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UMW-OG sees better 2016, taking two-way approach to manage tough times

UMW-OG sees better 2016, taking two-way approach to manage tough times
UMW Oil & Gas (UMW-OG) is taking a two-pronged approach to riding out the sector downturn, by participating in more tender exercises in the first quarter of this year compared to the preceding quarter while also shedding some 300 workers as part of a group-wide cost-cutting exercise.

Local reports quoted UMW-OG president Rohaizad Darus as saying that as a result, the outlook is better for the company in 2016. He pointed out that the current elevated crude oil prices, if sustained, combined with the company securing more bids in the coming quarters would lead to better financial performance in 2016.

Rohaizad said that UMW-OG is bidding for 22 tenders valued at $628m, with 48% of the tenders in the domestic market and the remainder overseas, including three in Vietnam and two in the Middle East.

"We need to get at least five of the 22 contracts to be in the black this year. If we don't, then it will be a challenging year " he revealed.

In terms of rationalisation, Rohaizad said that the company has reduced its manpower by 300, all being contract staff on the operations side. Their contracts were not renewed, and this included expatriate staff.

He said other forms of cost reductions include decreasing the remuneration packages and perks of the company's upper management staff.

The cuts also saw a 40% reduction in senior management remunerations, and the company has been very diligent in ensuring that those holding managerial positions and below are not impacted by the company's cost reduction exercises.

“We have made the necessary rationalisations via the reduction in manpower, renegotiations with our vendors, and reduction in capital costs. We are looking at more reductions, and we have already saved some MYR18m ($4.5m) in expenses during the first quarter alone,” he said.

He noted that any further cuts in the group’s workforce would be based on the flow of jobs going forward. In its fleet, five of UMW-OG’s eight drilling rigs are currently awaiting contracts.