PROPOSED DIVERSIFICATION OF THE EXISTING BUSINESS OF CARIMIN AND ITS SUBSIDIARIES TO INCLUDE THE BUSINESS OF CONSTRUCTION ( PROPOSED DIVERSIFICATION )

CARIMIN PETROLEUM BERHAD ( CARIMIN OR COMPANY ) PROPOSED DIVERSIFICATION OF THE EXISTING BUSINESS OF CARIMIN AND ITS SUBSIDIARIES TO INCLUDE THE BUSINESS OF CONSTRUCTION ( PROPOSED DIVERSIFICATION ) 1. INTRODUCTION On behalf of the Board of Directors of Carimin ( Board ), Alliance Investment Bank Berhad wishes to announce that the Company proposes to undertake the proposed diversification of the existing business of Carimin and its subsidiaries ( Carimin Group or Group ) to include the business of construction. 2. DETAILS OF THE PROPOSED DIVERSIFICATION Presently, the Group is principally involved in the provision of offshore hook-up and commissioning services, maintenance, engineering and minor fabrication services for offshore and onshore structures. In addition, it also provides inspection services, project management support services including sourcing for consultants, technical professionals, engineers, skilled personnel and other quality assurance services. As part of its marine spread activities, the Group deploys marine vessels such as work barges, accommodation vessels, crew boats and anchor handling tug supply vessels ( Existing Principal Business ). On 20 July 2016, the Board announced that the Company had, on even date, executed a share sale agreement to acquire 60% of the issued and paid-up share capital of Noblecorp Builders Sdn Bhd (now known as Carimin Bina Sdn Bhd ( CBSB )) comprising 1,500,000 ordinary shares of RM1.00 each in CBSB for a total cash consideration of RM838,000 ( Acquisition ). CBSB is principally involved in general civil contracting and geotechnical work. The Acquisition was completed on 8 August 2016 and CBSB has become a 60% owned subsidiary of Carimin. Pursuant to the Acquisition, the construction business is expected to provide a new source of revenue for the Carimin Group. Based on the current projects undertaken by CBSB (as set out in Section 2.2 of this announcement) and with CBSB s intended application for Bumiputera status on its existing Construction Industry Development Board Malaysia ( CIDB ) G7 classification, CBSB would have the opportunity to tender for projects designated for Bumiputera contractors. As such, it is envisaged that CBSB could secure more contracts and the Board anticipates that the projects to be undertaken by CBSB may contribute more than 25% of the Group s net profit in the future. As such, the Board proposes to seek prior approval for the Proposed Diversification from the shareholders of the Company at the Extraordinary General Meeting to be convened pursuant to Paragraph 10.13(1) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. Notwithstanding the Proposed Diversification, the Group intends to continue with the Existing Principal Business as its main business activity. 1

2.1 Information on CBSB CBSB was incorporated in Malaysia on 21 December 2004 under the Companies Act, 1965. CBSB is principally involved in general civil contracting and geotechnical work. CBSB is an active civil contractor registered with CIDB under Grade G7 category. As at the date of this announcement, CBSB s authorised share capital is RM5,000,000 comprising 5,000,000 ordinary shares of RM1.00 each of which RM2,500,000 comprising 2,500,000 ordinary shares of RM1.00 each have been issued and fully paid-up. 2.2 Details on key projects undertaken and completed by CBSB (a) Key current projects undertaken by CBSB Type of construction Geotechnical - Supply and installation of prefabricated vertical drain ( PVD ) Project name Client Provisional contract value Reclamation works for 49.3 hectares located in Mukim Tanjung Kupang, District Johor Bahru Tengah for PVD Package Extension of above (Section 3) JBB Builders Sdn Bhd JBB Builders Sdn Bhd (RM 000) Estimated project timeframe* 4,056 2015-2016 3,240 2016 Building construction One (1)-storey banquet hall and two (2)-storey office on Lot HSM 24726 - HSM 24737 PT 62887, Seksyen 14, Bandar Baru Bangi, Mukim Kajang, Daerah Hulu Langat, Selangor Darul Ehsan WHE Bina Sdn Bhd 5,987 2014-2017 Slope stabilisation and waterbody lining Pond liner for the proposed housing and business development, Blok 7, Cyber 1, Persiaran Semarak Api, Zon Pembangunan Flagship Cyberjaya, Cyberjaya, Selangor Darul Ehsan Eco Setia Sdn Bhd 3,365 2014-2016 Note:- * Based on the management s estimation. 2

