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UMWO&G turns to $17m Q2 loss

UMWO&G turns to $17m Q2 loss
UMW Oil & Gas Corp (UMWO&G) swung to a MYR67.3m ($16.7m) net loss for the second quarter from a profit of MYR4.5m previously as revenue fell on lower levels of exploration, development and production activities in the oil and gas (O&G) industry.

UMWO&G said in a stock market announcement that revenue fell 29% to MYR130m from MYR183.4m previously as a result of this.

“Weak demand for the group’s drilling and oilfield services in the second quarter of 2016 due to low oil prices had caused both the drilling services and oilfield services segments to incur losses,” UMWO&G said.

Its drilling services business posted a pre-tax loss of MYR48m while the oilfield services business turned in a loss of MYR10.1m.

The key drilling services segment, which makes up 96% of total revenue saw sales fall 28% from the MYR173.8m it brought in during the previous corresponding quarter.

This fall in revenue was mainly due to fewer assets that actually generated income in the second quarter of 2016 compared to the corresponding period in 2015.

A slowdown in capital and operating expenditure by the oil majors due to prolonged low oil prices resulted in the low demand for drilling services, UMWO&G explained.

“In addition, excess supply of drilling rigs also adversely impacted time charter rates of new contracts secured,” it said.

Looking ahead, UMWO&G said the financial performance of the group for the remaining period of the year depended on the outcome of the potential local and overseas contracts the group was currently working on.

It noted that if the group succeeded in securing some of the potential contracts, asset utilisation in the last quarter of 2016 was expected to improve.