UMWOG’s 9MFY16 core net loss below expectations
KUCHING: UMW Oil & Gas Corporation Bhd’s (UMWOG) first nine months of financial year 2016 (9MFY16) core net loss of RM292.3 million came in below expectations on the back of lower than expected utilisation rate for the group’s jackup rig fleet.
UMWOG revealed in a filing on Bursa Malaysia that it posted a loss before tax of RM265.5 million for the nine-month period ended September 30, 2016, as opposed to the RM61.9 million of profit before tax achieved in the same period of 2015.
“Weak demand for the group’s drilling and oilfield services due to prolonged low oil prices had caused both the drilling services and oilfield services segments to incur losses,” it said.
According to the research arm of TA Securities Holdings Bhd (TA Research), UMWOG’s 9MFY16 core net loss of RM292.3 million was below its and consensus expectations.
“We understand that in 3Q almost all rigs were idle,” TA Research noted in its results update. “That said, fourth quarter (4Q) should be better as two of the seven jack-ups have secured contracts.”
TA Research expected the challenging environment to persist on the back of the current oversupply of jack up rigs in the market.
Although tender activities have increased, the research arm believed award of contracts will still be slow.
TA Research highlighted that on the bright side, Petroliam Nasional Bhd (Petronas) favors local players, hence any local contracts would likely be awarded to UMWOG.
That said, the research arm expected daily charter rates (DCRs) to be heavily discounted and remunerated under “pay-peruse” basis.
“Hence, UMWOG’s earning remains uncertain going forward,” it said.
On earnings forecast, TA Research reduced utilisation rates.