Looks like the only way out is to unlock the value of those oilfields in E&P segment to pare down the borrowings.

Although Sapura has more diverse activities, its exposure on tender rig is very huge. Unlike jack up rig, tender rig needs a strong platform so that the derrick can be put on top on the platform for drilling. To do that, oil companies need to invest a lot of money on the platform. At times like this, oil companies are very unlikely to invest on such capex. Does anyone know what is the utilization rate of their tender rig?

It depends if US interest rate will move up or not. Their interest cost will increase accordingly. Let see how sensitive their profit is towards interest rate fluctuation.

I just read the news a couple of days saying that Uzma and Handal also got some umbrella contract from Petronas on workover services. So where is that so-called "monopoly" everyone is dreaming about?

While investors focus on Libya, in the U.S., oil explorers boosted the number of rigs drilling for crude to 800 for the first time in almost three years, according to Baker Hughes data released on Friday. Drillers have been accelerating exploration in an almost-unbroken streak since the beginning of November, vaulting American crude output to a record of more than 10 million barrels a day.


* thumbs up *

"Therefore, we must abandon the concept of austerity and continue to ensure cost control, efficiency and value enhancement."



The word "cost control" means Petronas will continue to squeeze contractors like Umwog. ... LOL

In a statement, Tan Sri Wan Zulkiflee Wan Ariffin, President and Chief Executive of CNOOC, said ...

This must be an error, since when he joined CNOOC?

If you subscribe the IPO at 2.80 and then take up all the right issue, your cost will average down to around 90 sen. PNB case is a lot more lower than 90 sen cos they get free shares being a major shareholder of UMW Holdings. Coupled that with exercise of RCPS and free warrants. Definitely lower than many other initial investors.

And conversion of RCPS-i also at 30 sen. They can exit anytime without much losses. Those who are stuck at IPO price and didn't subscribe the right issue will be stuck with this share for a long time.

Very hard to estimate. IPO price was 2.80 but PNB should have gotten a lot of Umwog shares by way of dividend during the demerger. Coupled with subscription of right share and exercise of warrants, their cost is much lower than many retail investors out there that went in at IPO price. Definitely lower than 90 sen.

You mean aramco investment in pengerang?

I felt even more sorry for those who bought at 4.40.

Increment was already given way back in June 17 before the completion of the RI. Promotion was given recently in December 17 and car benefit is still maintained. Senior mgmt. gets a Toyota, petrol card, touch n go and basement parking. Let's see if they get bonus or not in April since there is "core profit".

We heard all these before. Statements like "profitable if utilization is x%" or "we are going to Middle East". Don't you think they are frying a pile of cold rice here.

DCR was actually higher, if not the same, between FY17 and FY16. So how can the impairment is higher? As Warren Buffett said, "Honesty is a very expensive gift, Don't expect it from cheap people."

Agree, just wait and see. If you really want to try your luck, better don't commit more than 10% of your investable fund in this counter. But then, if you really think this counter can reach 2.80 or 4.40 again, no harm wait first and sacrifice a little bit of profit for more certainty.

RM25m is not a lot of profit when the interest starts to move or any of the rig starts to idle. There will be idling period when transiting from old to new contract. There will also be idling period when a rig goes for dry dock.

And please don't worry so much about this company's cash flow. The banks are a lot more worried than anyone of us here and have measures in place to ensure the company can repay their loan.

I am sure the employees in umwog can predict the future of the company better than anyone of us in coming up with the DCF calculation. They have a business development team that talks to oil companies regularly on new drilling projects. And I am sure they want to show the best possible financial position for good bonus. And the best they can come up with is higher impairment although FY17 has improved. Someone should ask during the AGM the assumptions they use in the DCF calculation for supporting the impairment amount.

Do you know why there is a need for impairment? It is because the FUTURE economic benefit that is expected to flow from the assets has been reduced. Have you seen how the calculation looks like? There is a projected discounted cash flow prepared based on certain assumptions and should be checked by the auditor. It is through these assumptions where judgment is exercised (or abused). If things will improve, there should be reversal of impairment.

Another odd finding is impairment for FY17 is higher at RM982k compared to FY16 of RM780k. Come on, FY17 was a better year compared to FY16. We all expected an impairment but a higher impairment? Even Bumi Armada has a lower impairment. Seriously, there is a gross misrepresentation of financial statement here by taking advantage of judgmental accounting treatment. I am sure a lot of retailers got conned into this counter by comparing the share price and the NAV last year, thought it was undervalued.

