PETALING JAYA: UMW Oil & Gas Corp Bhd (UMW-OG) got a shot in the arm when it won a contract for one of its jack-up drilling rigs.
However, the company did not state the value of the contract in a Bursa Malaysia statement.
UMW-OG procured a letter of award from Petronas Carigali Sdn Bhd for the provision of drilling rig services, whereby the company’s UMW NAGA 7 will be assigned for a duration of 18 months.
“The provision of the drilling rig services is expected to contribute positively to the earnings and net assets of UMW-OG during the contract period for the financial period ending Dec 31, 2017,” said UMW-OG.
The jack-up drilling rig UMW NAGA 7, a premium independent-leg cantilever jack-up rig, has a drilling depth capability of 30,000 ft and a rated operating water depth of 375 ft.
UMW-OG has been on the lookout for such contracts as it sought to secure contracts for the firm’s fleet of drilling rigs, which can be costly to maintain.
In addition, domestic oil and gas jobs have been scarce following the decision by Petronas to gradually reduce capital expenditure in the coming years in a weak oil price environment.
According to a previous report, at least half of UMW-OG’s tenders stem from domestic jobs.
Analysts forecast the demand for jack-up rigs in Malaysia to fall to six units this year versus eight last year.
Furthermore, the South-East Asian region has one of the lowest utilisation rates for jack-up rigs in the world, suggesting a worse-than-average oversupply of jack-up rigs in the region.
For the nine-month period ended Sept 30, 2016, UMW-OG registered revenue and net loss of RM267.34mil and RM267.76mil respectively.
During the third quarter of 2016, the drilling services segment contributed revenue of RM46.3mil, a 77.3% decrease over the RM203.7mil recorded in the same quarter last year.
In its quarterly financial report, UMW-OG said the fall in revenue for the company’s drilling services segment was primarily due to more idle assets in the third quarter of 2016 compared to the same quarter of the previous year.
“Despite slight improvement in demand for drilling rigs, the long lead time in translating capital and operating expenditures into drilling contracts has resulted in idling in between contracts in 2016.
“Besides that, low assets utilisation and time charter rates due to stiff competitions from excess offshore rigs, resulted in the drop in revenue,” it said.