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Marine fuel seller Brightoil Petroleum (Holdings) Ltd has informed the Stock Exchange of Hong Kong (SEHK) that its Audit Committee has "encountered a number of difficulties" with regard to the work being carried out by an independent adviser to review previous transactions made by the company - which in turn has resulted in the delay of the publication of its 2017 annual results and 2018 interim results.

Brightoil explained in an update to SEHK that the difficulties it had encountered revolved around "determining the scope of the investigation and understanding the rationales behind the steps or works recommended by the Independent Adviser that require more time and effort to resolve than had been anticipated".

According to the Audit Committee, the key work performed up until now by the independent adviser includes reviewing the financial data of the relevant entities; performing general background checks on customers; checking the sales data, invoices and supporting documents; checking the documentation and terms and conditions of the transactions; conducting an analysis of trades; performing a credit review process of the customers concerned, and potential repetitive sales; conducting integrity due diligence work on customers and suppliers; and carrying out benchmark analysis.

Costly process

Discussing the next phase of work to be performed by the independent adviser, Brightoil noted that this would involve "more detailed analysis into the background and commercial rationales for conducting and continuing the transactions, and analysis of the relevant transactional records, documents and communications", and concluded that the "substantial work" yet to be performed would be costly.

Outlining its concerns regarding the work already carried out and yet to be performed, Brightoil said: "The potential costs, as presently advised, have exceeded the expectations of the Audit Committee as they seem not to be proportionate to the initial budget. Substantial sums have already been incurred, and the Audit Committee is concerned to keep costs under control having regard to proportionality and the circumstances of the situation. The Audit Committee are not only deeply concerned about the staggering amount of the present costs estimate but also the possibilities that these estimate[s] could not be contained and could go out of control in completing the Investigation procedures."

As a result, the bunker firm explained that it is now looking at alternative solutions in an effort to control the costs of the independent review.

"The Audit Committee is presently liaising with the Independent Adviser in relation to matters of costs and budgeting and also to consider the feasibility and appropriateness of alternative procedures that could be less costly and which can be done efficiently bearing in mind the desirability of completing the Review as soon as practicable.

"The Audit Committee are also in the course of consulting with further professional advisors for views and the recommendations on control of costs and the methodologies to be applied," Brightoil said.

Trading in shares of Hong Kong-listed Brightoil was halted on October 3, with the company requesting a suspension until the publication of its annual financial results.