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[KUALA LUMPUR] Malaysia's UMW Oil & Gas Corp is teaming up with foreign partners for the first time to venture outside of Asia and predicts the slowdown that forced the company to idle most of its drilling rigs may be ending.
The Kuala Lumpur-based company, which had a record loss last year as it idled six out of eight drilling rigs, hopes to forge alliances with overseas firms to boost its chances of winning jobs beyond its home base of Southeast Asia, President Rohaizad Darussaid in an interview, declining to name the companies. Charter rates have reached a bottom and the industry is showing signs of a slow recovery amid gains in oil, he said. The stock posted its best weekly gain in four months. It was unchanged at the close on Friday.
"We are already jointly bidding for contracts with our partners, and the alliances would be formalized after we get them," Mr Rohaizad said by phone. "My main objective is to get the rigs to work. We are seeing some recovery, but it will be slow."
Crude has surged about 85 per cent from a 12-year low in January, boosting the outlook for oil and gas service providers. They were the worst performers on Malaysia's stock market in the past two years as the rout in oil dried up demand for their services and sparked a price war on charter rates.
Charter rates for drilling rigs dropped from a peak of US$180,000 a day in late 2014 to about US$100,000 a day in the third quarter of 2015, and are probably now less than US$70,000 in Southeast Asia today, according to CIMB Group Holdings Bhd. in a report last week.
"The price war for charter rates has stopped, and everybody has reached a level that they can't go lower," said Mr Rohaizad.
UMW Oil & Gas's stock has plummeted about 80 per cent from its 2014 high, making it the worst performer on the FTSE Bursa Malaysia 100 Index of the nation's top companies. The stock is trading at 60 per cent of its book value, compared with an average of more than twice that since it was listed in 2013. The company posted a loss of RM372 million (S$123.43 million) last year and a RM65 million loss in the first quarter of 2016.
The company is still discussing whether it should be a joint venture or a consortium, Mr Rohaizad said. Venturing beyond Southeast Asia could help it secure higher charter rates and raise the utilization of rigs, he said.
Earlier this week, the company won a charter contract from Petronas Carigali Sdn, the exploration arm of state oil company Petroliam Nasional Bhd.
"The Petronas contract will give us earnings visibility for at least two years. It is significant to our bottom line in this current environment," Mr Rohaizad said.