KUALA LUMPUR: CONSOLIDATION may be on the cards for UMW Oil & Gas, following the recent uptrend in crude oil prices.
Permodalan Nasional Bhd’s (PNB), Malaysia’s largest fund management company, is of the opinion that consolidation may be the way forward for the industry.
PNB holds 58.19 per cent stake in UMW Holdings Bhd, the parent of UMW Oil & Gas.
PNB president and chief executive officer Datuk Abdul Rahman Ahmad said the consolidation would be in tune with the oil & gas (O&G) industry trend.
“The consolidation has been something the industry, Petroliam Nasional Bhd (Petronas) and the government have been talking about for quite some time.
“I think we need to consolidate to create scale in order to withstand the challenges within the oil and gas industry, but it is not easy to do so.
“If there are opportunities, PNB will be very open if it makes sense to enhance the value of the company further.
“On our side, we are supportive (of the consolidation),” he said during the Amanah Saham Nasional briefing, here, yesterday.
“UMW Holdings has been one of the most challenging stocks in our portfolio and part of the reason was because of UMW Oil & Gas.
“We will continue to engage with the board of UMW and I think we can ensure that UMW Oil & Gas will ride the crisis through.”
He declined to say if there were any talks on the consolidation.
UMW Holdings’ earnings are largely tied to the automotive sector, from which the conglomerate derives 80 per cent of its total revenue. It is the sole assembler and distributor of Toyota and Lexus vehicles.
The weak O&G business has somewhat impacted its bottom line and may affect the performance of PNB as a whole.
Hit by sliding crude oil prices, UMW Oil & Gas’s average rig utilisation rate fell from 95 per cent in 2014 to 52 per cent last year.
PNB chairman Tan Sri Abdul Wahid Omar said with the increasing crude oil prices, it was a good opportunity for consolidations to take place.
“We believe we will see some consolidations across the O&G industry, taking the cue from Petronas’s suggestion for smaller players to merge or consolidate.”