(b) Key completed projects undertaken by CBSB Type of construction Geotechnical - Supply and installation of geotextiles and PVD Project name Client Contract value (RM 000) Development of new low cost carrier terminal and associated works at Kuala Lumpur International Airport ( KLIA ), Sepang, Selangor Darul Ehsan (Package EW01 - site preparation, earthworks and main drainage) WCT Construction Sdn Bhd Project timeframe 46,177 2009-2015 Geotechnical - Supply and installation of geotextiles and PVD Development of new low cost carrier terminal and associated works at KLIA, Sepang, Selangor Darul Ehsan (Package EW02A - site preparation, earthworks and main drainage for runway 3 and its associated taxiways) Gadang Engineering (M) Sdn Bhd 7,961 2010-2014 Geotechnical - Supply and installation of geotextiles and PVD Development of new low cost carrier terminal and associated works at KLIA, Sepang, Selangor Darul Ehsan (Package LF06 - perimeter road and security road and fencing) Suhati Sdn Bhd 8,120 2010-2013 3. RATIONALE FOR THE PROPOSED DIVERSIFICATION The Group s Existing Principal Business is within the oil and gas industry which is experiencing a downturn cycle leading to a challenging market environment for the industry. Consequently, the Group s reported revenue and profit have been affected as follows:- (i) (ii) For the financial year ended ( FYE ) 30 June 2015, the Group recorded a total revenue of approximately RM163.44 million, representing a decrease of approximately RM82.14 million or 33.45% from the previous FYE 30 June 2014 of RM245.58 million. The Group had reported a loss after tax amounting to approximately RM8.25 million for the FYE 30 June 2015 as compared to a profit after tax of approximately RM21.90 million for the FYE 30 June 2014; and The Group recorded a total revenue of approximately RM123.53 million for the FYE 30 June 2016, representing a decrease of approximately RM39.91 million or 24.42% from the previous year s revenue of RM163.44 million. However, the Group managed to register a profit after tax for the FYE 30 June 2016 of approximately RM3.45 million as compared to the loss after tax for the FYE 30 June 2015 of approximately RM8.25 million. 3

Currently, the Group derives most of its revenue from the manpower services and offshore hook-up and commissioning activities. In view of the reduced demand for the Existing Principal Business and the uncertainty of the oil and gas industry, the Group has identified construction business as complementary to its core competency. The Group has within its directors, senior management and key personnel, the required skill sets, expertise and experience to develop and grow the construction business. CBSB is an active civil contractor registered with CIDB under Grade G7 category undertaking sub-contracting works. With CBSB s intended application for Bumiputera status on its existing CIDB G7 classification, CBSB would have the opportunity to tender for projects designated for Bumiputera contractors. As such, it is envisaged that CBSB could secure more contracts and shall provide an additional revenue stream to the Group and reduce the Group s dependency on its Existing Principal Business. The Group may allocate 25% or more of the Group s net assets to the construction business as it diversifies into the construction business which may contribute more than 25% of the Group s net profit in the future and effectively enhancing the returns on shareholders fund. The projects listed in Section 2.2 of this announcement provide the credentials of experiences and track record for CBSB to participate in larger scale projects. The inclusion of Carimin Group s resources including key management experiences would enhance CBSB s capacity and capability to execute projects secured as it diversifies into the construction business. The profiles of the key management with experience in construction industry are set out below:- (i) Mokhtar Bin Hashim ( En. Mokhtar ) En. Mokhtar, aged 57, is the Managing Director of the Group. In 1982, he graduated with a Bachelor of Science in Civil Engineering from the University of Salford, United Kingdom. In the same year, he started his career with the Public Works Department as a Road Design Engineer. In 1984, he left the Public Works Department and joined Esso Production Malaysia Inc where he held various posts including Project Construction Supervisor, Senior Contracts Engineer/Administrator, Senior Construction Engineer, Senior Off-Take and Structures Engineer, Lead Construction Supervisor and Senior Fabrication Supervisor. Subsequently in 1994, he left Esso Production Malaysia Inc and joined the Group. Since then, he has been instrumental in the growth and development of the Group. As the Managing Director, he is currently responsible for the overall management and charting strategic directions of the Group. (ii) Lim Yew Hoe ( En. Lim ) En. Lim, aged 48, joined the Group as an Executive Director on 19 April 2016. He has been involved in the construction industry for more than 20 years. He started his career with Intan Kuala Lumpur Sdn Bhd, a company involved in geosynthetic engineering and later joined the Emas Kiara Industries Berhad Group in 1995 where he played an active role in the growth of the group s geosynthetic supply and installation business. En. Lim was also involved in the development of design and build projects with geosynthetic engineering and a key member of the group s expansion to overseas markets. In 2001, he obtained an Executive Master's in Business Administration from Greenwich University, Australia. He was also an Executive Director of Emas Kiara Industries Berhad Group from 1999 to February 2016 and responsible for finance, operations management and business development of the group. 4

(iii) Ng Mai Mai ( Pn. Ng ) Pn. Ng, aged 52, is a Director of CBSB and is currently overseeing the Operations and Contracting Department of CBSB. She graduated from Herriot-Watt University, Scotland with a Bachelor of Science in Building Economics and Quantity Surveying in 1988 and a Master of Science in Construction Management in 1989. Pn. Ng started her career as a Quantity Surveyor in 1989 with Konsultan Perkhidmatan Kontrak. She has over 25 years of experience in the construction industry where she held various positions, amongst others, General Manager, Head of Tender Department and Senior Contract Manager. She was the Chief Quantity Surveyor of Seloga Jaya Sdn Bhd from 2002 to 2007 where her responsibilities include, amongst others, the feasibility study of the projects such as preparing project budgets, cash flow planning and control, project implementation and reporting and review of project design and value engineering. Subsequently, she joined Vantage Lifestyle Sdn Bhd in 2008 as the Deputy General Manager where she was mainly incharge of the Serai @ Bukit Segambut development where she was actively involved in the financial planning of the project, sourcing of suppliers and contractors, sales and cash flows management of the development. In 2010, she joined Kemaman Bitumen Company Sdn Bhd as the General Manager of the Procurement and Contracts Department where she was mainly involved in the sourcing of supplier for the refinery, preparing and coordinating the tender projects and managing of warehouse team. Pn. Ng joined CBSB in 2014 as Chief Operating Officer. (iv) Chung Chee Wai ( En. Chung ) En. Chung, aged 51, is the Senior Project Co-ordinator of CBSB. He is currently responsible for the implementation of project construction works for CBSB. He graduated from the National University of Singapore with a Bachelor of Engineering in Civil Engineering in 1990. En. Chung started his career as a Project Engineer in 1990 with a precast concrete company. He has experience in precast concrete works and as a member of CIDB task team, he was also involved in the establishing of key performance indicator for the implementation of Industrialised Building System Road Map 2003 2010 in Malaysia. He also has extensive experience in civil and structural engineering and geotechnical engineering works in Malaysia, Singapore, Thailand and India. He joined Emas Kiara Marketing Sdn Bhd in 2009, where he was involved in the technical proposals and management of supply and installation of geosynthetics and civil engineering projects and was assigned to CBSB on project basis. (v) Abd Hamid Husin ( En. Hamid ) En. Hamid, aged 56, is the General Manager of Project Services Department at Carimin. He graduated from University of London with a Bachelor of Science in Civil Engineering in 1986. In 1987, he was a Trainee Engineer with the Development Division of the Melaka Tengah District Office. He began his career in 1988 with Esso Production Malaysia Inc as Project Engineer, where he was responsible for the daily supervision of offshore contractors, supervision of repair work on oil risers at production platforms, and supervising fabrication work at third-party fabrication yards in Pasir Gudang, Johor. Subsequently, in 1996, he joined Sumatec Corporation Sdn Bhd as a Project Manager responsible for onshore construction work on oil terminals, refineries and petrochemical plants. He left Sumatec Corporation Sdn Bhd in 2010 and joined Kencana HL Sdn Bhd as a Senior Proposal Manager, where he was in charge of the company s tendering department. He left Kencana HL Sdn Bhd and joined the Group in 2011. 5

