KUALA LUMPUR: Due to a lack of new jobs, UMW Oil And Gas Corp Bhd (UMW-OG) has revealed that it has shed some 300 employees as part of a group-wide cost-cutting exercise, which it said was necessary to address operating costs.
President Rohaizad Darus said the headcount reduction comprised workers who were on a contractual basis. The company currently has 736 employees, about a third of which comprise contract staff.
“We have made the necessary rationalisations via the reduction in manpower, renegotiations with our vendors, and reduction in capital costs. We are looking at more reductions, and we have already saved some RM18mil in expenses during the first quarter alone,” he told reporters following the company’s AGM in Kuala Lumpur yesterday.
He noted that any further cuts in the group’s workforce will be based on the flow of jobs going forward. In its fleet, five of UMW-OG’s eight drilling rigs are currently awaiting contracts.
“We are going to try to reduce it by a little bit more, but it will be focused on the contract staff and not permanent ones. This includes non-renewals of existing contractual personnel,” he said.
On the other hand, Rohaizad maintained that he is confident that the recent rebound in crude oil prices marked an upturn in the fortunes of the oil and gas industry, and will pave the way for a better earnings performance for the company this year.
Brent crude prices rose to their highest in six months on Tuesday and were just a few cents shy of hitting the US$50-per-barrel mark. This marks a near doubling in oil prices since January when oil prices hit a low of US$27 per barrel.
Oil prices would need to stay at their present levels or rise further to spur new offshore drilling activities due to the high capital requirements.
UMW-OG is currently bidding for US$628mil (RM2.52bil) worth of jobs for its fleet of drilling rigs. Out of the 22 tenders it is currently participating in, 48% are for domestic contracts while the remaining 52% are in international waters.
While low utilisation and low charter rates remain key concerns, Rohaizad said the group’s earnings outlook this year would ultimately be dependent on the success of the tenders.
“We are making new inroads into the Middle East with two contracts in the tender book, plus we should be able to obtain approvals soon to bid for new jobs in both Kuwait and Saudi Arabia. We see more tenders coming out in this region soon,” he said.
UMW-OG is set to announce its first-quarter results on May 23.