KUALA LUMPUR (Aug 25): UMW Oil & Gas Corp Bhd (UMW-OG) expects the utilisation rate across its seven jack-up drilling rigs to remain high in 2018, despite the impending expiration of some contracts by end of this year.
"We are working very hard to replace these contracts with new ones. Even if we cannot maintain the utilisation rate of this year, but we believe it will be stable [in 2018]," group president Rohaizad Darus told the press after UMW-OG's extraordinary general meeting (EGM) today.
Just last week, the group's idle UMW Naga 5 jack-up rig commenced a RM113 million contract with Repsol Malaysia, which will bring the overall utilisation rate of its assets to 100% by September from 68% at the end of June.
The current rate is much higher compared to last year when it hit as low as 7% in June.
Rohaizad acknowledged that UMW-OG is addressing the issue of low charter rate, which has mitigated some of the gains from the higher utilisation. UMW-OG's charter rate averaged at US$70,000 per day this year, compared to its high of US$142,000 in 2013 when oil price broke US$100 per barrel.
"Some of the current contracts are being exercised at a loss… One of our priorities is to negotiate new ones at slightly higher day rate. We cannot expect the rates to return to the way they were, but we would like to go forward with at least break-even on all the contracts, and not just a few," he said.
Meanwhile, Rohaizad said UMW-OG will continue to dig deeper for cost-cutting measures, beginning with reduced interest costs on lesser borrowings, after shareholders today voted to allow the group to proceed with its massive RM1.8 billion cash call.
The cash call entails a 14-for-5 rights issue at 30 sen apiece, attached with free warrants on the basis of one warrant for every four right shares subscribed.
About 83% or RM1.5 billion of the proceeds will be used to cut the group's debts to RM2.6 billion, from RM4.1 billion presently.
"The decision today at the EGM is crucial to ensure the company is able to weather the current situations and move forward more competitively.
"Hopefully, we can achieve a significant reduction in interest costs after the repayment of the loans," Rohaizad said, adding that the group is continuously looking into hedging of foreign exchange as well.
Additionally, Rohaizad said UMW-OG may look into consolidation of spare equipment between rigs. He, however, discounted the possibility of selling any more assets — at least in the medium term.
"We believe we are still capable to get jobs for our assets. As long as the oil price is stable, even at US$50 per barrel, oil companies will start to invest again," Rohaizad said. UMW-OG's present order book stands at RM525 million, with RM433 million worth of extension options.
To add to that, UMW-OG is currently bidding for 24 jobs — 15 of which are in Malaysia. Of the total, 10 of the contracts are for the long-term basis, while the other 14 being tendered are short-term contracts.
"If the oil prices continue to stabilise and maintain its current prices, we should be able to return to the black within three years' time," said Rohaizad.
UMW-OG's share price rose one sen to close at 31.5 sen, with 8.59 million shares traded, giving it a market capitalisation of RM681.03 million.
uk-en
http://www.theedgemarkets.com/article/umwog-expects-rig-utilisation-rate-remain-high-2018
