KUALA LUMPUR: UMW Oil & Gas Corp Bhd (UMW-OG), whose earnings slumped 93 per cent in the second quarter ended June 30, hopes to secure new jobs from the promising Middle East markets to sustain its growth.
Its president Rohaizad Darus said the company was bidding for 23 contracts worth a combined US$1.05 billion (RM4.45 billion) in Malaysia and other countries, including those from Organisation of the Petroleum Exporting Countries (Opec).
“Opec is dominated by Middle Eastern countries and they have made it very clear that they are not going to cut production even if the oil price drops to US$10 per barrel,” he told Business Times in an interview recently.
“The Asia-Pacific region is no doubt a good market during non-crisis period, but it is not the biggest producer in the world. In order to get sufficient jobs, you must target where the biggest demand is, which is the Middle East.”
Rohaizad said the company’s main concern during this low oil price environment was to ensure that it was able to register decent financial results.
He said the oil and gas (O&G) services provider had widened its safety net prior to the downturn by actively exploring overseas markets rather than depending on a single market or client.
UMW-OG now operates in seven countries, with the other six being China, Vietnam, Myanmar, the Philippines, Thailand and Turkmenistan.
It has yet to secure a job in the Middle East.
While most countries are cutting expenditure on O&G activities due to the weak global oil price, Middle Eastern countries had reiterated their stand to maintain output.
“Saudi Arabia produced about 9.4 million barrels per day in April, which is relatively high. This has influenced other Middle Eastern countries to follow suit, resulting in more activity in the O&G fields.
“While you cannot make up for the reduction of activity in this region, at least we can hope for some buffer so that the fall will not be too painful,” said Rohaizad.
UMW-OG has eight offshore drilling rigs, mainly jack-up, including the recently-acquired Naga 8. Of the total, six are in service while Naga 7 will drill offshore Philippines in the first quarter of next year under a US$20 million contract.
It was reported that Naga 8 was being prepared for a potential client in Southeast Asia. Its current order book stands at RM1.4 billion, including four long-term drilling contracts.
The company’s lower net profit of RM4.4 million in the second quarter this year, compared with RM60.3 million last year, was recorded on the back of lower revenue contribution from both its drilling and oilfield services segments.
Group revenue dropped 23.2 per cent to RM183.4 million from RM238.8 million in the period, dragged down by lower time charter rates and asset utilisation, as well as foreign exchange losses.