KUALA LUMPUR: UMW Oil & Gas Corp is teaming up with foreign partners for the first time to venture outside of Asia, Bloomberg reports.
The Kuala Lumpur-based company, which had a record loss last year as it idled six out of eight drilling rigs, is forging alliances with overseas firms to boost its chances of winning jobs beyond its home base of Southeast Asia, President Rohaizad Darus said in an interview.
Rohaizad told Bloomberg over the phone: “We are already jointly bidding for contracts with our partners, and the alliances would be formalised after we get them. My main objective is to get the rigs to work. We are seeing some recovery, but it will be slow.”
He said they were still discussing whether it should be a joint venture or a consortium.
He said venturing beyond Southeast Asia could help the firm secure higher charter rates and raise the utilisation of rigs.
Charter rates for drilling rigs dropped from a peak of USD180,000 a day in late 2014 to about USD100,000 a day in the third quarter of 2015, and are probably now less than USD70,000 in Southeast Asia today, according to CIMB Group Holdings Bhd. in a report last week.
“The price war for charter rates has stopped, and everybody has reached a level that they can’t go lower,” said Rohaizad.
Crude has surged about 85 per cent from a 12-month low in January, boosting the outlook for oil and gas service providers. They were the worst performers on Malaysia’s stock market in the past two years as the rout in oil dried up demand for their services and sparked a price war on charter rates, the report said.
UMW Oil & Gas’s stock has plummeted about 80 per cent from its 2014 high, making it the worst performer on the FTSE Bursa Malaysia 100 Index of the nation’s top companies, according to the report.
The stock is trading at 60 per cent of its book value, compared with an average of more than twice that since it was listed in 2013. The company posted a loss of RM372 million last year and a RM65 million loss in the first quarter of 2016.
Earlier this week, the company won a charter contract from Petronas Carigali Sdn Bhd, the exploration arm of state oil company Petroliam Nasional Bhd.
“The Petronas contract will give us earnings visibility for at least two years. It is significant to our bottom line in this current environment,” Bloomberg quoted Rohaizad as saying.