Drilling rig Naga 5 of OMW Oil & Gas working for PetroVietnam, 320km off the Vietnam coast. PICTURE: OMW Oil & Gas
By Arno Maierbrugger
Gulf Times Correspondent
Bangkok
Kuala Lumpur-based drilling and oilfield services provider UMW Oil & Gas Corp Bhd is setting its sight on the Middle East in a bid to secure lucrative contracts in the industry, local media reported.
The company, whose earnings dropped 93% in the second quarter ended June 30, is in dire need for new jobs away from its home market Malaysia where the downfall in oil prices has created uncertainty on the future of the hydrocarbon industry growth.
The company’s president Rohaizad Darus said UMW Oil & Gas is currently bidding for 23 contracts valued a total more than $1bn in Malaysia and other countries, including the Middle East. “In order to get sufficient jobs, we must target where the biggest demand is, which is the Middle East,” Darus said, adding that contracts especially in the Gulf states, where he particularly mentioned Saudi Arabia, would not make up for the reduction of business in Southeast Asia, but at least provide a “buffer” for the company.
However, operations in the Middle East would be a new arena for UMW Oil & Gas. Its current foreign projects are limited to six countries, namely China, Vietnam, Myanmar, the Philippines, Thailand and Turkmenistan, while in Malaysia it is mainly dependent on government-owned oil giant Petronas. Due to the continued low oil price, most of the company’s eight offshore rigs are at risk of standing idle by the end of the year.
Plans of UMW Oil & Gas to enter the Middle Eastern market are not new, though. In May this year, at a press conference after the company’s annual general meeting, Darus already talked about such expansion plans which now are obviously getting another push from the weak earnings in the second quarter 2015, when net profit fell to just $1.04mn from $14.2mn in the same period last year, mainly owing to lower revenue contribution from both its drilling and oilfield services segments. This came after the company already registered a 40.1% decline in net profit to $7.6mn in the first quarter this year over the same period last year.
Darus said he was not surprised by the low crude oil price as he was aware that the oil and gas sector is cyclical. However, he noted that the firm’s main concern during this low oil price phase was to achieve “decent financial results“ at a time when oil and gas industry as a whole has seen a 30% decline in the number of tenders locally and internationally.
UMW Oil & Gas is a relatively small player in the Southeast Asian region, competing with far larger Corps such as British contract drillers Noble Corp and Enso plc. It is a subsidiary of state-backed Malaysian industrial conglomerate UMW Holdings, one of the largest companies and also one of the leading industrial enterprises in Malaysia, active across Asia-Pacific. Parts of UMW Oil & Gas were listed at the Kuala Lumpur Stock Exchange in a $750mn-IPO at the end of 2013 at an issue price per share of 2.80 ringgit. The price shot up to 3.92 ringgit in September 2014, just to slump to an all-time low of 0.86 ringgit in August 2015 in the wake of the weakening Chinese economy. The price recovered to 1.25 ringgit as of last week, though.