The Group will leverage on the expertise of the key management personnel mentioned above in managing the construction business. Presently, the Group does not have any plan to recruit new personnel for the construction business. Any potential recruitment in the future will be dependent on the size and requirements of the projects to be secured and also the availability of qualified and suitable candidates for the Group. 4. INDUSTRY OVERVIEW, OUTLOOK AND FUTURE PROSPECTS 4.1 Overview and outlook of the Malaysian Economy The Malaysian economy registered a growth of 4.0% in the second quarter of 2016 (1Q 2016: 4.2%). Despite the stronger expansion in domestic demand, growth was weighed down by the continued decline in net exports and a significant drawdown in stocks. On the supply side, growth continued to be driven by the major economic sectors. On a quarter-on-quarter seasonally-adjusted basis, the economy recorded a growth of 0.7% (1Q 2016: 1.0%). Private sector activity remained the key driver of growth, expanding at a faster pace of 6.1% in the second quarter (1Q 2016: 4.5%). Private consumption grew by 6.3% (1Q 2016: 5.3%), supported by continued wage and employment growth as well as the additional disposable income from Government measures. On the supply side, all economic sectors continued to expand, with the exception of the agriculture sector. The higher growth in the services sector was underpinned primarily by stronger household spending while the manufacturing sector was supported by the electronics and electrical cluster. Growth in the construction sector was stronger, dominated by the civil engineering subsector. Growth of the Malaysian economy is expected to be 4-4.5%. Domestic demand will continue to be the main driver of growth, supported primarily by private sector spending. Private consumption is projected to expand further, underpinned by continued growth in wages and employment, as well as additional disposable income from Government measures. While the growth in private investment has moderated due to lower capital expenditures in the oil and gas sector, overall investment will remain supported by the implementation of infrastructure development projects and capital spending in the manufacturing and services sectors. Exports are projected to remain weak given the subdued global demand. Overall, while domestic conditions remain resilient, uncertainties in the external environment may pose downside risks to Malaysia s growth prospects. (Source: Economic and Financial Developments in Malaysia in the Second Quarter of 2016, Bank Negara Malaysia) 4.2 Overview and outlook of the construction industry in Malaysia The construction sector grew by 8.8% in the second quarter (1Q 2016: 7.9%), driven by the civil engineering sub-sector. Growth in the civil engineering sub-sector was stronger, underpinned by petrochemical, transport and utility-related projects. In the special trade sub-sector, growth was sustained, supported by early-work activity such as site clearance and piling activity. The residential sub-sector expanded at a faster pace during the quarter, reflecting higher construction activity of both high-end and affordable housing projects. In the nonresidential sub-sector, growth weakened further following slower construction activity in the commercial property, especially in the office space segment. (Source: Economic and Financial Developments in Malaysia in the Second Quarter of 2016, Bank Negara Malaysia) 6

Federal Government development expenditure (DE) is expected to expand mainly led by construction of major infrastructure projects. The construction sector continues to expand driven by ongoing private investment and Tenth Malaysia Plan (10MP) projects. The construction sector is projected to increase by 8.4% in 2016 (2015: 8.8%), largely driven by infrastructure projects. The sector is expected to benefit, particularly from civil-engineering activities such as Pan-Borneo Highway, MRT Line 2 and Pengerang Integrated Complex (PIC) project. (Source: Economic Report 2015/2016, Ministry of Finance Malaysia) 4.3 Prospects and future plans of the Group The higher production by major oil-producing economies and shale oil producers in the United States of America, amid moderating global demand, contributed to persistent oversupply concerns in the global markets and thus lower crude oil prices. Furthermore, the successful conclusion of the Iranian nuclear deal, the commitment of the Organisation of the Petroleum Exporting Countries to not cut the existing production levels, and the worsening sentiments over global growth prospects of several large emerging economies have also contributed to the lower crude oil price. Arising thereof, oil and gas majors have reduced its capital expenditure and operational expenditure for 2016. Premised on the above, in view of the