UMW-OG RESTRUCTURING DEBTS
Company aims to strengthen financials, maximise rig utilisation, among others
UMW Oil and Gas Corp Bhd (UMW-OG) is determined to return to the black and is currently restructuring its debts, said president Rohaizad Darus.
He said the demerger exercise between UMW-OG and UMW Holdings Bhd, which was approved by shareholders recently, provided support to the company and for a more structured debt restructuring exercise.
“After the demerger, we will have more support in terms of finance with the RM1.8 billion rights issue, of which RM1.3 billion will be used to reduce debt and RM300 million for working capital.
“With that, our gearing ratio will go down from 1.81 to 0.56, which is significant, and our total debt will reduce from RM4.1 billion to RM2.3 billion.
“This will reduce our annual interest rate and free up cash to enable us to be more efficient when we are negotiating with vendors for early payment,” he told NST Business after the company’s annual general meeting recently.
Rohaizad said at 0.56 gearing, the company could operate at optimum level.
About the company’s plans this year, he said it aimed to strengthen its financials, maximise its rig utilisation and get better day rates.
There are also plans to return to Myanmar, Indonesia, Thailand and Vietnam.
“It is important for us to return to these countries and ensure that we don’t lose the market we have developed.
“Looking at the cyclical nature of the business, we need to ensure that we have a wider market, potentially in the Middle East, so that we can spread the competition between rigs and where chances of getting jobs are better,” said Rohaizad.
He said rig utilisation was important and continuation of jobs was a must for the company.
“With 59 rigs in Asia not in operation, it is difficult to see the day rate increasing in the near future, although it has somewhat stabilised.
“The fewer the rigs that are operational, the higher the day rate.”
Currently, UMW has seven rigs at 100 per cent utilisation, a progress compared to last year when there was only a 60 per cent utilisation rate. “While we thank Petroliam Nasional Bhd (Petronas) for the jobs, we need to go back to the previous markets we have ventured into.
“We want to help ourselves by getting jobs elsewhere and only go to Petronas when the situation really calls for it (such as during the low oil price crisis last year).
“Of course, Petronas is our priority. But we are trying to ensure that we have a steady flow of jobs in other markets,” he said.
On May 14, UMW-OG bagged two contracts worth about US$34.81 million (RM151.08 million) from Petronas Carigali Sdn Bhd to provide two jack-up drilling rigs for offshore upstream projects.
Earlier this month, a planned merger between UMW-OG, Icon Offshore Bhd and Orkim Sdn Bhd was called off.
Ekuiti Nasional Bhd, the largest shareholder of Icon Offshore and Orkim, said it arrived at the decision after considering the significant capital requirements of UMW-OG, which necessitated a far larger recapitalisation than initially envisaged.