UMW's semi-submersible drilling rig, Naga 1 (for CR coffeetable book)
KUALA LUMPUR: UMW Oil & Gas Corp Bhd (UMW-OG), which ceased to be a subsidiary of UMW Holdings Bhd
last month, reduced its loss to RM50.99mil in the second quarter (Q2) ended June 30 from RM67.25mil a year earlier.
This marked the first quarter in more than two years that the company showed a year-on-year improvement in its bottom-line results.
Revenue, meanwhile, increased by 8% to RM139.91mil.
UMW-OG, which provides drilling and oilfield services, told Bursa Malaysia that the better performance was due to higher rig utilisation rate coupled with lower losses from oilfield services.
Five out of the group’s seven jack-up rigs were income-generating with four contributing full-quarter revenue, thereby achieving an overall asset utilisation rate of 68%. This compared to three jack-up rigs and the Naga 1 submersible rig in Q2 last year, all of which were working for less than the full quarter.
However, the positive effect from higher asset utilisation was offset by the lower time charter rates as well as zero contribution from Naga 1, which was disposed of in May.
As for its oilfield services segment, UMW-OG registered a lower loss before tax of RM0.5mil in the quarter under review versus a loss of RM10.1mil previously.
“Concerted efforts to reduce operating costs and cut losses, partly contributed to the smaller loss in the second quarter of 2017,” it said.
Despite the lower loss in Q2, UMW-OG, which has already been in the red for two consecutive financial years, posted a wider loss attributable to shareholders in the first half year to June 30 - up 17% to RM155.10mil.
Revenue slipped 2% to RM214.19mil.
The company said lower time charter rates and reduced foreign exchange gain on translation resulted in the bigger six-month loss.
This was despite the higher asset utilisation achieved in the period.
UMW-OG said during the first half of 2017, two jack-up rigs achieved 100% asset utilisation while another three jack-up rigs began operation progressively.
Average asset utilisation rate for the first half of 2017 was 47% (H1 FY16: 29%).
UMW O-G said the group expected its financial performance for the financial year 2017 to remain challenging due to the low time charter rate environment.
“Barring any unforeseen circumstances, full utilisation of all seven jack-up rigs is expected by September 2017. However, there are potential risks of off hire for some of the rigs in view that some of those contracts are short term in nature,” it said.
“While asset utilisation is improving for the second half of 2017, the charter rates continue to remain soft, in line with prevailing market rates.”
On Aug 9, UMW Naga 5, the group’s only idling jack-up drilling rig at present, secured a contract from Repsol Oil & Gas Malaysia Ltd for an initial contract duration of one year with an option to extend for another year.
In a separate filing with the stock exchange, UMW-OG said the work, expected to start in the middle of next month, was valued at RM113mil.
In a recent circular to shareholders dated Aug 3, UMW-OG said it was in various stages of tendering exercises for 30 potential new jobs, with a combined estimated value of RM3.2bil, for its jack-up drilling rigs in Malaysia and overseas.
It also noted that the oilfield services segment was also expected to recover, albeit at a much slower rate, in line with the sub-sector recovery.
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