JJchan, just ask yourself why the oil price dropped and whether the reason causing that drop is still around or not. If yes, what makes you think the price will go up again. Simple as that.

95% utilization in Q4 but profit is only RM18.5m. This is not a small company. Billion units of share issued here. That profit also include investment income of RM6.5m which is not from operation. Next interesting thing to wait is how sensitive their profit is to the fluctuation in interest rate. This will be reported in the audited accounts.

So how? Where is the much hyped dividend? Maybe you will get some "dividend" by attending the AGM.

Seriously, if the drilling industry is really turning up, uwmog should take the opportunity to add more rigs when the price is still cheap just like how investor average down their investment cost. I am sure PNB can provide that financial support.

There is reason why impairment is needed. Year 2017 should be profitable year because all rigs have contract. If it is losing even if there is contract, obviously the book value of the rigs are overvalued, resulting to high depreciation that cannot be covered by the current day rate. I always suspect the management is understating the impairment because they need to rollover the financing and can't afford to show a very negative result to the banks.

Oil price has recovered from the bottom but not the day rate of offshore drilling. It will take sometime for the market the absorb the rig overcapacity before the day rate starts to climb. If you already have bought in, just wait or pass it down to your children to continue to wait. If you are thinking to buy because price is already cheap, well, price can remain low for a long period of time. Until there is reversal of impairment, there is no turnaround yet.

I wouldn't regard them as competent but things should be better with Abdul Rahman being the Chairman. Just look at the management team profile and see if you could find anyone with offshore drilling industry experience.

Some correction here. The impairment is an accounting requirement. It is to ensure the company's asset in the balance sheet reflects the current market value. It is not because of any intended rig sale. You can find almost all oil and gas companies are hit with this impairment recent years.

Umwog also uses the Labuan structure extensively such that it is not paying a lot of tax during good times but don't expect any tax rebates from the losses during bad times.

I believe the day rate has to increase and all rigs to have a contract for the impairment to be reduced. Unfortunately, contract value is no longer disclosed.

JJchan, a jack up rig is not cheap. Do go through their announcement and find out how much they paid for one jack up. When the oil price collapsed, oil companies terminated contracts or reduced the day rates, coupled with many new rigs entering the market, a brand new jack up has dropped its value. All this info is in the internet. Naturally, the value of these assets need to be impaired in umwog's books.

A reversal of impairment will signify an increase in rig value in the market and thus, an imminent turnaround of the industry as how much one would pay for a rig will represent how much return he expects from leasing the rig in future.

Impairment no doubt is a paper loss but the lower the value of the rig, the less you can borrow from bank. That's why the RI is needed to cover the shortfall. Bank will not lend the same amount of money to rollover the debts if the rig no longer command the value that umwog has previously paid for.

Profit will rise with the interest cost saving from the RI proceeds used to pare down borrowings. This is all within expectation and will not make the share price to fly because the EPS will still not be fantastic. What will make the share price to fly if there is impairment reversal, that will be a surprise. This piece of news below should be a support for impairment reversal and if the reversal doesn't happen, likely the impairment has been understated by the management previously:

http://www.marinelog.com/index.php?option=com_k2&view=item&id=28203:jackup-rig-values-rise-on-oil-recovery&Itemid=222

This company plans to acquire an EOR well. Can they possibly make profit from EOR well based on today's oil price? I recall oil price needs to be above USD80 for EOR wells to be economically feasible.

This is a growing company and is not supposed to pay dividend even during good times. They are supposed to reinvest their profit.

Oil is not just an energy source for transportation. It's usage is much wider. Many refineries closed down because their margin is thin but they need to continuously invest for upgrade. That's why shell sold the refinery to Heng yuan.

I saw that one year ago today, oil price is around $56 - $58 and everyone was so excited with the merger.

One year ago, many people thought 60 sen was the bottom.

The disposal has no material impact at all.

MMHE income source is a lot more stable as every vessel will need to undergo dry dock or repair after some years for recertification. And i think petronas owns a big chunk in mmhe.