uncertainty of the oil and gas industry, this has resulted in lower unit rates and volume of work orders for Carimin and as a result, the revenue and profit after tax of Carimin had been affected. In order to mitigate the dependency of the Group on its Existing Principal Business, the Board is undertaking the Proposed Diversification to include the construction business. The Board believes that the Proposed Diversification is complementary with the Group s core competency as the pool of staff including En. Mokhtar, the Managing Director of the Group has the necessary experiences for construction operations and management. He is supported by other key management personnel (as set out in Section 3 of this announcement) who have significant experience in the construction business, which is critical for the Group s success in the construction industry. As mentioned in Section 4.2 of this announcement, the construction sector grew by 8.8% in the second (2 nd ) quarter of 2016 mainly driven by the growth in the civil engineering sub-sector, underpinned by petrochemical, transport and utility-related projects. With the ongoing private investment and Tenth Malaysia Plan projects, the construction sector is projected to increase by 8.4% in 2016, largely driven by infrastructure projects. Given the outlook of the Malaysian economy and the construction industry in Malaysia as set out in Sections 4.1 and 4.2 of this announcement, the Board is of the view that the prospects for the Proposed Diversification is favourable. The Board is also of the view that the Proposed Diversification represents an opportunity for the Group to expand its revenue sources beyond its current revenue base. Moving forward, the Group will seek further opportunities in the construction business. 7

5. RISK FACTORS 5.1 Business risk Pursuant to the Proposed Diversification, the Carimin Group will be subject to risks inherent to the construction industry. These may include, amongst others, timely commencement and completion of projects, project defects, dependency on operating permits, licenses, certificates and/or regulatory approvals, fluctuations in the prices of raw materials (i.e., metal, cements, etc), availability of raw materials and labour, adverse weather conditions and changes in the regulatory framework governing the construction industry. The Group will adopt prudent management and efficient operating procedures to adapt to any negative changes in the construction industry. However, no assurance can be given that any changes in these factors will not have any material adverse effect on the Group. 5.2 Business diversification risk As the implementation of the Proposed Diversification would result in the Group s business to include construction business, the Group will be subject to new challenges and risks arising from the construction business in which the Group has not been directly participating in the past. The Group seeks to mitigate these risks by leveraging on the extensive work experiences of the key management of the Group (please refer to Section 3 of this announcement for further details) as well as careful planning and allocation of resources. Nevertheless, no assurance can be given that any changes to these factors will not have a material adverse effect on the Group s business and earnings in the future. 5.3 Competition risk Pursuant to the Proposed Diversification, the Group will face direct competition from both new entrants and existing players in the construction industry. Nevertheless, the Group will continue to take proactive measures to remain competitive in the construction industry by creating niches, utilising innovative engineering applications and actively seeking new opportunities in the construction industry. However, no assurance can be given that any changes to these factors could have an adverse impact on the Group. 5.4 Political, economic and regulatory risk Similar to other types of businesses, political and economic conditions as well as regulatory developments in Malaysia could have a material effect on the Group s foray into the construction business and consequently the financial performance of the Group. Adverse political, economic and/or regulatory conditions or developments include but are not limited to risk of war, change in political leadership and environment, unfavourable changes in government policies, laws and legislation, nationalisation, changes in interest rates, changes in methods of taxation and economic recession. For example, the construction industry will be sensitive to, inter alia, interest rate movements, consumer sentiments, regulation and taxation changes or the gradual tightening of credit conditions. While the Group seeks to limit the impact of such risks in its diversification by monitoring and adapting business strategies in response to major developments in the political, economic and regulatory environment, there is no assurance that any change to the above factors will not have a material adverse effect on the business and prospects of the Group s construction business. 8

