(Apr 23): UMW Oil & Gas Corp., a Malaysian oil and gas services provider, may buy more jack-up rigs to tap rising demand as it bids for $1.1 billion worth of contracts in Southeast Asia this year.
The company has four drilling rigs, which will be doubled to eight by 2015, President Rohaizad Darus, 49, said in a Bloomberg interview yesterday. It expects delivery of its fifth as early as next week, he said.
UMW Oil & Gas completed a 2.36 billion ringgit ($722 million) initial public offering, the biggest in Malaysia last year, to finance its rig expansion. It is seeking to tap a surge in orders spurred by countries in Southeast Asia looking to develop domestic marginal oilfields which were once considered commercially unattractive.
“There is still some more room for growth,” Rohaizad said in Kuala Lumpur. “We would only buy if a great opportunity presents itself.”
The stock advanced 1.5 percent to a two-week high as of 9:20 a.m. in Kuala Lumpur. It has risen for a fourth day, poised for the longest rally since Feb. 10. It has surged 45 percent since its IPO in November, compared with a 3.4 percent gain for the FTSE Bursa Malaysia KLCI Index in the same period.
The company is bidding for 20 potential contracts and expects some tender results to be known within a month, Rohaizad said. Charter rates in Southeast Asia are expected to reach $180,000 per day for short-term contracts compared with average rates of $150,000 because of rising demand, he said.
The company expects Vietnam and Myanmar to be potential growth areas in the region, Rohaizad said.
“We have established warm ties with PetroVietnam based on our past and current work,” he said, referring to Vietnam Oil & Gas Group. “Myanmar has been aggressive in the oil and gas sector, where the country has issued about 20 new licenses. This would entail more exploration and development activities which would be utilizing jack-up rigs.”
The company will add 100 more employees this year to support the new rigs, compared with as many as 30 in 2013, he said. It has 60 percent of the IPO proceeds left to be used for more rig purchases, Rohaizad said. Each rig can boost revenue by at least $57 million a year, he said on Nov. 1.
The jack-up rig business is a “straight-forward business, and we can easily double our bottom line based on the additional four rigs,” he said. “Revenue for 2015 could be an increase of more than 50 percent, in line with estimates.”
Revenue is expected to rise 47 percent to 1.47 billion ringgit in 2015, from an estimated 997.8 million ringgit this year, according to 12 analysts surveyed by Bloomberg.
“We quite like the company because we think that it’s fairly stable,” Thomas Yong, chief executive officer of Fortress Capital Asset Management, which manages 1 billion ringgit of assets, said in a phone interview in Kuala Lumpur on April 21. He owns shares in the company.
UMW Oil & Gas was spun off by UMW Holdings Bhd., controlled by Permodalan Nasional Bhd., Malaysia’s biggest state-owned asset manager. The parent company, UMW Holdings, assembles cars for Toyota Motor Corp. in Malaysia and manufactures industrial equipment.