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UMW Oil & Gas reported to be reorganising debt

UMW Oil & Gas reported to be reorganising debt
UMW Oil & Gas (UMW O&G) is the latest Malaysian oil and gas (O&G)-related firm to batten down the hatches ahead of an anticipated prolonged weakness in the oil price environment, and is taking steps to reorganise its debt, converting some of its short-term loans into longer-term loans.

UMW O&G did not disclose how much of its loans will be converted, but local reports cited sources as saying some $200m worth of borrowings will be involved for a start

.“When times are good, banks will always be ready to give you extensions on your short-term loans but when times are bad, they may refuse to extend, so it’s prudent to do this now so that there will be no surprises later,” said UMW O&G president Rohaizad Darus.

Based on the latest statements, UMW O&G’s short-term borrowings amount to MYR3.04bn ($688m) while long-term borrowings come up to MYR1.11bn. It however remains cashflow-positive, setting it apart in the current tough market environment.

Other firms in the sector such as SapuraKencana Petroleum have also started refinancing debt, announcing in September that it would issue debt papers starting with a $200m Islamic medium-term note programme, as part of its strategy to refinance a $2.3bn facility that is due next month.About half of UMW O&G’s fleet of eight drilling rigs do not have a charter currently and the situation is set to worsen as more rigs reach the end of their charter contracts this year.

UMW O&G's Petronas contract win in October however bodes well, as it suggests it's doing well for what limited Petronas contracts as there are, and market talk suggests that there will be several more tenders for rig charters in the first half of 2016, both in the domestic and international markets.