Award from PETRONAS Carigali (PCSB) for a contract for the provision of Drilling Rig Services for PCSB's Drilling Programme, whereby UMWOG will assign its UMW NAGA 7 for this contract. The contract is for 7 firm wells with extension option of 1 plus 1 well (estimated duration of minimum 1 month for each well). The commencement of the contract is 15 October 2015. (Source: Bursa Malaysia)

Comments: Given the current depressed crude oil price and jack-up rig market, the contract award is positive for UMWOG, whose 6M15 core net profit plunged 68% YoY due partly to lower utilisation rate and additional operating expenses for UMW NAGA 7. We will review our 2015E-16E forecasts after we have confirmed the contract sum with management. Also, it remains to be seen if the award is indicative of an overall improvement in the jack-up rig market. We maintain our SELL rating and TP of RM0.78 based 0.5x price to book.

Source: Affin Hwang Capital Research - 29 Oct 2015