KUALA LUMPUR: Oil and gas service providers, like Wah Seong Corp Bhd, look to brighter days as oil majors start to spend more, after years of belt tightening.
Wah Seong group chief executive officer Chan Cheu Leong expressed hope that the oil and gas sector is showing signs of recovery as oil majors like Petronas are spending more, after years of severe cost rationalisation.
Earlier this month, Petroliam Nasional Bhd (Petronas) group chief executive officer Tan Sri Wan Zulkiflee Wan Ariffin announced the group will ramp up this year's capital expenditure to "slightly above RM50 billion" from 2018's RM46.8 billion.
Chan was responding to a question on Wah Seong's outlook, after it posted its first loss-making quarter in two years as contributions from its oil and gas, and renewable energy segments fell and its industrial trading business sank into losses.
In its fourth quarter ended December 2018, Wah Seong posted RM9.98 million in net losses compared with RM65.96 million in profits, a year ago.
Wah Seong's order book now stands at RM1.1 billion, comprising RM774.2 million in the oil and gas segment, RM283.3 million in the renewable energy and RM54.4 million in industrial trading.
Chan commented since the middle of 2014 until now, there had been prolonged downtrend in the oil and gas sector due to low oil pricing and therefore severe cutbacks in oil majors' capital expenditure.
He said with prices gradually rising to average at US$70 per barrel, the cost of producing oil has also become 30 per cent cheaper over the years.
Chan described oil and gas counters on Bursa Malaysia, like Wah Seong, have gone through challenging times. “But now, as oil and gas majors around the world tender out more jobs we’re here to benefit from the upcycle.”
Wah Seong's share price has recovered slightly from its all-time low of 59.5 sen in December 2018, with the shares closing at 77 sen apiece today.
In November 2018, Chan tightened his grip in Handal Resources Bhd to 11.5 per cent. Asked if he would buy up more as Handal shares trade at around 37.5 sen apiece, Chan smiled and replied, "the shareholding in Handal is my personal investment. I may buy more, depending on the valuations."