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Malaysian state fund signals prepared to take UMW Oil & Gas into consolidation

Malaysian state fund signals prepared to take UMW Oil & Gas into consolidation
The drive towards consolidation in Malaysia's oil and gas industry may have been give some impetus with a clear statement from state fund management company Permodalan Nasional Bhd (PNB) that consolidation may be the way forward for the industry.

PNB president and ceo Abdul Rahman Ahmad was quoted in local media as saying that the consolidation would be in line with industry trends.

“The consolidation has been something the industry, Petroliam Nasional Bhd (Petronas) and the government have been talking about for quite some time," he said. Abdul Rahman, however, noted: “I think we need to consolidate to create scale in order to withstand the challenges within the oil and gas industry, but it is not easy to do so."

Although he added that “if there are opportunities, PNB will be very open if it makes sense to enhance the value of the company further."

“On our side, we are supportive (of the consolidation),” he concluded.

PNB has a 58% stake in UMW Holdings, the parent of UMW Oil & Gas. The weak oil and gas market has hit UMW's bottom line and may affect the performance of PNB as a whole.

Hit by sliding crude oil prices, UMW Oil & Gas’s average rig utilisation rate fell from 95% in 2014 to 52% last year. With the recent uptrend in crude oil prices, a consolidation exercise may be on the cards for UMW Oil & Gas,

PNB chairman Abdul Wahid Omar said with the increasing crude oil prices, it was a good opportunity for consolidations to take place. “We believe we will see some consolidations across the oil and gas industry, taking the cue from Petronas’ suggestion for smaller players to merge or consolidate.”