UMW Oil & Gas Corp Bhd has been awarded an RM113 million contract for the provision of jack-up drilling rig services for Repsol Oil & Gas Malaysia Limited.
In a filing with Bursa Malaysia yesterday, UMW-OG said UMW Offshore Drilling Sdn Bhd (UOD) was awarded the contract by Repsol. UOD is a wholly-owned subsidiary of UMW Malaysian Ventures Sdn Bhd, which in turn is a wholly-owned subsidiary of UMW-OG.
The contract is for the provision of drilling rig services for Repsol’s drilling programme and UMW-OG has assigned its UMW Naga 5 for the contract. The one-year contract comes with a one-year extension option, and work is expected to commence in the middle of September.
UMW Naga 5 is a premium independent-leg cantilever jack-up drilling rig that has a drilling depth capability of 30,000 feet and has a rated operating water depth of 400 feet.
The contract is expected to contribute positively to the earnings and net assets of the group for the financial year ending Dec 31, 2017 and the financial periods thereafter during the contract period.
Meanwhile, UMW-OG’s net loss for the second quarter ended June 30, 2017 narrowed to RM50.99 million from RM67.25 million a year ago due to higher rig utilisation rate and lower losses from oilfield services.
Revenue for the quarter rose 7.61% to RM139.91 million from RM130.01 million a year ago due to improved revenue from both the drilling and services segments.
For the six months ended June 30, 2017, net loss widened to RM155.10 million from RM132.32 million a year ago due to lower time charter rates and reduced foreign exchange gain on translation.
Revenue for the period fell 1.61% to RM214.19 million from RM217.69 million a year ago due to lower revenue from both segments.
Drilling services reported lower revenue due to lower time charter rates from new drilling contracts secured while oilfield services reported lower revenue due to continued soft demand for oilfield services.
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For drilling services, UMW-OG expects full utilisation of all seven jack-up rigs by next month but warned that there are potential risks of off hire for some of the rigs, as some of the contracts are short term in nature.
“While asset utilisation is improving for the second half of 2017, the charter rates continue to remain soft, in line with prevailing market rates,” it said in a separate filing yesterday.
For oilfield services, the group does not expect demand for oil pipes threading, inspection and repair services to recover significantly for the rest of 2017 as oil companies continue to use existing threaded stocks. Repair works also continue to experience low volume.
The group expects 2017 to remain challenging due to the low time charter rate environment.
UMW-OG’s share price fell 4.48% to close at 32 sen, with a total of 16.25 million shares traded. It has a market capitalisation of RM691.84 million.