OIL and gas offshore pipeline service provider Barakah Offshore Petroleum Bhd
has submitted about RM1bil worth of bids for jobs both here and overseas but is feeling the strain when it comes to securing new jobs.
“We’ve secured jobs this year but we don’t know about next year,” says vice-president and chief corporate officer Abdul Rahim Awang.
Not surprisingly, he says oil majors that dish out jobs to companies such as Barakah are adopting a wait-and-see attitude on the back of overall weak crude oil prices.
For work that is available, profit margins have been squeezed, falling from double-digit to single-digit as the job pie gets smaller. That profit squeeze is a result of increased competition in the industry.
“There are actually still a lot of jobs in the pipeline but most oil companies are holding back. A lot of it depends on when they want to implement their projects,” says Abdul Rahim, a former chief financial officer with Kencana Petroleum.
“Basically, jobs are hinged on their capital expenditure rollout,” he adds.
Barakah gets its jobs from companies like Petroliam Nasional Bhd (Petronas), Shell and Petrofac.
Besides local jobs, it has also done work in both Indonesia and Vietnam. Fresh bids for new jobs have been submitted in those countries.
The company’s share price is one of the many that has suffered in line with falling oil prices.
Crude oil has lost more than half of its value since last June, trading at levels seen only during the most recent recession of 2009. That low price makes it less desirable for oil and gas activities to be conducted.
Over that period, Barakah’s share price has also been slashed by some 50%.
Abdul Rahim says that for now, Barakah’s orderbook of about RM1.8bil should keep it busy until 2017.
Some of these jobs include hook-up and commissioning (HUC) for oil platforms in the peninsula, Sabah and Sarawak as well as pipeline works for Petronas’ Refinery and Petrochemical Integrated Development (Rapid) project in Pengerang, Johor.
Barakah has secured some RM130mil of work year-to-date, with the latest being a contract from Sarawak Shell to supply operational pipeline inspection gauges, accessories and related equipment and services.
“We are also participating in some pre-qualification exercises,” he says without elaborating.
The target for order book replenishment this year is RM300mil.
Besides providing offshore pipelines services, Barakah is also involved in offshore transportation and installation (T&I) works, HUC, onshore construction, underwater services and chartering of marine vessels and equipment.
The company reported a higher net profit of RM15.1mil on revenue of RM191mil for its first quarter ended March 31 compared with a net profit of RM9.4mil on revenue of RM84.4mil for the same period a year ago, due to ongoing projects that were brought forward from a year ago.
Amid a weak crude price environment, Barakah’s profit margins took a beating for the quarter under review also due to a change in revenue mix, as most of its projects completed were T&I projects that generally command lower margins than its other segments.
Meanwhile, Abdul Rahim says some of the strategies the company is employing to ensure it “remains competitive” include planning to expand into other areas such as technology-driven businesses as well as undertake cost-saving exercises.
“We want to make sure we can ride on the upturn (of the industry) when it comes.”
Barakah took over the listing status of Vastalux Energy Bhd in 2013, raising RM126mil in the process.
Earlier this year, research outfit UOB Kay Hian Malaysia noted that Barakah was a cheap proxy to the domestic T&I business, although it is not spared from Petronas’ prudent budgeting in the current oil crisis.
At its current price of 87.5sen , the stock is trading at a forward 12-month price-to-earnings ratio of about 9.8 times.
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