I did read article in The Edge talking about their assets are not utilized fully and it is getting harder to find jobs due to current oil price. One company terminated the contract early and they are in court case now.
None except for one of its contracts has been affected ------------------------------------------------------- IT’S not the best of times for oil and gas exploration companies and the effects of the crunch in crude oil prices have been felt in the scope of work for the oil drillers.
UMW Oil & Gas Corp Bhd (UMW O&G), involved in drilling and oilfield services for the upstream sector, was hit recently by the cancellation of a major contract but notes that despite the fall in oil prices in the second half of last year, none except for one contract had been affected.
UMW O&G president Rohaizad Darus tells StarBizWeek that the company is in the midst of tendering out contracts again for UMW NAGA 7 after its venture with Philippines-based Frontier Oil Corp fell through. UMW O&G last week announced that it was taking Frontier Oil to the Singapore International Arbitration Centre to claim damages including compensation for all losses arising from Frontier Oil’s breach of contract.
The company says that losses from the breach of contract was not limited to the early termination fee amounting to US$19.2mil (RM69.68mil). On the impact to its UMW NAGA 7, Rohaizad says the company is in various phases of tendering activities for a number of contracts in the Asia-Pacific and Middle East.
“We believe there is a good opportunity for the rig to secure a job this year,” Rohaizad says in an e-mailed statement.
He did not comment much when asked if the company was confident of winning the suit against Frontier Oil, only noting that the basis of the case is in accordance with the provisions as it was stated in the contract. “As the suit has been initiated and ongoing, we are not at liberty to divulge any information,” he says.
As for its other projects, Rohaizad notes that all of its contracts that have been secured earlier have either been completed or are a work-in-progress, highlighting that none of it have been abandoned nor unfulfilled thus far with the exception of Frontier Oil.
While analysts may opine that the current situation may force certain companies to stop drilling altogether due to the imbalance in the cost-benefit ratio, such scenario does not seem to apply directly for UMW O&G, at least on the surface of it.
However, despite the considerably steep descent in oil price, it does seem to appear that the market has priced in a worst-case scenario in terms of the impact of the collapse in oil on upstream players such as UMW O&G which derives a majority or more than 90% of its revenue from drilling services. UMW O&G’s share price is today hovering at near its historical lows of RM2.40 post-listing and had fallen by some 48% from a peak price of RM4.58 last year. The company, which is the third-biggest capitalised O&G upstream player, today trades at a price-to-earnings ratio (P/E) of 20.64 times against a forward P/E or 15.38 times.
Its year-to-date share performance was dismal at best but is already in positive territory with gains of 2.13%.
Its similar peers such as SapuraKencana Petroleum Bhd had similarly seen a sharp fall in its share price of 45% to RM2.72 today from a peak of RM4.95 registered last year.
However, the jury is still out on whether the impact on these players have been overstated by the market at this point in time.
But fundamentals which usually dictate how the market moves will, in part, help to decide this as well, keen observers note.
In the realm of financials, indeed Rohaizad says that new contracts that were recently awarded in the Asia-Pacific saw charter rates falling by a double-digit quantum.
“Charter rates have dropped by between 10% and 25%, depending on which country the work is awarded,” he says.
Moving foward, it would be interesting to watch how upstream companies cope with the new realities of lower oil price and whether it would eventually translate into a leaner and more efficient upstream workforce.
UMW-OG seeks arbitration on alleged breach of US$20m Palawan deal By Gho Chee Yuan / theedgemarkets.com | April 10, 2015 : 8:07 PM MYT
KUALA LUMPUR (April 10): UMW Oil and Gas Corp Bhd (UMW-OG) has started arbitration proceedings to seek damages and compensation from Frontier Oil Corp in relation to drilling works in north-west Palawan in the Philippines.
In an announcement this evening, UMW-OG said its wholly-owned subsidiary UMW Offshore Drilling Sdn Bhd (UMWOD) has served a notice of arbitration on the Philippines-based oil and gas group today.
The move is “to seek, amongst others, an award for damages and/or compensation for all losses arising from the respondent’s breach of contract, but not limited to the early termination fee amounting to US$19.2 million (approximately RM70.46 million)”, it said.
To recap, UMW-OG, a subsidiary of UMW Holdings Bhd ( Financial Dashboard), had inked a US$20 million (RM73.40 million) rig contract with Frontier Oil Corp on Sept 15 last year.
Under the contract, UMWOD will provide Frontier the “UMW Naga 7” drilling unit and other related services for its drilling operations in the Calauit field.
"In accordance with Clause 2.2 of the contract, the respondent (Frontier Corp) was to have arranged for the issuance of the bank guarantee of US$5 million (RM18.53 million) and an advance payment of US$15 million (RM55.05 million) within the time stipulated in the contract, i.e on or before Dec 15, 2014," it said.
The Dec 15 date would be no later than 30 days prior to the early commence date, which was Jan 15, 2015, it noted.
"Despite repeated reminders, the respondent has failed to, refused to and neglected to arrange for the said Bank Guarantee and Advance Payment," UMW said.
It said the contract had stated that any breaches or termination shall be settled by final and binding arbitration in accordance with the Singapore International Arbitration Centre (SIAC).
"The place of arbitration shall be Singapore and the award shall be deemed to be a Singapore award," it added.
Shares in UMWOG closed three sen or 1.28% higher at RM2.38, for a market capitalisation of RM5.081 billion.
Guys, up & down is controlled by syndicate. Remember SKPETROL after hit 3.00 during CNY then all the way plunged down, and was rated TP 2.20 only! But what's the price now? 2.70! Institute/ Inv Bank = Syndicate.
Whether UMW OG will continue fall or not, it depends on KLCI. Current price has factored in all bad thing. KLCI n entire market in Malaysia now affect other counters including OMW OG when more than 700 counters drop yesterday.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Chloe_ts
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Posted by Chloe_ts > 2015-04-10 11:44 | Report Abuse
rchi and Christine, how much is your tp? :)