Wait for Q4 result and see how much interest can they save. The data can be used to estimate their breakeven point which will determine their future profitability. There should not be any impairment as the oil price has already stabilized for some time. If there is still impairment, I am really speechless.

Well, if you think this share can go up to 4.40 again, what is 30 sen risk to you. Go on, this is your chance to go in or buy more if you think you missed the boat previously.

The reasons why PNB sell and convert the RPS were already discussed. Please refer past comments.

Q4 result "should" be better with interest savings. I m interested to know how much interest the RI can save. Please also remember that there is a one-time cost for that RI exercise and it's quite a lot.

Forecasted three rate hikes in 2018. Those with USD loans will be impacted.

Yeah, sometimes I wonder why PNB doesn't take this umwog private and relist it at a higher price since it is soooo undervalued now as pointed by someone. Why all the trouble having to ensure their shareholding doesn't exceed 65%? Why do a RI exercise to raise cash just to reduce the borrowing? Why not raise more cash and payoff all their borrowings? I am sure PNB can pay off their loan.

Not easy to penetrate a market so far away from Malaysia. No oil company will pay for the cost to mobilise the rig from Malaysia to Gulf of Mexico. I also doubt Umwog will "invest" in that mobilization cost.

These HWUs are not very high value. As I said earlier, the value of all the 5 Gaits combined are not even equivalent to 1 Naga. Impairment or not is really nothing to the group. Some of the HWUs are purchased many years ago and probably fully depreciated by now. Nothing more to impair anyway. Hope they sell them and focus on offshore drilling.


i3lurker @offshore

I understand that you are very aware that without the umbrella contract ALL the relevant assets need to be "written off or otherwise fully provided as non-working assets" under accounting standards. This will mean another QR of losses. With this umbrella contract no provision need to be made so no more losses.

Perisai rig is same as Umwog, good thing is they only own one. Tioman's rig are jack up but they are much older.


princeofthi3ves Well. Time will tell. We just decide what we thing the best and see results. I will still collecting. My target is 1m shares. I just on my 40 percent target. Perisai and sapura have diff type of jack. My main business also oil and gas and all these players are my client too and sometimes competitors.

Yes, you are entitled to your opinion but i wish to correct you that there is nothing special about that umbrella contract because it is a callout contract without any minimum well or minimum work days committed by petronas and it is for workover activities which is of low value to the group. Umwog is also not the only local player. There are also perisai and tioman drilling (under Sapura energy) that own jack-ups. Lastly, about the management, please read the profile of their management team. Did you see anyone with offshore drilling experience? Not talking about oil and gas in general.


princeofthi3ves Buy or sell based on your future expectation of company and not prediction of price. I will share why i accumulate this counter.
1. I make handsome amount of profit when it listed in 2014 by taking it placement block.
2. Movement of oil price give better overall position to all supply chain level in oil and gas industries
3. UMW is the local only player in jack up rig which are heart of oil drilling. By having monopoly position on this when production start getting hot it will be seriously benefit from it.
4. Management of company not run by yo-yo businessman but by handful experience mangement.
5. UMW won umbrella contract for 3 years. Umbrella doesnt meant instant contract but if project coming umbrella contractor will the first benefits.
6. ATH of company is very well in 4.50 range. With current price it was under 10 percent of former value so as capital investor this high upside potential is what i m looking for.
We thats my opinion based on my research. Everybody has their own opinion.

http://www.telegraph.co.uk/finance/markets/12053898/Oil-prices-to-hit-100-a-barrel-and-nine-other-predictions-for-2016.html

Well, if you strongly believe in this company, this is your chance to enter or top up. I m sure you have that "i should have bought or bought more" feeling when it was 48sen. Now this is your chance. Go on, never doubt yourselves if you have done enough research.

“First, the number of rigs employed increases and then one or two years later the rates come up.” 

Fully agree on this. One or two years later.

Fren, where is the gap?



maoyap PNB and Yaysan quietly acquiring UMWOG shares. hahahahha. Gap up tmr!
30/01/2018 00:20

Funny thing is ... some of you even think Amanahraya is the culprit. Do you guys actually know how unit trust funds work? Amanahraya is just a trustee. The buying and selling order come from the fund managers. Who is managing the amanah sahams?

LOL ... I wonder how many fake breakouts can you traders tolerate. It's just too frequent in this counter.