5.5 Dependency on key management personnel As in any other business, the involvement of the Group in the construction industry depends largely on the abilities, skills, experience, competency and continued efforts of its key management personnel for the construction business. The loss of any of the relevant key management personnel without suitable and timely replacement, or the inability of the Group to attract and retain other qualified personnel, could adversely affect the Group s construction business and consequently, its revenue and profitability. Recognising the importance of having key management personnel, the Group will continue to adopt appropriate approaches to retain such key personnel. To avoid over dependence on any key management personnel, the Company strives to attract qualified and experienced employees to complement the key management team. This will in turn help to ensure continuity and competency of the key management team. 5.6 Financing risk Construction is considered a capital intensive business. The availability of, or the ability to secure adequate financing is critical to the Group s ability to embark on and complete construction projects. The incurrence of debt to finance the construction costs will result in new interest/principal servicing obligations to the Group. Besides increasing the gearing level, new bank borrowings incurred could result in operating and financial covenants being imposed that could restrict, to a certain extent, its operations and its ability to pay dividends to its shareholders. If the Group does not have adequate resources to finance the construction projects, this will have an adverse effect on its future construction business. In mitigating such risks, the Group will actively review its debt portfolio taking into account the level, structure and nature of borrowings and seek to adopt an optimal mix of financing that is cost-effective. While every effort is taken to ensure that no adverse effects would arise from the interest/principal servicing commitments, there is no assurance that it will not have any material impact on the Group s financial performance in the future. Nevertheless, the Group is expected to be able to reduce the gearing level via the future earnings and cash flows to be generated from the construction business in the future. 6. FINANCIAL EFFECTS OF THE PROPOSED DIVERSIFICATION The Proposed Diversification will not have any effect on the issued and paid-up share capital, net assets per share and gearing, earnings and earnings per share and the substantial shareholders shareholdings of the Company. However, the profit contributions arising from the construction business are expected to have a positive impact on the future net assets of the Group while the gearing of the Group will depend on, amongst others, the manner of funding for the construction projects. Barring any unforeseen circumstances, the Board expects that the Proposed Diversification will contribute positively to the future earnings of the Group. 7. APPROVALS REQUIRED The Proposed Diversification is subject to and conditional upon the approval being obtained from the shareholders of the Company at the Extraordinary General Meeting to be convened and any other relevant authorities, if required. The Proposed Diversification is not conditional or inter-conditional upon any other corporate exercises undertaken or to be undertaken by the Company. 9

8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM None of the Directors of Carimin, its major shareholders and/or any persons connected with them has any interest, direct or indirect, in the Proposed Diversification. 9. DIRECTORS STATEMENT The Board, having considered all aspects of the Proposed Diversification (including but not limited to the rationale, financial effects and risks associated with the Proposed Diversification), is of the opinion that the Proposed Diversification is in the best interests of the Company. 10. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed Diversification is expected to be completed by the fourth (4 th ) quarter of 2016. 11. ADVISER Alliance Investment Bank Berhad has been appointed as the Principal Adviser to the Company for the Proposed Diversification. This announcement is dated 22 September 2016. 10