanical failures. In the event of accidents apart from the Target Company’s own insurance, the Charterer will indemnify the Owner for any consequent direct loss and the Charterer under its own insurance has to bear the costs of clean up and salvage costs and other damages sustained in collisions as well as wreck removal charges.

3 4.i.5 Unexpected Breakdown of MOPU

As stated above in cases where a MOPU is chartered on a bareboat basis, all the maintenance and repair costs associated with the MOPU will be borne by the Charterers and not by the Owners. In the event there are breakdowns, all costs of repair and all attendant additional costs are borne by the Charterer. The Target Company will undergo statutory dry docking to ensure reliability of the MOPU and they have responsibility for keeping the MOPU’s certification up to date.

4.i.6 Acquisition Risks

Perisai Group expects that the Proposed Acquisition will allow the Target Company to leverage on the common infrastructures to reap economies of scale and operational synergies thereby enhancing the revenue and earnings of the enlarged Group. However, there is no assurance that the anticipated benefits and synergies expected from the Proposed Acquisition will be realised.

To a certain extent, the commercial risks faced by Perisai Group in respect of the Proposed Acquisition will be mitigated by the bareboat charter of the MOPU owned by the Target Company.

4(ii) There is no feasibility report prepared at this juncture. We have just entered into a Term Sheet and we are in the midst of conducting a due diligence exercise, which includes technical, legal and financials, on the Target Company and the asset. The due diligence exercise is expected to be completed prior to the signing of Share Sale Agreement;

4(iii) There is no additional financial commitment required from Perisai in putting the asset operational. The completion of the MOPU conversion lies with the Vendor. Perisai will only acquire the Target Company after the MOPU is operational and acceptable to the major oil company;

4(iv) The net book value of the jack up MOPU based on the Target Company’s latest audited accounts as at 31st December 2010 is USD12.3 million; and

4(v) The net asset, after netting of the shareholder’s advances, of the Target Company based on its latest audited accounts as at 31st December 2010 is USD (285,357) and the amount would be USD 9,999,678 should the shareholder’s advances be excluded.

4 This announcement is dated 1st April 2011.

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